Postgraduate student loans
Master's students can now get £10,000 graduate loans from the Student Loans Company
Master's students can apply for Student Loans Company loans of up to £10,609 to pay for their courses, which they'll only need to repay if they earn enough once the course ends.
This guide by MoneySavingExpert.com's founder Martin Lewis, explains the new postgraduate master's student loans, with 15 mythbusters including who can get them, how expensive they are, how you repay, are they worth it and when you get the cash.
10+ student loans mythbusting tips, including
For those who've started their undergraduate studies since 2012, the student loan system will be pretty familiar. For those who went before that, there are some changes. For more information on how undergraduate loans work, see my 22 Student Loan Mythbusters guide.
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You have to be under 60, living in England and doing your first master's to be eligible
The new postgraduate master's student loan is only for new starters from 1 August 2016; those already doing a master's won't be eligible. Applications are now open and you can apply on the Student Loans Company website or by post by downloading an application form.
If you've already applied for student finance in the past you can use your existing login details. If not, you'll need to register. You have up to nine months from the start of the academic year to apply (or nine months after the start of the second year if it's a two-year course).
And there are other eligibility criteria too...
- You must be under 60: If you're 60 or over on the first day the academic year starts, you can't get the loan.
- This must be your first master's degree: If you already have a master's degree or a higher qualification (even if it was not from a UK university) you won't be eligible for the loan.
- It must be a full master's course: This technically means a level 7 qualification worth 180 credits. Postgrad diplomas therefore don't count as these are usually 120 or 60 credits.
- It needs to be a maximum four-year course: Any master's course including taught, research, distance learning and professional, in any subject in an eligible UK university (one that has power to give degrees), is fine.
It should be a one- or two-year postgraduate master's course, or if you're studying part-time, the course must be at least 50% intensity (ie, a maximum four-year course). You can also get the loan if you're on a three-year part-time course even if there is no full-time equivalent.
- This must be your only funding: If you're able to apply for a bursary instead, eg,a healthcare bursary from the NHS, a social work bursary from the Department of Health, Social Services and Public Safety (DHSSPS) or a bursary from Student Awards Agency Scotland (SAAS), you won't be eligible for the postgraduate loan.
- You must be a UK national living in England: If you’re a UK or EU national, you must be living in England, and have lived in the UK for at least three years, to qualify. You may also be able to get the loan if you’re an EU national, you’ve been living in the EU for the past three years, you’ll live in England when your course starts and you’ll be studying at an English university or college.
The situation for those in other areas of the UK varies. We're focusing mainly on England in this guide, so make sure you research all the T&Cs, eligibility criteria and figures for your area.
Scottish students can apply for a postgraduate tuition fee loan to cover tuition fees up to £5,500 when enrolled in Masters' and postgraduate diploma programmes. Full-time students are also eligible for a living cost loan of up to £4,500, meaning a total of £10,000 is up for grabs.
The tuition fee loan is paid directly to your university or college, spread equally across the years. If the tuition fee for your course is higher than the maximum loan amount, you will have to make up the difference.
Your course: This must be your first Master's course. It must be a full-time Master's programme (up to two years in length) or a taught postgraduate diploma programme of up to one year in length.
Your nationality and residency: You must be a UK national (or have settled status), and have been living in Scotland for three years when your course starts. You must be normally living in Scotland (so not have moved there just to study) and aged under 60 on the first day of your first academic year.
More info: Student Awards Agency for Scotland
The postgraduate Master's loan can cover up to £13,000 of your course and living costs if you start your course on or after 1 August 2018 - and up to £10,280 if you started before.
Your course: You must be enrolled on a stand-alone Master's course worth 180 (check with the university if you're not sure). It can be taught or research based and studied, and must be provided through a UK based university.
Your nationality and residency: You must be a UK national (or have no restriction to how long you can stay), normally living in Wales (so not have moved there to study), and have been living in the UK for three years when your course starts.
If you're an EU national living in Wales when your course starts, you've lived in the EU for the past three years, and you'll study at a Welsh university, you may also be eligible.
More info: Student Finance Wales
Northern Ireland offers a tuition fee loan of up to £5,500 to Master's students. Payments are made directly to your university, and spread across your course, so if you're studying for two years, you'll get £2,750 each academic year.
If your tuition fee is higher than the maximum loan amount, you'll need to pay the difference yourself. Bear in mind that you can't apply for more money than your tuition fee costs.
Your course: You must be studying for a Master's (taught or research), postgraduate certificate or postgraduate diploma provided by a UK university.
