Ignore newspaper headlines about students leaving university with £50,000 of debt. That’s a mostly meaningless figure. It’ll actually cost those who earn well after uni far more, and those who don’t earn as much far less or nowt.
It’s now three years since student finance in England was radically overhauled, yet myths, panic and confusion are still widespread. So forget the politics, its time to focus on the practical impact on students pockets.
This special guide by Martin Lewis shows the 20+ key facts every potential student, parent and grandparent should know.
In this guide
Before we start, I'd just like to say:
For 20 years we've educated our youth into debt when they go to university, but never about debt - that must change
For this reason, even though I'm no fan of the changes, in 2011 I agreed to head up a student finance taskforce working with the NUS, universities and colleges to try to ensure we bust the myths and misunderstandings that have resulted from so much political spittle flying.
What counts is that no student is wrongly put off going to university thinking they can't afford it. Some may rightly be put off, but unless you understand the true cost, how can you decide?
Trebling of tuition fees doesn't necessarily mean trebling of costs
All universities are now allowed to charge up to £6,000 a year and many up to £9,000 (nearly three times 2011's fees), providing they make extra provisions for bursaries for poorer students. The max for part-timers is £6,750 a year.
The changes ONLY hit first time undergraduates starting after September 2012
The new student finance system only affects those starting their first undergraduate course at university or college in 2012, 2013 or beyond. If you already have a higher education qualification you're unlikely to be able to borrow the money. Included within undergraduate courses are Higher National Diploma/Certificate courses and certain teacher training courses such as PGCE. Those on courses which started before 2012 stick with their existing fees and repayments.
Find out more if you're...
Changing or deferring course
If you started a course before 2012, and then changed, provided it was to an equivalent (full-time to full-time or part-time to part-time) degree, even at a different university, you should be able to continue on the same fee structure and not move to the new system. Always double-check with the institution beforehand.
On a foundation course
If you started a higher education course in 2011 that includes a foundation year which is an integral part of the course, and you enrolled at the outset for the integrated course, you will continue to remain on the 2011 structure and not move to the new one.
However, if you began a freestanding higher education course in 2011, like certain 'access' courses, and start a degree in the following years you would be treated as a new starter.
Wanting to study healthcare or medicine (NHS Bursary Scheme)
Medical and healthcare students get support from the NHS Bursary Scheme, where you'll also get an additional NHS grant and maintenance loan from Student Finance England. The amounts and rules are different depending on the course.
Undergraduate medical or dental students on five/six-year courses will have all tuition fees paid in their fifth and final years. Those on four-year courses must contribute £3,465 to their first year fees, then receive £3,465 in years two, three and four. Both will then be able to apply for a student loan for the remainder of their fees.
Graduates on the four year accelerated medicine programme will have to fund the £3,465 tuition fee themselves. Eligible students can apply for a loan up to £5,535 to cover the remaining tuition fees.
You must re-apply every year for the NHS bursary, and applications have to be received within six months of the first day of the academic year.
Fees for suitable non-medical courses, eg, physiotherapy, nursing and midwifery, are usually paid directly by the NHS so eligible students will not be required to pay tuition fees.
They will also be eligible for a £1,000 grant, means-tested bursary up to £4,395 (£5,460 in London, £3,351 if living at home, less for courses under 30-weeks each academic year) and a non-means-tested maintenance loan of up to £2,324 (£3,263 London, £1,744 home, reduced in final year).
You don't need the cash to pay for university
It ISN'T a case of 'pay up or you can't go'. Once your application has been processed, tuition fees are automatically paid by the Student Loan Company. Full-time students only need to start repaying this in the April AFTER graduation (or leaving) at the earliest, no matter how long your course is.
Earn under £21,000 and you'll never repay
You only repay 9% of everything you earn annually above £21,000 of pre-tax salary once you've left university. Therefore if you've started repaying the loan, but then lose your job or take a pay cut, your repayments drop accordingly.
No debt collectors with student loans
Student loans for both post 1998 and post 2012 starters are repaid through the payroll just like income tax. What this means is that once you're working, your employer will deduct the repayments from your salary before you get it. So the amount you receive in your pay packet each month already has it removed.
After 30 years, any and all remaining debt is wiped
You stop owing when you've cleared the debt or when 30 years (from the April after graduation) have passed, whichever comes first. If you never get a job earning over the threshold, you'll never repay.
