Student Loans

Student loans play a vital role in supporting those in higher education by providing them with financial help to meet the demands placed on the purse-strings by undertaking a degree at university. When they were originally introduced, back in 1990 by the Conservative Government, student loans were seen more as an additional form of financial help, to compliment the grants available at the time in paying for living costs and resources required by students.

With the introduction of tuition fees, and the reduction in the availability of grants, the student loan has become more and more relied upon to bank roll the higher education of students, without it a great many students simply wouldn’t be able to pay for their education and would have to miss out on the opportunity.

The cost of studying can add up to surprisingly large sums, especially when dealing with courses that span more than the typical three years. Tuition fees, text books, rent, food, phone bills and of course the expenses of going out on the town at every given opportunity mean that the average student leaves with around £17,000 of debt to go with their new letters after their name.

With such expense to cover, the student loans are invaluable as they provide much needed cash, and do not place a burden of repayment on to the individual until they have finished their studies and are in work and earning in excess of £15,000 per annum. The monthly repayments are then worked out based on earnings, so will remain affordable, in addition the amount of interest charged is well below normal market rates, and is linked to inflation to ensure that the debt and repayments stay the same relative to the person’s earning in real terms.

The amount that can be borrowed on a student loan is determined by a number of factors, such as whether the person is living away from home, and if they are in their final year of study. The amounts available for the 2008/9 year are as follows:

Living with parents: £3580 (final year: £3235)
Living away from home: £4675 (final year: £4280)
Living away from home (London): £6475 (final year: £5895)

Along with taking student loans, many students will also make heavy use of the overdraft facility that most banks provide on their student accounts. While it is generally not a good idea to run your account in the red, the vast majority of student accounts do offer the overdraft as interest free, so in those cases it will not snowball with interest and fees.