You are able to apply even if you already have a Master's or higher education, but you won't be able to apply for another loan once you've received one from any government authority in the UK.
Your nationality and residency: You must be a UK national (or have no restrictions to how long you can stay), have been living in the UK for the three years before your course starts and normally living in Northern Ireland (so not have moved there to study) on the first day of your course.
You can also apply if you intend to study somewhere else in the UK.
You may also be eligible if:
- You're an EU or EEA national, you've lived in the EU, EEA or Switzerland for at least three years, and you'll study at a Northern Irish university.
- You're a UK national who's been living in the EU (if you were living in Northern Ireland before you moved), you've lived in the EU for the past three years and you'll live in Northern Ireland when your course starts.
More info: Student Finance NI
Disabled Students' Allowances (DSAs): If you need help with costs you have to pay in relation to your course as the result of a disability, long-term health condition, mental health condition or specific learning difficulty, then DSAs can help you.
You're allowed to borrow up to £10,609 for your master's, even if your course costs less
The maximum loan amount you can get is £10,609 regardless of whether your course is over one year, or a number. This is because the Government has said the average master's course fee is around £8,000 and so has set a maximum loan limit of £10,609, so there is a little extra to help toward other expenses.
If your course costs more than £10,609 you'll have to fund the rest yourself.
You can choose how much you want to borrow. It's not dependent on your income or the course fees. If you don't want a loan then you don't have to take it.
KEY TIP: You don't have to decide at the start – you can increase your borrowing up to the maximum £10,000 until a month before your course ends.
The Student Loans Company will pay the loan directly to you, not to the university
Unlike undergraduate loans where the Student Loans Company (SLC) pays the university the tuition fees directly, for master's courses the money is paid to you. If you change course during the year to one that is not eligible for the loan, or you leave during the year, you won't receive the final loan payments. You will still need to repay what you have received.
If your course starts on or after 1 August 2018, your loan is divided equally across each year of your course, so if you apply for the full £10,609 and you're on a two-year course, you'll get £5,304.50 per year.
The timing of the payments varies depending on course length...
- One-year master's: It's paid in three instalments. You'll get the first payment when the university confirms your placement to the SLC, and you'll get the other two payments during the year.
- Two-year+ master's: The money will be divided equally across each year of your course, so if you apply for the full £10,609 and you're on a two-year course, you'll get £5,304.50 per year. It will be paid in three instalments every year.
KEY TIP: If you have a longer course than two years, the fact you'll be given the money early is tempting. So I would suggest you open up a top savings account and put the money for the remaining course-fees away in there and think of it as sacrosanct; don't allow yourself to touch it for anything else – otherwise you may struggle to pay for your final years.
You're eligible to start repaying in the April after graduation
Just like for undergraduate loans, you're eligible to start repaying in the April following the end of the course. So if you finish in June, it'll be the following April.
However, the first payments won't be taken until April 2019 due to how the system has been set up - so if you started a one-year course in 2016, you will have had an extra year without having to pay.
You repay 6% of everything earned above £21,000 – earn less and you don't repay
Once you're eligible to start repaying, you will only actually repay if you're earning above £1,750 a month or £404 per week – equivalent to £21,000 a year (and this threshold is not set to rise until at the earliest 2021).
The amount you repay for postgraduate loans is 6% of everything above that, this is lower than undergraduate loans which are set at 9% above the threshold.
Even if you've started repaying the loan in a year, but then lose your job or take a pay cut, your repayments drop accordingly.
Of course if you never earn over £21,000 that means you'd never need to repay a penny.
KEY TIP: Earnings doesn't just mean money from employment or self-employment, in some cases income from investment and savings count too, if you have that, read these links...
If you have additional annual income of over £2,000 from savings interest, pensions or shares and dividends, this will also be treated as part of your income for repayment purposes. You'll need to repay 6% of that too via self-assessment.
While the amount you pay is calculated based on your pre-tax income above £21,000, the money is taken after you've paid tax. For example:
If you earn £30,000 a year gross (pre-tax) salary, you will repay £540 a year (6% of the £9,000 above £21,000).
Yet you still pay tax on the entire £30,000 income. You don't get any tax breaks on the fact you're repaying the student loan.
Yes. The student loan has been set up as a contract, not a tax; therefore, the fact you're no longer living in the UK doesn't affect that contract.
The rules state you're still obliged to repay based at 6% of all earnings above (the local equivalent of) £21,000 a year. Not doing so could lead to substantial penalties.
If we ignore the moral obligation to repay the state for the education it provided you, the real question here isn't "do I have to?", but "how can they make me?"
