Q&A

  • How does means testing work?

    Means testing is used to decide how much financial help you are entitled to. For most students it’s based on the joint income of your parent(s) before tax (they are allowed to take off their pension contributions and some allowances for each of your younger siblings, if you have any). If you have a lot of savings in your own name this will also be taken into account. There are a few situations that mean the testing is based on your own income (and your husband, wife or civil partner if you have one) including if you are over 25, or have financially supported yourself for more than three years, have no living parents or are caring for a child.

  • If my parents are divorced / separated whose income is means tested?

    If this is the case in your family the income of the parent you live with most of the time will be used (if that’s not clear, this is normally the parent who claimed child benefit for you before university). If the parent you mainly live with remarries or has a cohabiting partner, their joint income will then be looked at.

  • Will the student loan go on my credit file?

    Whenever you apply for a financial product which involves lending you money, be it a bank account, contract mobile phone or monthly paid car insurance, the company you’re applying to will check your credit file to help decide if they want to lend to you. Your file is a record of things like how much debt you already have and whether you have missed payments on credit cards or utility bills. Having a lot of outstanding debt on your file can make it hard to get a loan or credit card. Unlike other loans, student loans won’t appear on your credit file, so lenders won’t know about it unless they ask – and they often won’t. Even if they do, though, in the bigger scheme of things due to how it’s repaid it’s only likely to have a limited impact on your ability to borrow.

  • Will it be harder to get a mortgage later?

    Once you’re earning enough to repay the student loan you’ll have less income than if you didn’t have it, so this will have a minor impact on your ability to get a mortgage. However, it’s worth noting that this has always been the case.

  • If we’ve got the money should we simply pay and not take the loan?

    If you or your parents decide to pay your tuition fees without taking a loan there’s a few things to bear in mind. It’s definitely a bad idea if you or your parents are borrowing the money elsewhere to do it – as student loans are a very cheap long-term form of borrowing, and you only have to repay them if you earn enough. Even if you used savings, it’s worth remembering that if, as an extreme example, you never earned over £21,000 you’d have effectively paid that cash for no reason – as you’d never have needed to repay the loan. This is a complex subject though, so if you’re serious about doing it, research the pros and cons fully before making a decision.

  • Why does a bursary beat a fee waiver?

    Unless you earn a higher salary on graduation, a fee waiver is unlikely to reduce the amount you repay at all. So while it may feel like your fee and debt is lower, there may well be no material impact on your pocket. Yet a bursary will provide cash now, which could reduce the need for any commercial borrowing. So as one is a certain gain, and the other a ‘you may benefit in the future but might not’, the choice is a no brainer.

  • If you’ve got savings or other earnings after I graduate do they count?

    If you have additional income of £2,000 or more from savings interest, pensions or shares and dividends, this will also be treated as part of your income for repayment purposes and you’ll need to repay 9% of that, again via self assessment.

  • Do I still have to pay if I move abroad?

    Yes is the simple answer. You’re still obliged to repay the student loan based on 9% of all earnings above the equivalent of £21,000 in the country you are in and can face a fine if you don’t. By taking out the loan you have a contractual relationship to repay it. You may have heard that some people don’t repay loans when they move abroad. If that happens it’s because there are practical difficulties in the government pursuing them for the money – but that doesn’t stop them being responsible for paying it back.

  • How do you pay back the debt if self-employed?

    If you set up your own business or work for yourself your repayments will be collected via HMRC’s Self Assessment scheme. This means you will need to make payment at the appropriate deadline to fulfil your legal obligations. If you do not pay, HMRC will pursue you for any amount overdue.

  • What happens if I drop out of university?

    If you don’t complete your course, any tuition or maintenance loan you have taken up to that point will still need repaying. The repayments and interest work in the same way as if you had done the course – in other words you repay 9% of everything earned above £21,000 from the April following the three years after you started.

  • What happens to the loan if I die?

    While it sounds morbid, it’s worth knowing that if you die, or are permanently injured, the rest of your loan is wiped, meaning your kids or parents will never have to pay it on your behalf.

  • Can I pay back the loan more quickly?

    Yes, the government has said that you will be able to repay the loan early without penalty charges, although this doesn’t mean you should pay off early. While in general it’s better to repay debts as quickly as possible, student loans are one of the rare cases where it may be a bad decision because you might not repay the full amount before it’s wiped after 30 years.

  • USEFUL RESOURCES

    • www.brightknowledge.org – the essential guide to careers, education and student life.
    • www.NASMA.org.uk – the National Association of Student Money Advisers who work in universities, student unions and further education colleges.
    • www.nus.org.uk – National Union of Students, a voluntary membership organisation which represents the interests of students.