7 Student Loan Facts You Need To Know!

If your school was anything like mine, student loans were simply mentioned but discussed thoroughly. I had to do the research myself! So, I’ve saved you the time and collated 7 student loan facts that you should know – preferable before you take the loan out!

It does not affect your credit score

Number one of my seven student loan facts is something I think only a handful of people know! It is the number one reason I don’t consider UK student loans as a type of debt! UK student loans DO NOT affect your credit score because in theory you have no control over the payments. Your payment comes directly at the source – meaning it automatically comes out of your wages before your employer pays you.

This means that your balance or payment history does not impact your score. It will not affect any future credit applications – e.g. mortgage, business loan etc. The only way a bank will know about your student loan history is if they ask you directly! They will not have access to this data.

It is made up of two separate loans

This is something I did not know about until I was physically applying! Whilst they are often referred to as one thing, at undergrad level UK student loans are made up of two different loans: tuition loan and maintenance loan. Tuition loan is exactly what the name suggests – its money to pay your tuition (fees paid to attend university). Maintenance loan is money paid directly to you to cover your living costs – e.g. rent, groceries, booze etc.

However, it is worth baring in mind that your balance will be a combination of the two, so they will earn interest collectively.

Everyone can apply for the full tuition loan

Anyone eligible for English student loans is automatically eligible for a full tuition loan – currently £9,250 per year. This money is paid directly to your university – you will never see a penny of it!

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The less your parents earn the more you will get in maintenance

The second part of the loan is called a maintenance loan – money paid directly to you so you can live. The amount varies from person to person. The biggest factor is how much your household income is. Essentially, the more your parents earn the less you will get. But there is a minimum amount – meaning you will be eligible for something. The current minimum is around £4,500. Most students won’t be able to afford their rent on the minimum student loan amount so you will need to consider how you will make up the difference.

Interest is charge from the day you receive your first payment

The minute that first payment hits your bank account, interest will start getting added to your balance. 

Your balance is cancelled after 30 years

This is one of my favourite student loan facts – regardless of how much you’ve paid back, your balance will be written off 30 years after you graduate. Another key reason why I don’t consider UK student loans as a debt because it is more than likely you will not make a dent in it let alone pay the entire thing off. Speaking of not paying the full thing back….

Estimated that only 25% of current students will pay back the loan in full

The UK government have recently estimated that only 25% of current full-time students will pay back their loan in full. This stat is absolutely insane!! One of my biggest worries when decided whether I wanted to go to uni was taking on a ridiculous amount of “debt”. This stat just makes me more and more confident that I am making the right choice by taking every single penny I am eligible for.

Technically, with my income from my part-time jobs, I am able to support myself without claiming the maintenance loan. But both of my jobs are zero-hour contracts and in industries that are currently very unstable. So, I feel much more comfortable using this money to boost my savings rather than having to rely on it to support myself. It also takes away the pressure of having to work, a position I am very thankful to be in.

Since starting uni in October 2019, I have been able to build up a net worth of nearly £26k from my student loan, bursary and various additional jobs. Most of this money is invested in the stock market – with an average return that is higher than the interest rate charged on UK student loans. Therefore, it makes much more financial sense to use the loan to cover my living costs so that I can invest all of my additional income and harness the power of compound interest.

Did you know all seven? Did any surprise you?

Want to know more about UK student loans? Check out this ultimate guide!

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