This is an issue of enforcement. Certainly if you temporarily leave the UK and come back having missed some payments, expect to be pursued. If you move abroad permanently, never to return, there may be no attempt to pursue you in a foreign court. But there are no guarantees of that.
What's more, the Government has said it will chase people who move abroad more thoroughly than it has in the past – through 'sanctions' and prosecution. We'll update this guide when more on this becomes available.
Some further information on this for current graduates (likely to be similar for future graduates) is available on the Student Loans Company website, though it's a bit sketchy in parts.
Whether student loan repayments are taken from your salary before or after you make a pension contribution depends on how you contribute, and what sort of scheme you're in.
Defined benefit schemes (known as final salary schemes). If you're in an employer's pension scheme, eg, final salary/average salary, your student loan repayments will depend on how the scheme's administered.
You pay student loan repayments on the same income that your employerpays national insurance contributions on. So, if your pension contributions lower this figure, that's the one assessed for student loan repayments.
However, some defined benefit schemes take the pension payment pre-tax, but after national insurance. In which case, you'll have slightly higher student loan contributions.
- Defined contribution schemes (where you save up a pot of cash – this is what most people now have). If you pay in to a personal pension, whether monthly via your company payroll or directly as a lump sum, student loan contributions are worked out using your gross pay. In other words your pay before the pension contribution.
The exception to this is if you pay via salary sacrifice (where you give up income and your firm contributes for you), then it comes from the after-contribution income.
You can do a self-assessment tax return to have the pension contributions taken into account. But decide if it's worth the hassle of going self-assessment if you don't already. For each £1,000 you pay in to your pension (£800 net) each year, you could pay around £90 extra in student loan repayments.
You repay it through the payroll, and there are no debt collectors
All student loans since 1998 have been 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 bank account each month already has it removed.
This means no debt collectors will come chasing as you don't have a choice in the matter and will have paid it automatically.
If you're self-employed you repay the student loan in the same way as you repay income tax. This is done via HM Revenue & Customs's self-assessment scheme. At the end of each tax year, you calculate your earnings and the appropriate amount of tax and loan repayments, then send it to HMRC. This also applies if you have additional self-employed earnings on top of employment.
If you're self-employed and fail to pay, you'll be sent a reminder. Ignore that, and in a similar way to failing to repay your taxes, you could end up in court. More information is available for graduates on the Student Loans Company website.
After 30 years, any and all remaining debt is wiped
You stop owing either 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 won't have to repay a penny.
It's one reason those who are relatively near retirement, who don't have a degree and want one, will find doing one very appealing. This is because unless they've a huge pension, they know they'll never have to repay
The debt is also wiped if you die, so it won't be passed onto 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 would 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).
If you already have an undergraduate student loan, you'll repay both, at usually 15%, but they are kept separate
The reason the amount you repay here at '6% above £21,000' is lower than the '9% above £21,000' for undergraduates is because many master's students will still be repaying their undergraduate loan too. The two loans are paid together, but treated separately. In other words...
They wipe at different times:
If you are repaying both, once one is cleared you stop paying it, but will keep paying the other. Not all undergraduate loans wipe after 30 years, some are sooner, some later (see when will my loan wipe?), but your master's loan is always 30 years.
You repay both loans at the same time:
The total repayment for both loans will depend on which undergraduate loan you have; full info in three types of student loan.
- If you started your undergraduate degree in or after 2012: The repayments will be aligned, so rather simply you will pay 15% of everything you earn above £25,000. So if you earn £30,000 you will repay roughly £990.
- If you started your undergraduate degree between 1998 and 2012: You will repay 9% of everything above £18,330 currently for your undergraduate loan, plus 6% of everything above £21,000 for your master's loan.
- If you started your undergraduate degree between 1991 and 1998: Your undergraduate loan works a different way: you pay a fixed amount back each month regardless of earnings, provided you earn over £29,219 currently. You will then repay 6% of everything above £21,000 for your postgrad loan.
The doctoral student loan can help with up to £25,000 – take that after a master's and you'll repay 9% for both
The Doctoral loan lets you borrow up to £25,000 for your whole course. It's paid directly to you in three equal instalments each year.
Your course: You need to be on a full, stand-alone course starting on or after 1 August 2018, which lasts between three and eight academic years and is provided by a UK based university.
You must be under 60: If you're 60 or over on the first day the academic year starts, you won't be eligible.
You must be living in England. If you're a UK or EU national (or have settled status), you normally live in England and you've lived in the UK for three years before your course starts, you're eligible to apply.
