A Professional and Career Development Loan can give you the leg up you need to change career as the Government pays the interest on the loan while you're on the course.
They're useful while you study, but you need to give them the elbow sharpish after you graduate or the interest will pile up. The good news is that by manipulating them cleverly, you can finish your course in the money.
What is a Career Development Loan?
Career Development Loans are bank loans to pay for courses and training that help with your career or help get you into work.
The Skills Funding Agency foots the interest on the loan for the duration of your course (and for a month after it's finished). After this, it's down to you to start repaying the loan, plus interest.
Career Development Loan need-to-knows
You can only apply through Barclays and Co-operative banks
You should apply for your loan three months before your course starts to give the bank enough time to make a lending decision. Certain times of the year – such as the start of the academic year in September/October – are particularly busy, so you may need to wait for a decision.
Others may try to pass off another product as the real deal. The line they use to draw you in is “no repayments to make while you study”. But don't be sucked in. Unlike a development loan where there's no interest charged while you study, here you're charged interest. Because you don't make repayments, the debt grows and remains unpaid during that time.
The interest is paid while you study
In order to help you focus on studying, the Skills Funding Agency will pay the interest on the loan to the bank on your behalf while you are studying and for one month afterwards. You then need to start repaying the loan to the bank in the usual way.
You may be able to borrow between £300-£10,000
Once you have your loan amount agreed, you agree with the bank how long you'll take to pay it back. You can repay it over 12 to 60 months, or in one lump sum.
If you take out your loan with the Co-op, and pay it back early, you will incur an early settlement fee equal to one additional month’s interest calculated on the balance outstanding.
Check your provider's terms and conditions.
Courses must only last up to two years
Or three years if the course includes one year of work experience.
You can't have savings over £16,000
To be eligible for a loan, you can't have savings over £16,000. Anyone taking out a loan has to sign a legally binding agreement with the bank stating that they need the loan for course fees or living expenses.
Some 70% of loans are used to fund course fees, which are paid directly to the provider. You have to show evidence of what you're borrowing the money for - using it for other purposes would be classed as fraudulent activity.
You have to repay the loan even if you don’t finish the course
If you don't complete your course, or finish earlier than anticipated, the bank will expect you to start repaying your loan one month after you finished – this date will override the repayment dates you originally agreed with it.
Remember that defaulting on your repayments may impact on your future ability to obtain credit. Read the Credit Scores guide to find out how yours shapes up.
What courses can I apply for?
To be granted a career development loan, your chosen course must help with your career – but it doesn't have to lead to a qualification. Examples of eligible learning includes:
- Postgraduate courses, for example an MSc or MA.
A specialist course at a privately owned learning provider, for example, in
homeopathy or studio sound engineering.
- Management courses, for example, a professional consultant's course.
- Technician level training, including plumbing or electrical installation.
A National or Scottish Vocational Qualification (NVQ/SVQ) at a local college,
for example in hospitality and catering.
Courses leading to a professional qualification, for example, the Certificate in
Costs covered by the loan
Course fees – the loan can cover up to 80% of your course fees; or 100% of your course fees if you've been registered unemployed for three months or more at the time you apply.
Course costs – books, equipment, travel expenses, childcare and any costs associated with a disability you may have.
Living expenses – the loan can cover the costs of food, ordinary clothing and footwear, housing costs, rent, fuel, council tax and water charges. These costs must not be covered by any other grants or state benefits. If you wish to pay for living expenses with the loan, you must be working for less than 30 hours per week.
Should I go back to school?
Before you hit the books, you'll need to do some basic maths. If you're going to rack up debts to fund your studies, weigh up the cost against your future earnings.
While postgraduate training in medicine or law might be a nice little earner, two years of musing on medieval poetry mightn't be so lucrative. Take a deep breath and think about whether you're really ready to commit to your course. Even if you decide to drop out, you could still be saddled with course fees to pay.
Don't rule out getting a bursary; several charities and foundations offer these and many go unclaimed each year. Check options in the Education Grants & Courses guide as well as with the seven Government-funded research councils or the Arts and Humanities Research Council. If you want to study something undersubscribed such as physics, you could strike it lucky.
Why not ask your employer to sponsor you? Especially if the course is related to your job. If none of this pays off, you'll need to stump up the cash yourself. Could you study part-time and keep working? Or put off extra study until you've saved some cash? Do a budget and work out exactly how much cash you'll need (use the special Budget Planner to help, basing the numbers on what you'll spend while studying).
How to apply
1:Check you're eligible
First things first you’ll need to make sure you meet the eligibility criteria for a loan.
To be eligible for a loan you must:
- Be 18 or over (the Co-op has an upper age limit of 69).
- Have been living in the UK for at least 3 years before your course starts.
- Plan to work in the UK, European Union, or European Economic Area after the course.
Reasons you might NOT be eligible
You are not eligible to apply for a Professional and Career Development Loan if
- Are eligible for a local authority mandatory grant and/or student loan for a learning programme you wish to undertake at a publicly-funded learning provider, including a higher education institution.
