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Do certain companies specialise in student loans?
Yes, and the main company is unsurprisingly called the Student Loans company, set up by the government, and run from Glasgow.
The government, having disposed of free tuition, and made student grants far more difficult to obtain, created student loans as part of a package of measures to help students on higher education courses in the UK to meet their living costs.
Student Loans in the UK
The idea is that the interest that is paid on the amount is linked exactly to the rate of inflation. This means that in real terms the amount that student loan borrowers will repay is equivalent to what they have borrowed. However, the speed at which borrowers repay their loans depends on their income level, because they only have to start repayments if they are in employment and earning a certain amount.
Because of these two features, the student loan is definitely one of the cheapest and most sensible ways to borrow money that will ever be available to you. Although you can apply for a loan from your first year of university, you do not have to actually start to repay your loan until the April after you leave your course. Be aware, however, that interest will be applied to your loan from the day you receive the first installment of your loan.
Whether or not you have to start paying the April after your course finishes depends on your income. You won't have to start repayments until you are earning £10,000 gross (before deductions). This is equivalent to £192 a week or £833.33 a month. The way it works after you start paying is that your employer will deduct your payments through PAYE, or you will pay through the self-assessment system if you are self-employed.
The amount you will pay will be at a rate of 9% of all gross earned income that is above the £833.33 threshold. An example of this is that if you are paid £1000 a month, then your repayment would be 9% of £166.67, which is the difference between £833.33 and £1000.
The length of time that it will take you to pay will depend on how much your payment amount is, and how much you are paying each month as a repayment. You can choose to make overpayments if you wish. However, since you have borrowed money at a rate of interest that is so low there is little point in making overpayments, as you can make more money putting an amount in a savings account that you would save in interest by paying it off.
To apply, you will need to do so through your award authority, which is determined by where you live, rather than where you are studying.
Frequently Asked Questions
Do certain companies specialise in students loans?
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Will I be able to get a loan if I have bad credit?
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