If you're an EU national, you may also be eligible if you're living in England when your course starts, you've lived in the EU for the past three years, and you'll be studying at a university in England.
It's not affected by your income, but beware that it could affect your benefit payments from the DWP.
This must be your only funding: If you're receiving, or in some cases eligible, for other funding (such as an NHS bursary, student finance payments, or a scholarship) you won't qualify.
You'll repay 6% of everything that you earn above £21,000 (the equivalent of £1,750 per month or £404 per week). If you already have a Master's loan, you'll make a combined payment of 6% covering both loans.
If you've already have an undergraduate student loan, you'll also repay 9% of everything you earn over £25,000 - so if you've got all three loans and earn over this, you'll pay 15% of your income.
There are regional differences.
There is currently no Doctoral loan available to Scottish students.
You can borrow up to £25,000 to cover course fees and living costs. Payments are spread out across the academic years of your course, and you can get a maximum of £10,609 in one year.
You don't have to apply when your course starts, but you'll still only receive this maximum yearly amount. So if you're studying for a three-year course but apply in your second year, you will only receive £21,218.
Your course: Your course must be a full-time or part-time stand-alone doctoral course, lasting between three and eight academic years, and involve taught and/or research based study.
Your nationality and residency: You qualify to apply if you're a UK or Eu national (or have settled status), you normally live in Wales (and didn't move there just to study), you've lived in the UK or the Islands for the three years before your course starts, and you'll study at a Welsh university or college.
You may qualify if you're an EU national living in Wales when your course starts, you've lived in the EU for the past three years, and you'll be studying at a Welsh university or college.
Your age: You must be under 60 on the first day of the first term of your course.
Other eligibility criteria applies, so make sure you check this carefully before applying.
You have to start repaying your loan in the April four years after the start of your course, or the April after you finish or leave your course, whichever comes first.
You'll repay 6% of any income you earn above £21,000 per year (£1,750 per month or £404 per week). If you earn less than this, you won't repay, but bear in mind you will pay if you're earning above the weekly or monthly thresholds, even if you don't go over the yearly threshold (for example, if you get a bonus).
If you already have a Master's loan, you'll pay a combined repayment of 6% of earnings above £21,000. If you also have an undergraduate student loan, you will pay 9% of your income above £25,000 as well. This means you'll repay 15% of the income you earn above £25,000.
There is currently no Doctoral loan available in Northern Ireland.
'Above-inflation' interest will be charged
As soon as you receive the money from the Student Loans Company interest'll start accruing on the money. The interest rate is set at...
3% plus the RPI rate of inflation
Yet this doesn't change on a monthly basis. In practice each year the rate changes in September based on the Retail Prices Index (RPI) inflation rate for the prior March.
The interest rate currently stands at 6.1%.
KEY TIP: Just because interest is charged, doesn't mean you'll pay it. That's because only those who clear the amount they borrowed within 30 years will ever repay the interest – and only medium- and higher-earners will hit that (see point 12 below).
Postgrad loans DO NOT go on credit files
When you borrow from a bank for a credit card, loan or mortgage, lenders look at three pieces of information to evaluate whether they'll make money from you – 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).
Most normal financial transactions and credit relationships you have are listed on these files – though student loans are not included (with the exception of students who started university before 1998 under the original loans system).
So the only way loan, credit card or mortgage providers know you've got a student loan is if they choose to ask on application forms. They can do this, and it happens, but in general it's only for bigger value transactions such as mortgages.
In many ways though the impact of getting this loan is less about the fact it is borrowing in itself, and far more the reduction of disposable income from the repayments.
So if you're trying to figure out what impact it will have, imagine you'd simply had a pay cut of the amount you'll be repaying for the loan – that's how lenders mainly see it. For more help on how lending works see my free First-Time Buyers' Mortgage Guide and Remortgage Guide.
You're more likely to repay this loan within the 30 years before it wipes than an undergrad loan
Typical full-time English undergraduate student loans are currently upward of £40,000 once tuition fees and living loans are incorporated. When you do the maths, and add the interest, as repayments are fixed based on earnings, it works out that only very high earners will clear it in the 30 years before the debt wipes. See who'll clear the loan.
The postgraduate master's loan however is for a much smaller amount. And even though there are lower repayments, the maths shows you are more likely to clear this within 30 years. For example, someone with a £10,000 loan, earning a starting salary of £25,000 that rises each year by more than inflation, would clear the loan within 18 years.
