Student Loans - What you need to know
As with any system you haven’t come across before, the system of student maintenance in the UK seems very complex but really isn’t. There are slightly different arrangements in England, Wales, Scotland and Northern Ireland but any borrower, anywhere, will only be concerned with what applies to them.
One important point is that you don’t just make a ‘one-off’ application for a student loan to cover all your time at college or university – you have to apply for a new loan for each year you will need one. (Not everyone takes out a loan every year of their course.) Depending on where your permanent home is, the application process differs and, depending on where you live and study, the maximum amount of loan is different.
For the next academic year (AY 2003/2004), a person studying away from home and based in London will receive a possible maximum of £4,930 (depending on their parents’ or partner’s income). Those studying away from home but outside London can borrow up to £4,000 and those living at home while attending college or university locally can get up to £3,165. A portion of these figures is automatically available to eligible applicants, and the remainder is subjected to a ‘means test’. If you are from England, Wales or Northern Ireland the portion which is means tested is 25%; the system in Scotland is slightly different.
Student loans are available to those studying for a first degree, such as a BA, a BSc or an HND. They’re not available to people on courses below degree level or those studying for a postgraduate degree – although students taking some postgraduate teaching qualifications can get loans.
Probably the most important message to a new potential borrower is to get your application in just as soon as you can – even if you’re still quite some time away from having a confirmed offer of a place at college or university.
The Student Loans Company (SLC) is the organisation with which the student borrower will have the most lasting relationship, but there are other key agencies involved in both the application process and in the repayment process (which begins the April after a borrower has finally left their course of study). SLC has a number of responsibilities but its primary function is to pay out the three instalments of loans each academic year to all borrowers, as well as the part of tuition fees not paid by students. The payment of tuition fees is separate from student loan arrangements because it applies whether students choose to take out loans or not.
“…get your application in just as soon as you can – even if you’re still quite some time away from having a confirmed offer of a place at a college or university.”
Under the Student Support Scheme arrangements, it is to the Local Education Authorities in England and Wales, the Student Awards Agency for Scotland and the Education and Library Boards in Northern Ireland that borrowers must apply for a student loan. They are known as ‘award authorities’ and they decide on the eligibility of an applicant and how much they may be entitled to borrow. Not everyone borrows the full amount, and it’s up to the borrower to decide how much of the entitled amount they will borrow. The award authorities instruct SLC to make loan payments in accordance with their assessment. At the other end of the process, the job of collecting repayments is done by the Inland Revenue, who ask employers to deduct loan repayments from employees’ salaries. Notice of these deductions is passed to the SLC, who then adjust borrowers’ accounts. The amount you will repay will be
directly linked to what you earn, and repayments start when you are earning more than £10,000 a year. This is called the ‘repayment threshold’ and, from 2005, it will be raised to £15,000 a year. Once you earn more than the threshold, you will be required to pay 9% of everything you earn above that figure. The Student Loans Company maintains a record of your repayment status, which is transmitted directly to the Inland Revenue – but you won’t be too concerned about that if you haven’t even applied for your first loan yet!
At a glance
If you live in England or Wales, the procedure starts with your contacting your Local Education Authority to ask for an application form. Ideally, this is done in January. Existing students will be sent an application form directly by their LEA.
Fill in the form and return it to the LEA, who will decide your eligibility and, if you are eligible, will send you a form requesting personal financial information – basically about your parents’ or your partner’s income. Now, you fill in this form and return it to your LEA. The LEA will then advise how much, if anything, you have to contribute to fees and the maximum amount of loan you can apply for. This is shown on a financial notice, a copy of which is sent to the Student Loans Company. You complete the back of the financial notice and send it to the Student Loans Company. There are a small number of LEAs where this process differs and you will be told if this applies to you.
The loan is in three instalments, paid directly into your bank or building society account at the beginning of each term, although a few students may receive their first instalment by cheque. It is extremely important that you give the Student Loans Company accurate, up to date details of your bank or building society account.
If you live in Northern Ireland, the process is as above, except that application is made to the local Education and Library Board. If you live in Scotland, you apply to the Student Award Agency for Scotland and the payment arrangements are broadly similar to those for other UK students.
All questions on eligibility should be directed to your award authority but you will get a great deal of information from the Student Loans Company’s website, which is www.slc.co.uk