Student loans and grants in the United Kingdom

Education Act 1962 In the years following World War II, most local education authorities (LEAs) paid students' tuition fees and also provided a maintenance grant to help with living costs; this did not have to be repaid. The Education Act 1962 made it a legal obligation for all LEAs to give full-time university students a maintenance grant. By the early 1980s the maintenance grant depended on parental income and for many students, about £300, was a minimum grant. There was no legal obligation on parents to make this up to the full grant. The full grant had increased by 1980 from £380 to £1,430 a year and the minimum grant after the increase was about £430. About 155,000 students were paid the full grant in 1980/81. Those whose parents had low income would receive the full maintenance grant. Creation of the Student Loans Company Student Loans in their original form were brought in under the Conservative Government of Margaret Thatcher which ended in November 1990. She was succeeded by another Conservative Prime Minister, John Major. The same government was in power until May 1997. The SLC (Student Loans Company) was founded for the 1990/91 academic year to provide students with additional help towards living costs in the form of low-interest loans. In its first year, the SLC gave loans to 180,200 students. This represented a take up rate of 28% of eligible students, with an average loan of £390. Introduction of tuition fees In 1997, a report by Sir Ron Dearing recommended that students should contribute to the costs of university education. The Labour government under Tony Blair passed the Teaching and Higher Education Act 1998 which introduced tuition fees of £1,000 per academic year to start in the 1998/9 academic year. In addition, maintenance grants were replaced with repayable student loans for all but the poorest students. The total loans provided by the SLC increased from £941 million in the 1997/8 academic year, to £1.23 billion in the next year, when tuition fees took effect. This charge was abolished in 2008. In a similar vein, the Welsh government gives Welsh students studying at Welsh universities a tuition fee grant. Higher Education Act 2004 The Higher Education Act 2004 increased tuition fees from £1,000 to a maximum of £3,000. By the 2005/6 academic year, the SLC was providing £2.79 billion in loans to 1,080,000 students. Those starting university in 2006 were the first to pay £3000 a year rather than £1000. The increase was brought in under the Labour Government of Tony Blair In late 2009, the SLC was heavily criticised by universities and students for delays in processing applications. It was further criticised in 2010, as previous issues did not seem to have been resolved. Such issues could include the repeated loss of financial evidence, refusal to acknowledge that an applicant exists, sending schedules for entirely incorrect universities and in some cases years, and failing to keep applicants informed. The chief executive resigned in May 2010, and the chairman, John Goodfellow, formally chief executive of Skipton Building Society, was required to resign, by David Willetts, incoming Minister of State for Universities and Science. Ed Lester became chief executive in May 2010. In 2012 an investigation by Exaro News revealed that the SLC was paying Lester through a private company enabling him to reduce his tax bill by tens of thousands of pounds. The day after the story broke the Chief Secretary of the Treasury, Danny Alexander was summoned to the House of Commons for an urgent debate. He told MPs that Ed Lester would have tax and national insurance deducted at source from that point on. In 2014 it was announced that student loans would be made available to postgraduate students aged under 30 for the first time. Alternative student finance and religious concerns In 2024, following campaigning by Muslim students, community leaders, organisations such as the Muslim Council of Britain, Islamic Finance Council UK and the Islamic Finance Guru, and support from some members of parliament (notably Stephen Timms) , the UK government announced plans to introduce an alternative student finance scheme. The scheme, intended to provide Sharia-compliant options for students who object to conventional interest-bearing loans, was scheduled to commence shortly after the implementation of the Lifelong Learning Entitlement (LLE). This initiative was first proposed in 2013, when Prime Minister David Cameron promised to introduce alternative student finance in a speech at the World Islamic Economic Forum. In this announcement, he said: “Never again should a Muslim in Britain feel unable to go to university because they cannot get a Student Loan—simply because of their religion.” Under Islamic law, the charging of interest (riba) is prohibited, leading some Muslim students to seek financing methods aligned with their religious beliefs. The proposed alternative scheme will use the Islamic finance principle of Takaful to provide a form of group-based mutual support, to accommodate religious diversity in student funding. Prior to this announcement, options were limited, and many Muslim students either avoided going to university altogether or relied on scholarships, bursaries, or standard loans despite objections. ==Eligibility==

