What are student loans and when do you start repaying them after university?

Independent

13 hours ago

It's A Levels results day and students across the entire country are now planning the next stage of their education, their lives – and, just as importantly, their finances.
For those heading to university, big decisions lie ahead around how to fund their studies, with student loans remaining the most common option.
But there's a lot to get your head around – from how the system works to how repayments affect you later in life.
Here's everything you need to know on the matter - just be aware, this is for those with an undergraduate loan in England, while details or rules can sometimes be slightly different for Wales, Scotland and Northern Ireland.
What's the difference between a bursary and a student loan?
Put simply, a bursary is a form of financial support that you don't have to pay back – similar to a grant.
Eligibility varies, but bursaries are typically awarded to students from vulnerable backgrounds or based on specific criteria set by a university, college or funding body. You can check if you're eligible here.
A student loan, by contrast, is borrowed money to help cover the cost of tuition and living expenses while at university – and, like any loan, it must be repaid. Your first step in exploring student loans is here.
Do student loans cover tuition fees?
Yes – and more. There are two types of student loans available: tuition fee loans and maintenance loans. Most students will apply for both.
Tuition fee loans do exactly what they say: they are payments sent directly to your university to cover your tuition fees.
Maintenance loans, on the other hand, are paid directly to you in three equal instalments each academic year. That means you're responsible for managing the money – from rent and groceries to textbooks and travel – and making it last throughout each term.
When do you start to repay them?
If you take out both tuition and maintenance loans, they're combined into one student loan balance. You can manage your loan online here, including updating details, checking your balance, and making extra payments if you choose.
Repayments don't begin until the April after you finish your course. For example, if you start university in September 2025, complete a three-year degree, and graduate in summer 2028, your repayments would begin in April 2029 – assuming the rules stay the same.
But there's an important condition: you won't repay anything unless you're earning above a certain threshold. For 'Plan 5' loans (those taken out in England from 2023 onwards), the current threshold is £25,000 a year.
Once you earn above that, you'll repay 9 per cent of the amount over the threshold – and if you're employed in the UK, it comes straight out of your salary.
For example, if your salary is £2,000 a month, that's £24,000 a year so you won't make repayments. If it's £3,000 a month, that's £36,000 a year so you'll pay 9 per cent of £11,000 which is £990, or £82.50 a month.
What interest will you pay and how long to repay in full?
The interest rate on student loans can change over time. Currently, for Plan 5 loans, it's set at 4.3 per cent – though this may rise or fall in future.
How long it takes to repay your loan depends on several factors, including your salary, the total amount borrowed, and how often your income fluctuates.
Since repayments are based on what you earn rather than what you owe, many graduates find that student loans take decades to repay – and some never pay them off in full before the remaining balance is wiped after 40 years.
Government data shows that the average debt among students finishing their course in 2024 was around £53,000, though this can vary widely depending on your course, how long you study, and where you live.
Interest rates also affect how much of your monthly repayment goes towards clearing the loan itself, rather than simply covering the interest. In lower-earning years, most of your payment may go toward servicing the debt, rather than reducing the total.
Expert tips on managing money at university
Managing your finances is one of the most important skills to develop while at university – and a few simple tools can make all the difference.
Karen Barrett, CEO of the financial advice platform Unbiased, told The Independent that budgeting tools and part-time work are among the best ways to stay afloat.
'Student bank accounts will have an overdraft facility - all the big high street banks are offering similar, at around £1,500. That can change with good management on the account - you can dip in should you need further funds,' Ms Barrett said.
'A second tip would be to get a part-time job! Working in the student bar is popular, or tutoring. That can be a really good way of earning extra income while also being able to focus on your studies.
'And if you're really hard-pressed and family can't help out, universities have hardship funds. They are for if there's nothing else available to you and it's on an as-needed basis - but it's just a fallback and can be a few hundred pounds, not to be relied on as a main income source.'
As with any major decision, taking stock before leaping is important – and that goes for university and loans just as much as for jobs, weddings or big expensive purchases.
Student loans aren't quite debts for life, but they are significant. However, there is data suggesting university degrees can lead to higher earnings.
Ms Barrett pointed to checkasalary.co.uk data showing average salaries of more than £19,000 without a university degree, or £24,000–£27,000 with one.
'Apprenticeships are also competitive and are seen the way to earn and learn at the same time, so they are in high demand,' she added.