How Student Finance Works
Student finance in England comprises two components: a Tuition Fee Loan (up to £9,535/year for 2025/26, paid directly to the university) and a Maintenance Loan (paid to the student in three instalments to cover living costs). Both loans are combined and begin accruing interest from the day the first payment is made. Crucially, you do not repay anything while studying and do not make any payments until the April after you graduate or leave your course, and only then if your income exceeds the repayment threshold. The loans do not show on your credit file and cannot affect your ability to get a mortgage. Thinking of them as "loans" in the traditional sense is misleading — they function more like a graduate income contribution.
"Both loans are combined and begin accruing interest from the day the first payment is made"
Tuition Fee Loans
The Tuition Fee Loan covers the cost of university tuition up to £9,535 per year (for students starting in 2025/26). The money goes directly to the university — you never handle it. Most UK universities charge the maximum fee. The loan is added to your student loan balance and repaid alongside the maintenance loan through the same monthly deductions once you are earning above the threshold. Tuition fees are the same regardless of your household income — all students receive the same tuition fee loan. The real variation in student finance is in the maintenance loan, which is means-tested.
Maintenance Loans: How Much You Get
The maintenance loan amount depends on your household income, where you study, and where you live. Maximum amounts for 2025/26: £10,544/year for students living away from home outside London; £13,762/year for students living away from home in London; £7,459/year for students living at home. The amount reduces progressively as household income rises above approximately £25,000 per year. Students from lower-income households receive the maximum; those from higher-income households receive a reduced amount (with a floor of around £3,790/year regardless of income). If your parents' income dropped significantly since the previous tax year, you can request a Current Year Income assessment which may increase your loan.
How Repayments Actually Work
Repayments are made through PAYE (automatically deducted from your salary like income tax) and through Self Assessment for the self-employed. Plan 2 graduates (who started between 2012 and 2023) repay 9% of income above £27,295 per year. Plan 5 graduates (starting from 2023 onwards) repay 9% of income above £25,000 per year. On a £35,000 salary, a Plan 2 graduate repays 9% of £7,705 (£35,000 minus £27,295) = approximately £693 per year or £58/month. If your income drops below the threshold at any point, repayments stop automatically. The loan does not grow to unmanageable levels — the interest rate for Plan 2 is RPI, and for Plan 5 is capped at RPI + 3% while studying and RPI after graduating.
"Plan 2 graduates (who started between 2012 and 2023) repay 9% of income above £27,295 per year"
Write-Off: When the Loan Disappears
Student loans do not follow you forever. Plan 2 loans (most graduates who started 2012–2023) are written off 30 years after the April you first became due to repay — typically 30 years after graduating. Plan 5 loans (starting 2023 onwards) are written off after 40 years. The Office for Budget Responsibility estimates that around 45% of current graduates will never fully repay their Plan 2 loan before write-off. For these graduates, the loan is not really a traditional debt — it is a graduate tax on earnings above a threshold for a set period. This changes the financial logic entirely: making voluntary overpayments on a loan that will be written off costs you money in the long run. The calculation depends on your expected lifetime earnings — high earners on a strong career path may genuinely benefit from overpaying; most will not.
Support Beyond the Headline Loan
Many students significantly underclaim the support available to them. Disabled Students' Allowances (DSA): grants of up to £26,648/year for students with disabilities, long-term health conditions, or specific learning difficulties such as dyslexia — not repaid. University hardship funds and bursaries: most universities have discretionary funds for students in financial difficulty, and many offer automatic bursaries for lower-income students. These are grants, not loans. NHS bursaries: students on nursing, midwifery, and allied health courses may qualify for additional non-repayable support. Free school meals legacy: students whose families received free school meals may qualify for additional grants. Also: council tax exemption applies automatically to full-time students — register with your local council to avoid being incorrectly billed.
Common Student Finance Mistakes
Applying late: student finance applications open in early spring for a September start. Applying after the deadline means your first payment may be delayed, leaving you short of money in Freshers' Week. Not reapplying each year: student finance does not automatically renew — you must reapply for every year of your course. Missing the income assessment: if your parents' income has dropped, requesting a Current Year Income assessment can significantly increase your maintenance loan. Treating the maintenance loan as a windfall: the loan must last the whole academic year. Divide the annual amount by 12 months, not by 3 term-time payments. Many students run out of money in the third term. Ignoring employer payslips: always check that the correct student loan plan type is being deducted — errors are common and overpayments can be reclaimed.
"Applying late: student finance applications open in early spring for a September start"
Student Finance for Parents
If you are a parent whose income is assessed for your child's maintenance loan, HMRC passes your income information to the Student Loans Company. You will be contacted to confirm income details — responding promptly avoids delays to your child's application. If your income has dropped significantly since the previous tax year (redundancy, reduced hours, retirement), ask your child to request a Current Year Income assessment which uses current-year income rather than the previous year's figures — this can meaningfully increase their loan. Parents are not legally obligated to financially support children at university beyond their means, but the maintenance loan calculation assumes a parental contribution for higher-income households. Having a frank conversation about the household finances before your child starts university is important to avoid a funding gap.
Making voluntary overpayments on a student loan you are unlikely to fully repay is financially irrational — you are prepaying a debt that will be written off in 30 years (Plan 2) or 40 years (Plan 5) anyway. The money is almost always better used for a pension contribution, ISA, or clearing higher-interest debt. Check the maths carefully for your own situation before making any voluntary payments. Also, some parents are contacted by misleading companies suggesting they should help their children pay off student loans early — this is almost always poor financial advice.
Finance Motion — General guidance only.
Not regulated financial advice.