This is important to consider, as it means unlike undergraduates where the 'price tag' of what you borrow often bears little relationship to what you repay, with postgraduate loans the two are more closely linked – and you need to add interest on top.
However there are a number of key factors that affect this:
- The higher your earnings potential the more likely you are to repay it in full within 30 years.
- The younger you are the more likely you are to repay within 30 years (as those starting later will be eligible to repay in retirement when incomes are likely lower).
- The less you borrow the more likely you are to repay within 30 years.
You can repay student loans early, but whether you should is a different matter
You have a right to pay off the student loan early – even while you're studying if you chose – or, as is more likely, to make overpayments after study to clear it quicker.
Yet this doesn't mean you should pay off early. While in general I'd always encourage people to repay their debts as quickly as possible, student loans are one of the rare cases where that will be a bad decision for some people. There are two reasons for this...
1) This is a 'better' loan than most commercial loans. The rate here is far cheaper than standard credit cards, loans and some mortgages – so paying those off first is certainly a priority. But just as important is that your repayments here depend on what you earn – great insurance if you lose your job or can't work as you don't have to repay it. Commercial loans don't do that.
Therefore if you're planning future borrowing, such as for a mortgage or car loan, it is worth asking yourself whether you should pay this off, only to then have to borrow back at a higher rate later. Instead you could just stick this in a top savings account where the interest paid will almost cover the student loan interest rate, and then use the cash to get a mortgage later.
2) You may not need to repay all of it. As explained above, some people won't need to repay the whole loan before it wipes. And even if it looks like you will, a change of circumstances could affect that. So by overpaying unnecessarily you could simply be paying money that you would never have needed to repay.
Is it worth borrowing the maximum loan even if you don't need it?
This is a relatively cheap form of finance, compared with commercial loans, and the fact you only repay in proportion to your income and it wipes after 30 years is hugely beneficial. So if you don't need the cash (and we ignore the morality of using taxpayer money to make a gain) the question of whether it could still be worth taking is interesting.
Certainly you're currently unlikely to make much gain from stoozing this cash (where you borrow cheaply to then save at a high rate to make money) as few savings accounts come close to paying more than RPI + 3% interest.
There are however two scenarios where it would be financially worthwhile to take it when you don't need it…
- If you're unlikely to repay the loan in full within the 30 years. For example, if you were aged 59 taking a course, unlikely to ever go back to full-time employment and living off pension earnings of under £21,000, you'd never need to repay this cash, so borrowing more would be a big win – at taxpayers' expense.
- If you were likely to need other borrowing in future. In effect what we need to do is assess whether you'd be better off to borrow this now, and keep the cash to use later, instead of taking another form of borrowing later.
For example, if you planned to borrow for a car in future, you'd usually be better off to take this loan to fund your studies and use the cash later to buy the car. This is because student loans have far better terms, and are usually – not always – cheaper (see Cheap Loans).
It's more complex, if you'll want a mortgage in future. The student loan has far better terms than a mortgage – after all unlike a mortgage lose your job and you don't have to repay it. Plus the bigger your mortgage deposit the lower the mortgage interest rate you will get – so taking the student loan and keeping the cash for a deposit looks attractive.
However taking the student loan reduces your disposable monthly income, which will hit affordability criteria, and this can reduce the amount you'll be able to borrow.
As a rule of thumb then, if you've got a decent deposit already saved and will struggle to borrow what you need (if you've less disposable income) – you're probably best not taking the student loan. If not, then maximising the deposit (aim for at least 10%, see the First Time Mortgage Guide) takes priority, so taking the student loan to do that helps (just don't spend it).
Warning. This is how it works now – sadly it can be changed – even retrospectively
So now you understand it, the obvious question is, "how fixed is all this?"
In theory it shouldn't change, but in practice it can. Parliament is omnicompetent. In other words, it's completely free to make and change rules made in the past. This means there is no 100% guarantee the system will remain unchanged for the 30 years until you're clear. It's worth being aware this is a risk factor.
More so, student finance rules are not enshrined in statute, so can be changed by the Government of the day even without a vote in the House of Commons.
In the past it has always been thought that retrospective changes to the system go against natural justice and it hasn't happened – after all each time a new student finance system has been introduced, it has only applied to new starters.
But that sacred trust was breached in November 2015 – the Government froze the repayment threshold for all those who started in 2012 and beyond. The threshold was meant to increase. This effectively hiked the cost of student loans above what people had thought they would be when they started university. That shouldn't happen. No commercial firm would be allowed to do so.
This is a very worrying situation as it means it's difficult to trust the system. Yet unfortunately if you want to get a master's you've no choice.
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