• How much will your student loan really cost



Can you afford to go to university? With tuition fees for many degrees now at £9,000 a year, it's understandable that a lot of prospective students are thinking twice.

That's the point of Student Finance Day, now in its second year which took place this year on Thursday 20 September. The day, which is run by the Independent Taskforce on Student Finance Information, is intended as a time for a bit of serious mythbusting on the topic of student finance. It's particularly focused on tackling the idea that rising tuition fees should put off anyone from going to university.

There are some key facts to take on board before you decide whether uni is for you. Martin Lewis of MoneySavingExpert.com has shared these 10 tips for any would-be students.

  1. You don't pay up front to go to uni

First time undergraduate's fees are automatically paid by a Student Loans Company loan. There are also loans of up to £5,500 to live off (£7,675 in London) and those from families with income under £42,611 get living grants of up to £3,354.

  1. Students don't repay, graduates do, but only if they earn £21,000+

You repay 9% of everything earned above £21,000 starting the April after graduation (2017 for most). This £21,000 will rise from 2017. Those who never earn over it, never repay.

  1. Monthly repayments are the same on £6,000 or £9,000 fee courses

As monthly repayments depend ONLY on earnings, the course fee size doesn't impact it.

  1. It’s wiped after 30 years

Whatever you still owe, repayments stop after 30 years.

  1. There are no debt collectors

Repayments are taken via the payroll, just like tax. So you never actually handle the cash, meaning there are no debt collectors chasing.

  1. Repayments are £470/year LOWER than before

Those asking "how can anyone live with such debts?" may be surprised that future graduates will initially have MORE disposable income than today's graduates as they repay above £21,000 earnings (under the old system, it was £15,795). This is also a mild improvement for building a deposit and getting a mortgage in the early years after graduation.

  1. You will owe for LONGER and may pay MORE

The bad news is compared to today's graduates, 2012 starters onwards repay less each year, have much bigger loans and pay higher interest (as much as inflation plus 3%), so it'll take MUCH longer to repay than now and depending on earnings, may cost a lot more.

  1. Many will NEVER pay it all back

Even many starting on £25,000 graduate salaries (and rising after) won't repay everything owed within the 30 years (test your situation at www.studentfinancecalc.com) meaning they'll often be repaying for much of their working life.

  1. Many won't pay more on £9,000 courses than £6,000

As even many £25,000 starters won't repay combined £6,000 tuition fees and living loans before the 30 year wipe, it won't cost them any more to take a £9,000 fee course.

  1. Paying up front could be throwing £10,000s away

Fee fears mean some parents aim to pay them upfront. For those planning to use savings, remember that because many won't repay what they borrowed at today's prices before the 30-year wipe, you could be throwing big money away. Don’t make knee-jerk decisions to pay upfront, without doing research.

Martin Lewis is head of the Independent Taskforce on Student Finance Information. Read Martin's advice to TSR members in our Q&A feature.

For more help on understanding student finances, check out our collection of helpful videos


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