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Everything you need to know about student loans

Last updated: 4th September, 2013

student_budgetWhether you’re heading off to university in September, or if you’ve recently graduated from your course, you’ll probably have quite a few questions about your student loan.

The student loan can keep you living throughout university, as well as paying for your course fees, but it can be a tricky one to understand. Luckily, we’ve got all the facts about each part of the loan so you’ll have one less thing to worry about.

How do I apply for a student loan?

Initially you need to know that there are two parts to your student loan; the loan for your tuition fees, and a maintenance loan.

The tuition fee loan does what it says on the tin – it’s there to cover your university tuition fees. If you’re starting university on a 2012/13 entry, these have risen to £9,000 per year, though some universities may charge slightly differently.

The maintenance loan is intended to help you with living costs, which includes everything you’ll need to spend money on outside of your fees – this includes food, clothing, course materials and, of course, the odd night out.

The amount you will receive depends upon not only your parents’ income, but upon which part of the country you will be living in whilst at university. One thing is for certain; part of the loan you will automatically be qualified to received; the second part is dependent upon your parental income.

To apply for these, you will need to visit the Directgov website to register for an account. From there, you will need to prove your household income; following this, you’ll need to complete the student declaration form within the deadline.

Common misconceptions about the loan

tuitionfeesbenefitsThere are a few misconceptions or uncertainties many students have about their loan, the first of which is that the student has to pay the tuition fees themselves. In actuality, the government pays the tuition fees directly to the university, so you never need to worry about managing that part.

A lot of students worry about how their student loans will affect their credit score. There isn’t such a thing as a universal credit score; when it comes to applying for other loans and mortgages, it is under the discretion of each individual bank, and it’s next to unheard of for a bank to see a student loan as a negative debt.

If you already have a bad credit rating, unless you owe Student Finance for a previous loan, you will not be prevented from being granted a loan.

Your credit score is determined by numerous factors. 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.

Being realistic about your overdraft

The temptation to extent your overdraft as much as possible and spend it all is incredibly tempting, but it’s important to realise from the start of university that your overdraft should be kept under control.

Keeping your overdraft under control from the beginning will leave you with less debt after university and more money in the long run. Obviously emergencies happen, and that is why having an overdraft is useful.

Check out the different overdraft offers from various lenders as many will come with free extras including travel cards and student discount cards.

How do I repay my student loan?                                

When you have graduated, you may be thinking about how you will repay your loan. Luckily, you will not have to repay anything on your loan until you are earning £21,000 or above. Once you are earning that wage, you can expect to pay 9% of the figure that you are earning.

Unfortunately, even whilst you are at university, you will be charged interest on your loan. Whilst studying, you will be charged the rate of inflation plus an additional 3%. If you are earning less than £21,000, then it is just the rate of inflation. Above £21,000, and you can expect to be charged the rate of inflation plus 3%.

Unless you are self-employed, your repayment will occur automatically through your employer. It will be taken from your wage alongside tax and national insurance, so that’s one less thing to worry about!

By students

Hello! This website has been written by student money experts Save the Student! to give you an overview of student bank accounts and what they have to offer you.

The studentsWe review the benefits and catches of all student accounts so you can make an informed choice and avoid the traps!

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