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Still not sorted your student loan? What you need to know

28th August 2013

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It’s now only two or three weeks before thousands of students begin their first year of their undergraduate studies. All the hard work involved in getting the A-Level results necessary to get onto your course is about to pay off, but before you attend the first lecture/seminar, there’s plenty to still get sorted – and if you haven’t got your finances sorted out yet, there really is no time to lose.

Accommodation, tuition fees, stationery, textbooks, a computer/laptop/tablet, clothes, cookware and the like are all needed, but they all cost money. To help pay for all that, students have to do one thing – take out Student Loans. Although they have to be paid back at some point, they’re essential for paying for all the necessities to see you through the duration of their course.

Here, we have a handy guide detailing all the basics you need to know if you’re still to sort out this fairly important part of your university planning...

What are Student Loans?

They’re what make paying for everything possible, and don’t have to be paid back until you’re earning at least £21,000 a year. There are two types of loan you should apply for:

  • Tuition Loan – this covers just the tuition fees, nothing more
  • Maintenance Loan – this covers everything else including accommodation and food
Ideally, you should apply for both, but you need to apply ASAP if it hasn’t been sorted already.

How to apply

If you need either or both loans, you must apply online here. For the application process, you will need:

  • Your home address
  • Your parents’ details
  • Your bank card
  • Your passport
  • Your National Insurance number – everyone has one
  • Details of the university you’re going to
Once you complete your application, you will hear back from the Student Loans Company in due course about whether your application has been successful. In the vast majority of cases, loan applications from genuine students are accepted.

Common application mistakes to avoid

It can be easy to make a few errors while applying for a loan. Here are some you should avoid:

  • Giving the money yourself to the University for Payment of tuition fees. The Student Loans Company will hand over the money themselves to your university
  • Worrying about repayment during your studies. You don’t have to pay it back while studying unless you’re earning more than £21K a year at the time
  • Thinking the loans will affect your credit rating. They don’t at all, as they’re seen as ‘good debt’ due to their manageable nature
Handling overdrafts

There may come a time, possibly towards the end of the final year, when you’re running low on funds. This is where using an overdraft from your bank might help, but you need to be aware of what you’re doing before it gets activated.

“It is really important to check your account provides an interest-free overdraft, rather than just assuming it will do so. Also, make sure you know the limit, as charges for exceeding your overdraft are high”, said Dan Bowen in a piece on student overdrafts for the Guardian.

Credit Rating and eligibility

Your credit score is determined by numerous factors. Many believe that a credit score can affect you from getting a student loan but this is far from true. Past debts play a big role in a credit score result. “As long as you don’t owe the Student Loan Company anything already, you should be fine. Having a bad credit rating has no impact whatsoever on your eligibility for a loan, which will come as a relief to many people who have a history of bad financial management. You can make any cuts to increase you’re saving, then set up a budget for essentials and stick to it,” says a spokesperson from Yorkshire Building Society. Repayments are only taken from future earnings, which will come as a relief to those of you with concerns about your credit rating.

Loan repayment and understanding debts

This comes after the course is finished and you graduate (hopefully with a first-class degree). You only start to repay your loans as soon as you earn at least £21,000 a year. The more you earn, the more you have to pay back, but the amounts paid are minimal, starting at just £30 per month for those on the lowest income levels.

  • Anyone earning more than £21K but less than £25K per year has to pay £30 a month
  • Anyone on between £25K and £30K must pay around £67.50 a month
  • Anyone on £40K or more has to pay £142.50 back each month
These are basic figures, but 9% of the amount you stand to earn over £21K per annum is charged over a year, and then divided into 12 monthly payments. The money is automatically subtracted from your salary, meaning you don’t have to do anything.

You could pay back more than that, but in order to do so, you must contact the Student Loans Company directly.

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