Under the new system, no student going to university need pay anything upfront and you'll only start paying back your loan once you are earning £21,000.
You'll pay the same amount back every month regardless of how many loans you take out to cover your fees and living costs.
However if you take more loans, you'll be paying off your student loan for a longer period of time.
But, after 30 years, any outstanding balance will be written off altogether and you won't have to pay anything further.
What will come out of my pocket every month?
You'll actually pay less each month than students do now and have more disposable income to hand.
This is because the threshold at which you begin paying back has risen from £15,000 to £21,000 which means students undertaking the 2012 costs will be better off than students under the current system (because they save nine per cent of the £6,000 difference).
The table below compares the repayments you would pay depending on your income, under both the current system and the new.
| Earnings |
Current system |
New 2012 system |
|
Annual repayment |
Monthly equivalent |
Annual repayment |
Monthly equivalent |
| £15,000 |
Nothing |
Nothing |
Nothing |
Nothing |
| £16,000 |
£90 |
£7.50 |
Nothing |
Nothing |
| £21,000 |
£540 |
£45 |
Nothing |
Nothing |
| £22,000 |
£630 |
£52.50 |
£90 |
£7.50 |
| £30,000 |
£1,350 |
£112.50 |
£810 |
£67.50 |
| £40,000 |
£2,250 |
£187.50 |
£1,710 |
£142.50 |
| £50,000 |
£3,150 |
£262.50 |
£2,610 |
£217.50 |
On the average graduate salary of £25,000 your monthly repayments - direct from your pay packet - will be £30 a month or £360 a year. (Please note however - this is a comparison of 2012 starters with current graduates. A fairer comparison is with 2011 starters who will be the last to repay under the current system).
Although under the new system, students will have more disposable income, it's likely the exact amount could be reduced as inflation rises.
This is a fairer view of what disposable income you are likely to have although this is subject to change depending on rate of inflation.
| Repayments in 2016 |
| Average annual inflation |
Current system |
New system |
Increase in disposable income under new system |
| Ignoring inflation |
£15,000 |
£21,000 |
£540 |
| 2.5% (A) |
£16,550 |
£21,000 |
£400 |
| 4% |
£17,550 |
£21,000 |
£310 |
| 5.5% |
£18,600 |
£21,000 |
£215 |
| 7% |
£19,660 |
£21,000 |
£120 |
What about the interest on my loan?
Under the current system, there is no 'real' cost to borrowing as the interest rate is set at the rate of inflation. But under the new system, there will be a cost to borrowing your student loan because you will be charged interest on your loan while you’re studying.
Until you start repaying the loan, interest will be charged at the rate of inflation plus three per cent. When you're due to start repaying your loan in the April after you graduate, the amount of interest you'll be charged will depend on how much you earn.
You will be charged the following rates of interest:
- if you earn less than £21,000 – interest at the rate of inflation
- if you earn between £21,000 and £41,000 – interest will gradually rise from the rate of inflation to the rate of inflation plus up to three per cent
- if you earn over £41,000 – interest at the rate of inflation plus three per cent
As interest is being added, this may increase the length of time you are paying back your loan, especially as monthly repayments will be lower.
What happens if I get a pay cut or lose my job?
If you lose your job, take a career break or simply take a lower-paying job that pays less than £21,000 a year, your payments will stop automatically with no questions asked.
If you take a pay cut your payments will be adjusted to a level which reflects that pay.
Does my loan defer to my parents or other family members if I can't pay?
No. Your loan is taken out in your name and no one else is liable for it. If you are not earning above £21,000 you will not have to pay anything back towards your loan. If you die, your loan will not pass on to family members, it will be written off.
Can I pay my loan off early?
The government has recently (February 2012) confirmed that no charges or so-called 'early redemption penalties' will be imposed on graduates who decide to pay off their student loan early, which means if you want to clear your debt early to avoid further interest costs you can.
However, just because you can repay without penalties, doesn't mean you should. Many people won't pay off their loan in its entirety so making extra payments may not make much difference.
All the above information and more is explained in this downloadable guide aimed at full-time students.
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Part-time
Around one third of undergraduates are part-time students. Fees for part-timers will rise in 2012 too, with universities being able to charge up to £4,500 and some up to £6,750, providing they offer bursaries.
If you are undertaking your first undergraduate degree, you won't have to pay anything up-front and will be eligible for tuition fees for the first time (as long as you are studying at least 25 per cent of a full-time course each year). However, you won't be eligible for living cost loans or grants.
Part-time students are eligible to start repaying their loan four years after the start of their course – which will be April 2017 for those starting in 2012. For those part-time students studying courses of five years or more, this does mean you will be eligible to start repaying your loan whilst still studying. However, you will only start repaying if you earn above the £21,000 threshold.
If you finish your course early, or give up on your course you may be eligible to repay earlier. As systems and processes need to be put in place for 2012 starters, the earliest you will be able to repay is from April 2016.
A part-time students guide containing this information, and more, is available to download here.
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Mature students
Mature students will be able to take advantage of the new system in the same way as full and part-time students - whatever their age - as long as they are taking their first degree.
Full-time mature students under 60 at the start of their course can also take a loan to pay for their living costs.
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EU students
University fees in Scotland, Wales and Northern Ireland will vary. Students from those countries will receive their financial support from the Scottish Government, the Welsh Assembly Government or the Northern Ireland Executive. It's a matter for the devolved administrations to decide how they wish to support their students.
Click for current details of cross border support for
full-time and
part-time students.
EU students from outside the UK
Students that meet certain eligibility criteria will have access to a loan to cover the cost of their tuition. But they will generally not be entitled to support for their living costs.
Find out more at
Student Finance England.
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International students
International students' fees are already higher and so will not be affected by the changes.
For more details on funding your study in the UK, visit the
British Council website.
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Parents
There are no upfront costs to you or your child if they decide to go to university.
Depending on your household income, your child might be eligible for a non-repayable grant to help them with their fees and their living costs.
A guide entitled 'What every parent needs to know about student finance' is available to download
here.
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