How does student finance work?

Don’t let the thought of student debt put you off applying to university. We believe that everyone should have the opportunity to go to university.

Even though tuition fees have increased in recent years, find out why and how university is still affordable using our guide to university fees.

No fees to pay up front

Tuition fees for UK students are now £9,250 per year, which means that most students will graduate with a ‘debt’ of £27,750 or more after three years of study.

Student loans explained

Most students living in the UK choose to apply for a student loan. That means that the government agrees to pay your fees during your time at university.

FAQs about student finance

Repaying student loans

Don’t be put off by the size of the ‘student debt’ you will graduate with. It’s probably more accurate to think of your outstanding student loan as a ‘graduate tax’ rather than a ‘debt’. A small amount that will be deducted from your salary every month for a portion of their working life.

Some important things to note

  • You’ll notice that the size of your child’s ‘student debt’ doesn’t affect how much they repay each month. The amount is determined by how much they earn.
  • Your child won’t be chased for outstanding debt. If they become unemployed or their salary falls below the threshold then their repayments will automatically stop. Until they’re earning above the threshold again.
  • It’s true that student loans gain interest (which is currently above the rate of inflation) – but don’t be alarmed. Whatever happens, your child’s debt will be written off after 30 years, regardless of how much they still owe. In fact, economists have predicted that the majority of students will never pay back their entire student loan.
  • ‘Student debt’ is not taken into account when your child applies for a mortgage. So applying for a student loan now won’t affect their ability to secure a mortgage and get on the property ladder later on.
  • Always remember that the costs of any student loan is likely to be offset by the increased employment opportunities. As well as the higher salary your child will get to enjoy throughout their working life as a result of having gained a degree. Research carried out by the Institute for Fiscal Studies in 2020 showed that graduates will earn on average 20% more than non-graduates during their working life+.

+GOV.UK website, published 29 February 2020.