- Are employed and your employer will be receiving funding to pay for the learning you wish to undertake (graduate or registered teacher programmes are an exception to this rule).
- Have access to funds of £16,000 or more and are therefore able to fund your learning without access to a Career Development Loan.
- Intend to use a Career Development Loan to pay for anything that is being financed from another publicly funded source.
- Are in prison or a Young Offenders Institution, or have been released on temporary licence. However, individuals who have been released from prison or a Young Offenders Institution or who remain under supervision in the community (such as electronic tagging) are eligible to apply for a Career Development Loan.
Do you receive benefits?
Receiving a development loan may affect your benefit entitlement, so double-check with your benefits office before you apply.
2:Check the course is eligible
Once you've chosen the course you want to do, you’ll need to make sure the provider is on the Professional Career and Development Loan Register (check with your course provider), or that they’re applying for registration.
Your learning provider should be able to tell you if it's registered. If it is, it will give you a registration number that you'll need to quote on your application form.
3:Apply to the bank
Each bank has a different application form and it’s important you follow your chosen bank’s guidance when completing the form. You can only apply to one bank at a time, but if the bank you initially apply to turns you down, you can submit an application to the other bank. Processing your application can take time, so make sure you factor this in.
If the bank agrees the loan
If the bank agrees the loan they will send you two documents:
A credit agreement which you must sign and return to them, and
A Course Start Notification form. You must sign the ‘learner’ part of this document to confirm the date you plan to start your course. You must take this document to your learning programme – your provider will need to complete the second part of the document when you have started your course, and submit it to your bank.
The bank will not release any funds until the learning provider has confirmed your actual start date and returned the form to it.
How the loan is paid
If your application is successful, the bank will release the funds when the learning provider has confirmed you’ve started your course.
Your bank will pay course fees funded via the loan to your learning provider. If your course costs £2,000 or more and is over three months long, payments will be made in up to four equal instalments. Funds for other learning-related costs and/or living costs will be paid directly to your account by the bank.
If your course lasts for more than a year, the bank will pay the living costs element of the loan in stages throughout the academic year. It’s important to discuss your individual circumstances with the bank so you fully understand how this will work.
Will it work?
Some MSE forumites have had success applying for a career development loan, while other posts demonstrate that it might not be as easy as it seems:
'If you get rejected,appeal!'
"It was the best decision to apply for the loan as it has allowed me to continue with my life rather than living on the edge. FYI - If you get rejected, appeal! I did and after much messing about with Co-op messing the application up, I was accepted."Lost Prophet - May 2013
'I didnt realise there were such strict regulations'
"I applied for a career development loan from the Co-op. I assumed I would get accepted for it as I didnt realise it had such strict regulations, but I unfortunately got turned down. I then buried my head in the sand about it for weeks until I decided to try and find out why I got turned down. All the Co-op would tell me is that I have a bad credit rating."lizzybeth18 - September 2012
Share your career development loan successes and failures in the Career Development Loans discussion.
How much will it cost?
This depends on how much you borrow and how long you take to pay it back. By spreading your loan over a longer term, your monthly repayments may be lower, but the overall cost of borrowing may be higher as the APR for your loan will depend upon the length of your repayment period.
It's vital you know what the repayments will be after you've finished your course, and that you're confident you can meet them.
The table below demonstrates what repayments look like on loan amounts of increasing size with the Co-op:
A brief glance at the bank's online info, and interest rates might look low. But don't trust the advertised APRs. Barclays, for instance, mentions 5.7% APR, but this rate is misleading.
It works out an average APR for the entire period of the loan - including the Government's interest-free period - and not just the period they're actually charging interest. As such, by far the most sensible thing to do is simply call the banks and get a quote for your loan.
After the interest holiday, rates are shocking (9.9%). So give your development loan the heave-ho as soon as the 0% period ends (one month after the end of your course). After checking any early repayment conditions, apply for the cheapest unsecured personal loan and use it to pay off the career development loan instead.
This should cost much less over the period you're paying back your loan.
The size of the saving
Borrow £5,000 with a Barclays professional career development loan, repay it over three years (after you finish study), and it would cost £800 in interest. Take out a development loan, pay it off with a personal loan as soon as the 0% period runs out and it would cost £540. That's £260 cheaper than taking out and sticking with the Barclays loan.
Example of a £5,000 loan, two-year course, then repaying over three-years:
|Rep APR||Total repayment||Interest||Saving|
|Co-op or Barclays development loan||9.9%||£5,800||£800|
|Personal loan (to pay off DL)||6.8%||£5,540||£540||£260|
Earn while you learn
Even if you don't need to use all the cash straight away, make any loan for living costs work for you. When you get the cash, plonk it in a savings account (see the Starting Savings guide) – and you could sneakily make a little money from study. However, don't reply on this for huge wads of cash - with savings rates so dismal, you won't be the next Rockefeller any time soon.
When you've finished studying, if you've any of the living cost element of the loan left over, repay as much of your loan as you can before any interest is charged. Then move whatever debt remains to a cheaper personal loan.
Savings interest won't make a huge difference to the big costs of further education, but it's a nice addition to your finances.