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How student finance actually works

Get your head around the real cost of university and find out more about how student finance for undergraduates really works.

When you go to university, it might be the first time you’ve had to deal with the financial side of things  and it can all be a bit confusing. This guide aims to give you a simple but comprehensive breakdown of the basics behind student finance.  

Visit our sister site The Student Room for all the latest information from Student Finance England, including how to apply for undergraduate student finance for 2022-23.

What are tuition fees?

These are the annual fees charged by the university or college to each student to cover the cost of your course and access to resource materials, such as the library. They don’t cover the cost of living or additional course materials, including books. 

Tuition fees vary depending on where you come from and where you are going to study. For example, if you’re from England, you will pay up to £9,250 no matter where you study in the UK. If you’re from Scotland, then it’s free to study there but will cost up to £9,250 in the rest of the UK. 

Welsh students pay up to £9,000 in Wales and £9,250 elsewhere. And Northern Irish students pay up to £4,530 there and up to £9,250 in England, Scotland and Wales. 

What is a student loan?

Don’t worry if all of the above numbers seem a bit confusing and scary. Funding is available in the form of student loans to help you pay these fees, as well as to help you with the cost of living while you study. 

In order to qualify for a student loan, you must be studying at a recognised or listed college or university on a full-time course. These are institutions that can legally award degrees or are affiliated to those that can. You must also be a UK national or have settled status. And you need to have been living in the UK for at least three years prior to starting your studies. 

The loan is broadly split into two parts: a tuition fee loan to cover the cost of your studies and a maintenance loan to help you with the cost of living while studying. Tuition fee loans are generally paid directly to your university or college so generally you won’t see the money.

Maintenance loans are paid on a sliding scale according to your needs. These are means tested by your household income, which for most young people effectively means that of their parents. Depending on how much they earn, the means testing system may expect them to contribute to your cost of living while studying.  

Remember that all student loans need to be repaid once you have graduated and started earning. And interest will be charged on your loans from the moment you take them out – even while studying. 

Don’t let this put you off. More than two thirds of students take out both types of loans to help them pay for their studies. Relatively speaking, student loans are not expensive, and you only start paying back once you’re earning above a specified threshold. 

How to apply for a loan

Again, the exact application process differs across the UK. For example, in England you will need to apply to Student Finance England and in Scotland to the Student Awards Agency

For means tested maintenance loans you will need to provide information about you or your family’s household income. You will also need to apply for your loan at the start of each academic year, as circumstances and entitlements can change. You can apply for all of the above loans online: here's more information from Student Finance England on The Student Room

How do loan repayments work?

You will repay your loan over a 30-year period. But it’s only repayable once you start earning over a certain threshold, as Student Finance England explains on The Student Room here

Currently, the threshold for repayments is £27,295. Once your salary is above this amount you will pay back 9% of everything you earn before tax. Interest is charged on a sliding scale with a maximum amount limited to 3% above the Retail Price Index (RPI). 

It’s important to remember that if you don’t earn over the threshold, you are not required to make any loan repayments although you will still be accruing interest. 

Most people never actually pay off the full loan amount. In this sense a student loan is more like a graduate tax, with higher earners paying back more over time. Any outstanding loan amounts are written off after 30 years. 

Here's more from Student Finance England on The Student Room about loan repayment.

Are student loan repayments changing? 

You might have seen reports in the news about changes to student loan repayments. These changes will not affect students starting university in September 2022, but they will affect those starting in 2023 and beyond. 

Students starting university in September 2023 will have a lower repayment threshold for their student loan than those starting in 2022 – that is, the annual salary they need to be earning before they have to start repaying student loans will be lower at £25,000 down from £27,295. 

The length of time that graduates have to pay back their student loans is also increasing for those starting university in 2023. At the moment, student debt gets written off after 30 years but this is being increased to 40 years. 

Is other funding available?

Even with a tuition fee loan and maintenance loan, funding your university experience can be a challenge. Many students get part-time jobs, but this may not always be an option due to the demands of studying. However, other funding is available in the form of bursaries and scholarships.

These are funds set up by public and private bodies to give additional help to students who may need it or who have shown promise in certain areas.

It’s a good idea to do some research to see what extra funding is available. You should also be prepared to write personal statements and attend interviews. Putting in this relatively small amount of effort might reap big rewards. 

Budgeting for university

Student finance doesn’t have to be scary and certainly shouldn’t put you off. Remember that most other students are in the same boat and that funding is there to make sure you get the education you deserve. 

It’s worth creating your own university budget. You will need to factor in the cost of tuition, accommodation, food, travel, utility and other bills, socialising and contingencies (such as unexpected travel costs, clothes, holidays and other non-essentials). This will help you work out how much you may need to borrow and where you can make savings.

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