Student loans factsheet

Sooner or later most students take out a student loan to supplement their income

Funding a degree course has changed substantially in the past decade. Maintenance grants have now been replaced by student loans and various other schemes. This Working Lunch factsheet guides you through the complicated business of borrowing money to go to college or university.

There are two main types of loans - which one you can apply for will depend on when you entered higher education, but you can apply for a loan from only one of the two schemes.

Who is eligible for a loan?

Basically, all students under 50 can apply for a loan, although students who started courses after September 1998 and were under 55 at the time might qualify if they can show that they intend to work after completing their studies. However, there are some exceptions.

Postgraduate students (unless on PGCE courses)

International students

EU students

Diploma of Nursing/Midwifery students

Part-time students (unless they meet certain requirements - see below)

Student Support Scheme

That's who can get a loan. Now let's start by looking at the latest method to be introduced, the Student Support Scheme. This applies to students who entered higher education after September 1998.

What is the maximum loan available?

These are the rates for 2000/2001. (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: £4,590 (£3,980)

Studying outside London: £3,725 (£3,230)

Living at home: £2,950 (£2,575)

You can borrow any amount up to your level of entitlement for each year of study. If you initially apply for less than the full amount in a given year, you may apply for the remainder later on in the year

The NUS provide comprehensive student finance information

About 25% (this varies for Scottish students studying in Scotland) of the loan is means-tested. This means that your application has to be approved by your Local Education Authority (LEA), the Students Award Agency for Scotland (SAAS) or the Education and Library Boards (ELB). Which authority is applicable to you depends on your home base, not place of study. Applications are then passed on to the Student Loans Company to forward any payment.

If your parents income after tax allowances is more than £28,505 they might have to make a contribution. These are set on a sliding scale, with parents earning £36,405 or above paying the highest figure of £930.

What is the interest rate?

The amount you owe each year will be adjusted in line with inflation (calculated using RPI, the Retail Price Index). The Annual Percentage Rate (APR) for the year starting September 2000 is 2.6%.

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.

How do I apply?

In the first instance contact your LEA, ELB or SAAS, as appropriate. If you haven't sent in your forms yet, you have four months from when your course starts.

Mortgage-style loans

Those who entered higher education before 1 September 1998 or meet other criteria qualify for what are called "mortgage-style" loans. You are eligible if one of the following applies:

you were on a higher education course in the academic year 1997/98, and are still on the same course,

you were a student in 1997/98 but transferred to a new course during 1998/99

you had a firm offer of a place on a course by 1/8/97, but deferred until 1998/99

you were unable to start a course in 1997/98 because your A-level grades were not good enough, but did so in 1998/99 after having grades raised following an appeal

The maximum amounts for 2000/2001 are (final year in brackets):

Students living away from home and studying in London: £2,255 (£1,645)

Outside London £1,825 (£1,330)

Living at home £1,395 (£1,020)

(These amounts are lower than those available under the new Student Support Scheme as the students who are eligible for them can also apply for maintenance grants.)

If you do not borrow the full amount you cannot apply for the rest in a subsequent year.

What are the rules for paying back?

You repay the loan in equal monthly installments. The amount repayed each month depends on

how much you borrowed

when you borrowed

the length of time you take to repay the loan

the amount of interest charged. Interest is levied according to RPI - this year that will be 2.6%.

If you take out four or fewer loans, repayments will be spread over 60 months. If you take five or more, your repayments will be spread over 84 months.

Repayments start in the April after you finish your course or stop attending it. However, you can pay back your loan early if you want.

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 - for 2000/2001 you qualify if your gross income each month is £1,592 or less.

How do I apply for a mortgage style loan?

If you have already received a mortgage-style loan for a previous year of your course the Student Loans Company will automatically send you a new application form. If you're applying for the first time, you should pick up an application form from your university or college.

Part-time students

For the first time, loans are now available to part-time undergraduates. 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:

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 DfEE on 0800 731 9133 for an application pack.

Career Development Loans

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 DfEE and four High Street 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 can be used to supplement a grant or bursary that does not cover the full cost of the training. It cannot finance anything that is being funded by another source such as a Local Education Authority mandatory award or student loan.

Who can apply?

Anyone aged 18 or over who lives or intends to train in Great Britain. If you are claiming, or wish to claim social security benefits you should check with your local Benefits Agency office and university student services and students' union how your benefits may be affected.

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 Training and Enterprise Council (TEC).

When do I repay the loan?

You make no repayments during the period of training supported by the loan and for up to one month afterwards. DfEE pays the interest on the loan during this time, known as the repayment holiday.

Before the end of the repayment holiday you can apply to the bank to defer repaying the loan for up to another five months as long as you can satisfy the bank that you are:

registered unemployed and claiming Jobseeker's Allowance and related benefits (including credit of national insurance contributions)

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

a student or trainee and, for reasons beyond your control (for example, a period of illness) you need to continue on your course.

As long as you continue to meet any of these conditions, you can apply for a further two extensions of six months each. At the end of this period you become responsible for the loan repayment and any further interest.

How can I find out more?

The DfEE website www.dfee.gov.uk/studentsupport has extensive information or you can phone a helpline number, 0800 731 9133 to order a copy of the booklet Financial Support for Higher Education Students in 2000/2001.

For more information on student loans contact the Student Loans Company at 100 Bothwell St, Glasgow, G2 7JD Tel: [phone]. Fax: [phone]. Website www.slc.co.uk.

As well as dealing with thousands of student welfare enquiries each year, the National Union of Students (NUS) provides finance advice for new students. Write to The Welfare Unit, NUS, 461 Holloway Road, London N7 6LJ.

Career Development Loans booklets, which include full details on eligibility, an application form and lists of bank branches you can apply to, are available from Jobcentres, TECs, careers advisers and colleges. Information, including the application form is also available on the internet at www.lifelonglearning.co.uk/cdl/index.

For the DfEE's free booklet on CDLs, telephone [phone] between 8 am and 10 pm, Monday to Sunday.