How student loans work and when you need to repay them

A student loan can be helpful in supporting young people through university, but there are warnings that the funding can have an adverse impact after graduation.

In fact, student loans accrued interest at a rate of £482 per second last year, far outpacing repayments, said The Telegraph, something that “plagues young professionals”.

These individuals have been affected since the introduction of £9,000 annual tuition fees in 2012 and 9% interest above certain earnings thresholds, said Claer Barrett in the Financial Times, leaving workers “bitterly angry”.

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Yet a student loan may be essential with the “rough cost” of a three-year course at £68,349 per year for tuition, books and living expenses, said SaveTheStudent.

What is a student loan?

Tuition fees are capped at £9,535 a year in England and Wales. The figure went up by £285 in 2025, the first increase in eight years, and is set to go up again in the 2026/27 academic year to £9,790.

However, this is not an up-front cost and instead student loans can be used to cover the educational aspect and some living costs while at university.

There are two parts to a student loan. The first covers tuition fees “equal to the annual cost” of a course, said BBC News, which is paid directly to the university.

The second is an optional maintenance loan that is paid directly to your bank account in three instalments to subsidise the general cost of living. A maintenance loan is supposed to “help out” with costs like rent, travel and food, but the “way you allocate this money is your decision”, said Whatuni.

Unlike the tuition fee loan, the maintenance loan is means-tested and depends on your parents' income and whether you go to university in London.

The maximum maintenance loan for students who stay at home with their parents is £8,877, rising to £10,544 “if they move out and study outside of London”, said The Telegraph.

Students who attend university in London while living away from home can get up to £13,762. This is also increasing to £9,118 for those who stay at home, £10,830 if living away from home and £14,135 for those in London.

You can apply for one or both types of loan, and whatever is borrowed is then combined into a final total that’s repaid once the student finishes their course.

Who can get a student loan?

To get a student loan, you “must be studying at a recognised or listed college or university”, said The Uni Guide, and you need to be a UK national or have settled status.

Student finance is typically only paid for a first undergraduate course, even if a previous course has been self-funded.

There is no age limit for the tuition fee loans but there may be limited funding for the maintenance portion if you are over 60.

How to get a student loan

You need to apply for student finance through the student finance body in your country.

Those from England must apply through Student Finance England, while the equivalent in Scotland is the Student Awards Agency for Scotland (SAAS), with Student Finance Wales and Student Finance NI in Wales and Northern Ireland.

You can apply up to nine months after your course starts, but “you might get less money than you expected” if you apply too late, said Gov.uk.

How a student loan works

Once your loan is approved, interest is charged while you study – “before you graduate and look to start paying it back”, said The Times.

Don’t panic though, as it “does not work like a bank loan”. Instead, student loans are often thought of as a “graduate tax” as the Student Loans Company only starts to take some of your earnings once you start earning a specific amount.

When do you repay a student loan?

A student loan is deducted automatically through your employer’s payroll. But the amount a person repays is dependent on “which of the five different repayment plans you’re on”, said This Is Money.

Anyone who started university since 1 September 2023 is on Plan 5 and needs to repay the loan once earnings go above £25,000, with 9% interest charged on earnings above this threshold. The more a person earns, the more they will need to repay each month.

Why are people angry about student loans?

Graduates have complained that the student loan debt makes “affording a mortgage more difficult, exacerbates cost-of-living concerns and makes parents feel penalised for taking leave for having children”, said The Independent, while campaign groups claim there are “hallmarks of mis-selling”.

The “worst hit”, said the Financial Times, are those on Plan 2 student loans between 2012 and 2022.

The repayment threshold for those on Plan 2 loans is set to rise from £28,470 per year to £29,385 in April this year but will then be frozen at that level until 2030.

This creates fiscal drag, said MoneySavingExpert’s Martin Lewis, which means that assuming prices and average earnings rise, “a bigger proportion” of income will go towards repaying the student loan debt.

But while there may be fear that “enormous interest payments could balloon a loan to unmanageable levels”, said personal finance analyst Alice Haine to Evelyn Partners, in reality, “many people will never repay the full amount”.

Student loans are not recorded on a person's credit file, but “can be taken into account” for affordability checks when applying for loans such as a mortgage, said MoneySavingExpert. The debt is also wiped out after 40 years, or if you die or are “permanently incapacitated”.