Student Loans System Defended by Chancellor Rachel Reeves
Chancellor Rachel Reeves has described the student loans system as "fair and reasonable" in response to criticism following last year's decision to freeze repayment thresholds for some borrowers.
Personal finance expert Martin Lewis stated it was "not a moral thing" for the government to do, amid increasing debate about student loan repayments, especially for those on Plan 2 loans.
How Do Student Loans Work in the UK?
The specifics of student loans differ depending on the part of the UK in which a student resides, but generally, student loans consist of two main components:
Most students are eligible for the tuition fee loan, which covers the annual cost of their course. These amounts vary across the UK.
The maintenance loan is separate and intended to help cover living expenses such as accommodation, food, books, and equipment.
Maintenance loans are means-tested, meaning the amount awarded depends on the household income of the student's family. Additional funds may be available for students who are disabled or have children.
Students under 25 who have no contact with their parents may apply as "estranged students," meaning their parents' financial circumstances are not considered.
Research published by the Higher Education Policy Institute in May 2024 indicated that maintenance loans in England typically cover only about half of living costs, with even less coverage for students living in London.
How Much Can I Borrow for Living Costs?
The amount of maintenance support available varies throughout the UK.
For the academic year 2025-26, undergraduate students in England and Wales can borrow more for day-to-day living costs than in previous years.
For example, the maximum maintenance loan for students from England living away from their parents outside London has increased to £10,544 from £10,227.
The government is reintroducing maintenance grants of up to £1,000 annually for students from lower-income households in England who are enrolled in courses that support its Industrial Strategy. These grants will be available starting in 2028, with the list of eligible courses still being finalized.
Welsh students studying away from home can borrow up to £11,345, up from £11,150, and may also qualify for maintenance grants that do not require repayment.
In Scotland, the maximum annual maintenance loan is £9,400 for students under 25. Additionally, students can apply for various bursaries and grants.
Students from Northern Ireland studying away from home can borrow up to £8,132, or £11,391 if studying in London.
How Are Tuition Fees and Maintenance Loans Changing?
Starting in 2026, tuition fees and maintenance loans are expected to increase annually based on an inflation measure called the Retail Price Index minus the interest on mortgage payments, known as RPIx.
This measure fluctuates, but an increase at the October 2025 rate—when the change was announced—would result in tuition fees rising by approximately £400 per year, exceeding £9,900.
The government has stated that only universities providing strong outcomes for students will be permitted to charge the maximum tuition fee in England.
Universities that do not meet the quality threshold set by the Office for Students, the regulator in England, may also face caps on student recruitment numbers.
How Do I Receive My Student Loan Payments?
Tuition fees are paid directly to the university or education provider.
Maintenance loans are paid directly into the student's bank account in instalments.
Payments are made at the start of each term in England, Wales, and Northern Ireland, and monthly in Scotland.
To receive payments, students must register at their university or college, usually during the first week of their course, often presenting their student finance entitlement letter.
In England, students typically receive a text message from the Student Loans Company a few days before the maintenance loan payment is made.
Applications for funding can be submitted up to nine months after the academic year begins.
Application processes vary by region.
How Much Interest Will I Be Charged?
Interest is charged on the loan from the day it is taken out, but rates vary across the UK.
It is important to note that loan terms and repayment conditions can change after borrowing.
Future interest rate increases apply to all student loans, not just new ones.
For students in England, the interest rate is generally set at the Retail Price Index (RPI) inflation measure. The rate usually updates every September but can change during the year.
Currently, the interest rate is 4.3% for those who began university in 2023 or later.
Interest rates for students in other parts of the UK differ accordingly.
Graduate repayments depend on income levels.
When Do I Have to Start Paying Back My Student Loan?
Repayments cover both tuition fees and maintenance loans combined.
Repayment begins only when the graduate earns above a certain income threshold.
Typically, graduates repay 9% of their earnings above this threshold.
For students in England who started university in 2023 or later, the repayment threshold is £25,000.
In Wales, the threshold is £28,470; in Scotland, £32,745; and in Northern Ireland, £26,065.
Repayments commence from the April following course completion.
Payments are automatically collected through the tax system.
Some borrowers opt to make additional repayments to reduce their loan balance early; there is no penalty for doing so.
Can I Get a Refund if I Pay the Wrong Amount?
Some graduates have experienced incorrect deductions from their wages, such as repayments taken before they became liable in April, or after their loan was fully repaid.
Errors may also occur if employers place graduates on incorrect repayment plans or if repayments are triggered by temporary income increases like extra shifts or bonuses that exceed monthly but not annual thresholds.
Incorrect repayments can be refunded.
In the 2023/24 tax year, just over £61 million was refunded to 216,300 customers, with an average refund of £280.
In May 2024, the Student Loans Company launched a digital refund service, accessed by more than 400,000 people within six months.
Graduates can check eligibility for refunds on the Student Loans Company website.
Note that voluntary overpayments cannot be refunded.
When Are Student Loans Written Off?
In England, students beginning university in 2025 will have their loans written off after 40 years, regardless of the remaining balance.
In Wales and Scotland, loans are written off after 30 years, and in Northern Ireland after 25 years.
Graduates who leave their course early are still required to repay their student loans.
