Essential guide to student loans

Most students take out a loan to fund their studies

Higher education in England and Wales can be an expensive business, with students having to pay tuition fees as well as living costs. This BBC Working Lunch factsheet guides you through the business of borrowing money to go to college or university.

(There are different arrangements in Scotland and Northern Ireland. Further details from the Student Awards Agency for Scotland and, in Northern Ireland, your local Library and Education Board.)

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Who's eligible for a loan?

Full-time students aged up to 54. They can get a loan even if they have previously studied in higher education. But students aged 50-54 will have to show that they plan to work after their course.

However, there are some groups who are not eligible for loans:

Postgraduate students (unless on PGCE courses)

Non-UK students

Diploma of Nursing/Midwifery students (although these courses can attract NHS funding)

Part-time students (unless they meet certain requirements - click here for more information)

How much is available?

These are the maximum loans for 2001/2002. (Loans are smaller in the final year as they do not need to cover the long vacation - these figures are in brackets):

Students living away from home and studying in London: £4,700 (£4,075)

Studying outside London: £3,815 (£3,310)

Living at home: £3,020 (£2,635)

Eligible students can borrow up to 75% of the maximum amount before means-testing comes into effect. The Local Education Authority (LEA) will look at your income and your family's income to decide how much money you'll need to find yourself.

By deducting certain sums from your parents' gross income, the LEA will come up with a figure called a residual income.

If it is less than £20,000 there will be no contribution

If the residual income is £20,000 your parents will pay £45

Over £20,000, they will pay £45 plus an extra £1 for every £9.50 of residual income.

Complicated, isn't it? How about tuition fees?

The most any student will be asked to contribute towards their fees in 2001/02 will be £1,075. The actual amount will depend on that old favourite, the family's residual income:

If it is less than £20,000 they will pay nothing

If it is between £20,000 and £29,784 they will pay part of the fees, worked out on a sliding scale

If the residual income is above £29,784 then they will have to pay the full fee contribution of £1,075.

It is estimated that about half of students in England and Wales will not have to pay fees in 2001/2002. Students in Scotland do not have to pay tuition fees.

How do I apply?

Ask your LEA for an Eligibility Application Form (HE1 - click here for an online form). The LEA will let you know what you are eligible for and you then need a Financial Assessment Form (HE2 - click here for an online form) to go through the means-testing process.

The NUS provide comprehensive student finance information

Once the LEA has calculated how much you are entitled to it will send a Loan Request Form. This is used to tell the Student Loans Company (SLC) how much of the loan you want to take out. The SLC will then send a cheque to your university or college.

Returning students should automatically be sent a new Financial Assessment Form (HE2) by their LEA.

The final deadline for applications is four months after the start of the academic year. Students who do not apply to be assessed for eligibility by then will not be eligible for support for the rest of that year. But they can apply during any subsequent year of their course.

How do I pay the loan back?

You start repayments the April after you graduate or otherwise leave your course. The amount depends on your level of income. Repayments are deducted from wages in a similar way to National Insurance, at the rate of 9% on everything earned above £10,000 gross - if you earn less than that, repayments are suspended until this threshold is reached.

What's the interest rate?

The amount owed is adjusted in line with inflation (calculated using RPI, the Retail Price Index). The interest rate for the year starting August 2001 is 2.3%.

Can I defer repayments?

You can apply to defer your loan for a year at a time if your gross income is less than 85% of national average earnings - you qualify if your gross income each month is £1,592 or less (figure at August 2001). You can also pay off your loan more quickly if you want.

What other financial help is available?

If you cannot get any of the loans mentioned already, you might be able to apply for a Career Development Loan (CDL)

This is a deferred repayment bank loan offered in partnership between DfES and four major banks. It is designed to cover vocational training and education lasting up to two years, plus, if relevant, up to one year's practical work experience where it forms part of the course. Study can be full-time, part-time or distance learning. A CDL cannot be used to finance anything that is being funded by another source.