What happens on death or incapacity
The debt is also wiped if you die, so it won't be passed on to your beneficiaries as part of your estate. It's also wiped if you're permanently disabled in such a way that you'll be permanently unfit to work (in such a case, earnings will usually be under the threshold anyway, but this rule's there for rare cases where unearned income is above the threshold to allow the recipient to keep it all).
'Above-inflation' interest will be charged. Don't understand interest rates? Read the Interest Rates Beginners' Guide
For those who started university before 2012, there was no 'real' cost to borrowing money via student loans, as the interest rate was set at the rate of inflation (RPI). So borrow a shopping trolley worth of goods and you'll repay enough to buy the same, even though the actual cash amount may increase (more on this in the Should I Repay My Student Loan? guide).
Repayments are £368/year LESS than for current graduates
Many people worry that with the much higher levels of student debt, cash will be too tightly squeezed to live on once post-2012 starters graduate.
Yet actually, today's university starters will have MORE cash in their pockets each month than those students who've just graduated.
You WILL owe money for longer than current graduates and MAY pay a LOT more
The flipside of people repaying less due to the higher £21,000 threshold than current graduates is that it will take much longer to pay off the loan. And this is compounded by the fact the original debt is bigger and the interest rate higher.
This is because under the new system the cost is effectively being spread over a much longer period. Initially, graduates will be able to keep more of their income to spend than now. Though later on when they would've paid off the loan under the current system, they'll have less as they'll still be repaying.
Part-timers can get loans for tuition fees too
Part-time students, often forgotten, make up 40% of all undergraduates. Fees for part-timers also jumped very substantially in 2012, with all universities being able to charge up to £4,500 and some £6,750, provided they offer bursaries.
Monthly repayments are the same, whether fees are £6,000 or £9,000
Whether you choose a course that costs £6,000 or £9,000, you'll repay the same amount each month, as that purely depends on what you earn (9% above £21,000).
Student loans also cover living costs
Full-time students aged under 60 at the start of their course can also take a loan to pay for their living costs, eg, food, books, accommodation and travel. They are known as maintenance loans, and are usually paid in three termly instalments direct to students' bank accounts.
Under £42,620 income households' students get maintenance grants
In 2014/15 full-time students with residual income under £25,000 get a grant of £3,387. Because it's a grant, not a loan, it never needs repaying (unless you leave your course early, when you may be asked to pay it back).
Student loans DO NOT go on credit files
When you borrow from a bank for a credit card, loan or mortgage, to evaluate whether they'll make money from you lenders look at three pieces of information – your application form, any previous dealings they've had with you and crucially, the information on your credit reference files (full info: How Credit Ratings Work).
Tuition fees can impact your ability to get a mortgage, but not as much as people think
I know many parents worry that the much higher level of tuition fees, and subsequent 'debt', will hit their child's ability to get a mortgage after studying.
You can repay early
In the early days, the Government was consulting on penalties to stop people repaying early - but the mass of feedback (including our no to penalties submission) was against - and thankfully it decided to scrap the idea.
Students from, or going to, Welsh, Scottish and Northern Irish unis may have different rules
Scottish, Welsh and Northern Irish students, including those who decide to study in England, receive their financial support from their "home" devolved administration so it's a matter for those governments to decide how they wish to support their students.
Many people will never pay it all back
By running the numbers on some typical situations using the Student Finance Calculator, it looks likely only those towards the higher end of the income scale will ever repay what they borrowed.
The very highest earners aren't the very highest payers
Throughout this guide, I've written "the more you earn the more you repay", yet a quirk of the system means technically, beyond a certain point, that's not true.
Think of it like a graduate tax, not a loan
The maximum possible loan combining tuition fees and maintenance in 2014 is £16,600 a year; £50,000 over a three-year course.
Student loans should be counted as part of students' income
Many school leavers go straight to university with their parents or grandparents yelling "STICK TO A BUDGET!" Yet that simply isn't enough info. Think about this for a moment:
A working person shouldn't spend more than they EARN.
What shouldn't a full-time student spend more than?
It's this piece of the budgeting jigsaw many people miss, but it's crucial - without knowing your income, you can't budget.
Offered a fee waiver or bursary? Go for the bursary
Those coming from homes with lower incomes, or with less traditional university backgrounds, are likely to be offered incentives by universities. The exact structure and money is likely to be given in one of three ways, but should be worth up to £3,000:
Can the system be changed once I've started?
So now you understand it, the obvious question is, "how fixed is all this?"