Who can apply?

Anyone aged 18 or over who lives or intends to train in Great Britain. If you are claiming state benefits, or wish to do so while you are studying, you should talk to the office that pays you before you apply for a CDL.

How much can I borrow?

You can apply to borrow between £300 - £8,000 to cover up to 80% of course fees (or 100% of the course fees if you have been out of work for three months plus prior to applying).

The full cost of books, materials and other related expenses including travel can be included and, if the course is full time, living expenses. If you are claiming 100% of the course fees you must get your application form endorsed by your local IAG provider, the National Council for Education and Training for Wales (ELWa) or Local Enterprise Company (LEC).

When do I repay the loan?

You make no repayments during the period of learning supported by the loan and for up to one month afterwards. The DfES pays the interest on the loan during this period and then you repay it to the bank in accordance with your loan agreement. It is possible to postpone the start of repayments by up to 17 months if, when you are due to start repaying:

you are registered unemployed and claiming Jobseeker's Allowance and related benefits (including credit of National Insurance contributions)

you are employed and receiving Working Families' Tax Credit; Housing Benefit; Council Tax Benefit or Disability Working Allowance

you are taking part in a government training programme and in receipt of a training allowance

you have to attend your course for longer than expected (due to ill health or other special reasons).

Students have to agree any postponement with the bank before repayments are due to start.

Part-time students can now apply for loans. If you are studying for at least 50% of an equivalent full-time course, you can apply for a loan of £500. To qualify, you must:

have an income of less than £13,000 a year (for single students) or a joint income of less than £15,000 a year for a student with a partner

be under 50 at the start of the course (or under 55 if you intend to return to employment)

have resided in the UK for the past three years

not already hold a first degree qualification

not be in breach of a previous student loan agreement

attend a course which qualifies as "designated"

Call the DfES on 0800 731 9133 for an application pack.

Your university or college can provide financial help if you are finding it difficult to meet living expenses or course costs. This help is discretionary and is based on individual circumstances. Admissions tutors or the student welfare section of the university or college will have more information and details about how to apply.

Access bursaries are for full-time student parents (and those studying part-time to be teachers) who might need extra help because they have children to look after. They are paid according to need. Students can apply before they start their course.

Students who are in financial difficulty during their course can also apply for hardship funds or loans. For information on hardship funds and bursaries in Wales, call the Further and Higher Education Division of the National Assembly for Wales on 029 2082 6318.

Social security benefits are also available to certain students, such as lone parents and disabled people. If you are receiving benefits and would like to know how becoming a student will affect them, ask at your local Benefits Agency office.

Housing Benefit and Council Tax Benefit can also be awarded to certain groups of students, including lone parents, disabled people, student couples with children and part-time students. Contact your local authority for more details.

How can I find out more?

For information on eligibility for support, the means test, entitlements and other sources of support in higher education, further education and studying on benefits, contact the National Union of Students at Nelson Mandela House, 461 Holloway Road, London N7 6LJ.

The Department for Education and Skills (DfES) publishes a guide called Financial Support for Higher Education Students in 2001/02, available by phoning 0800 731 9133. There is a free text phone service on 0800 210 280.

For information on applying to higher education, contact Universities and Colleges Admissions Service (UCAS) at Rosehill, New Barn Lane, Cheltenham, Gloucestershire GL50 3SH. Tel: [phone]

For more information on student loans and supplementary grants for living costs contact the Student Loans Company at 100 Bothwell Street, Glasgow G2 7JD. Tel: [phone].

Find out more about Career Development Loans on the net or by calling the Department of Education's CDL helpline on 0800 585 505.

Students in Scotland can pick up an application form for support from any higher education institution, by phoning the Students Awards Agency for Scotland (SAAS) on 0131 476 8212 or by downloading it from the SAAS website.

Students in Northern Ireland should contact their local Education and Library Board (ELB) for an application form and further information on applying for student support.