Students must meet two eligibility requirements: personal eligibility and course/institution eligibility. Personal eligibility principally concerns the student's residency status. To achieve course/institution eligibility, the student must be studying for an undergraduate degree at a UK degree-awarding institution or other verified higher education institution (HEI). Students on some teacher, youth and community worker courses are also eligible for SLC support. From academic year 2016/17, students aged under 60 studying for a postgraduate taught Masters at a UK degree-awarding institution or other verified HEI became eligible for a £10,000 student loan. Tuition fee loan All full-time students are entitled to a loan covering the full tuition fee. From the 2012/13 academic year, universities were entitled to charge up to £3,465 for pre-2012 students, and up to £9,000 for post-2012 students. Since academic year 2006/07 when variable tuition fees of up to £3000 were introduced by Tony Blair's Labour government, the maximum tuition fee had been increased each year with the April forecast for RPIX inflation for the following academic year. For academic year 2010/11 the maximum tuition fee had reached £3290 and in the 2011/12 academic year the tuition fee was raised again to £3,375. The "old system" maximum tuition fee was raised one last time for academic year 2012/13 to £3465, a level it has remained at for subsequent academic years in England. For courses starting after 1 September 2012 the maximum tuition fee cap was raised to a maximum of £9,000 per year for full-time students and £6,750 for part-time students where the HEI has an access agreement in place, and a maximum of £6,000 and £4,500 respectively where the HEI does not. Scottish and Welsh universities were also entitled to raise their tuition fees; however, Scottish-domiciled students studying in Scotland are entitled to free tuition and the Welsh Assembly pays any tuition fees for Welsh-domiciled students over and above the "old system" cap as uprated by inflation, of £3,810 for academic year 2015/16. Northern Ireland retained the existing post-2006 student loan system. Both pre-2012 and post-2012 maximum tuition fee caps were frozen at 2012/13 levels between 2012/13 and 2016/17 in England. Elsewhere the "old system" cap continued to be uprated annually with the April forecast for RPIX inflation for the following academic year, reaching £3,925 for the academic year 2016/17 and £4,030 for academic year 2017/18. Tuition fee caps remained frozen in England at £3,465 and £9,000 respectively in academic year 2016/17, but rose for post-2012 regime students in some institutions from 2017/18 with forecast RPIX to £6,165 (basic amount) and £9,250 (higher amount) in academic year 2017/18 with the introduction of the Teaching Excellence Framework. Maintenance loan All eligible UK-domiciled students are also entitled to a maintenance loan, which is designed to help pay for living costs whilst at university. All students are entitled to a set amount, with those living at home entitled to less and those living away from home in London entitled to more. For the 2009/2010 academic year, the maintenance loan was set at £2,763 for students living at home; £4,998 for students living in London; and £3,564 for students living at universities elsewhere in the UK. Students from low-income households may qualify for an increased maintenance loan and/or maintenance grant (for every £1 of maintenance grant received the maintenance loan entitlement reduces by £0.50). For the 2009/2010 academic year, students living at home were entitled to an extra £1,075 (bringing the total loan to £3,838); students living in London were entitled to an extra £1,940 (bringing the total loan to £6,928); and students living elsewhere in the UK were entitled to an extra £1,386 (bringing the total loan to £4,950). The precise threshold for qualifying as a low-income household varies depending on which country of the UK the student resides in, and is set between two bands, with very poor students receiving the full extra money and less-poor students receiving only a partial extra amount. For academic year 2015/16, maximum maintenance loan rates for both pre-2012 and post-2012 students will rise by forecast RPIX inflation (3.34%). The post-2012 maximum maintenance loan (for students living away from home, outside London) rose from £5,555 to £5,740 and the pre-2012 maximum maintenance loan (for students living away from home, outside London) will rise from £5,000 to £5,167. For academic year 2016/17, maximum maintenance loan rates for new students increased substantially to £8,200 (for students living away from home, outside London) to correspond with the abolition of maintenance grants. Maintenance loans were increased by forecast RPIX of 2.8% to a maximum of £8,430 (for students living away from home, outside London) in academic year 2017/18. Maintenance loans were extended to part-time students from academic year 2018/19 (including distance learners from 2019/20). Postgraduate loans It was announced at Autumn Statement 2014 (3 December 2014) that from academic year 2016/17, students aged under 30 studying for a postgraduate taught Masters at a UK degree-awarding institution or other verified HEI will be eligible for a £10,000 student loan. The outcome of the consultation confirmed many aspects of the initial proposals but also contained several changes. Anyone aged under 60 who meets the other eligibility criteria will be eligible for a postgraduate loan (previously it had been proposed that the loans would be restricted to under 30s), as will postgraduate research students. The repayment threshold of £21,000 has been confirmed, although the repayment rate (initially proposed to be 9%) will now be 6% of income above the threshold, ensuring repayments will be as affordable as possible for students repaying both an undergraduate and postgraduate student loan (the combined repayment rate is 15% although the repayment thresholds differ) as it is also confirmed that repayments will be concurrent between the two loans. The interest rate applied to the loans has been confirmed as fixed at RPI+3% (unlike undergraduate plan 2 loans where interest varies between RPI and RPI+3% depending on income). As with undergraduate plan 2 loans, the postgraduate loans will be written off 30 years after they become eligible to be repaid (April after leaving course), although no postgraduate loans will be eligible for repayment before April 2019 (a change from the proposed April 2018). It was announced at Budget 2016 that Doctoral postgraduate loans of £25,000 would be available from academic year 2018/19. It was originally announced at Budget 2016 that the intention was for Doctoral postgraduate loans to be repaid at 9% above the repayment threshold with a combined 9% repayment rate applying where a borrower is repaying both Masters and Doctoral postgraduate loans; however, this was later revised to one combined postgraduate repayment of 6%. an extract of which appears below. These new laws have implications for eligibility to benefits resulting in part-time postgraduate students potentially eligible to benefits. Therefore, postgraduate student loans for part-time students are unlike undergraduate student loans which usually exclude students from receipt of benefits. Statutory Instruments S2016 No. 743, Social Security, The Social Security (Treatment of Postgraduate Master's degree Loans and Special Support Loans) (Amendment) Regulations 2016: 'Where a student is treated as possessing a postgraduate master's degree loan under paragraph (3) in respect of an academic year, the amount of that loan to be taken into account as income shall be, subject to paragraph (5), a sum equal to 30 per cent. of the maximum postgraduate master's degree loan the student is able to acquire in respect of that academic year by taking reasonable steps to do so.' Maintenance grant Students from low-income households are entitled to an increased loan and also a maintenance grant, which does not have to be repaid. Like the extra maintenance loan, the precise threshold for qualifying as a low-income household varies depending on which county of the UK the student resides in, and is set between two bands, with very poor students receiving the full grant and less-poor students receiving only a partial grant. For the 2009/2010 academic year, students from England and Wales were entitled to a grant of up to £2,906; students from Scotland £2,105; and students from Northern Ireland £3,406. On the "new system" (post-2012) no such requirement exists, however, those institutions charging more than the basic fee level of £6000 (full-time) need to include some support for disadvantaged students in their access agreements which need to be approved by OFFA. ==Repayment and interest==

Since they were introduced in 1990, a variety of systems have been employed for student loans. These vary depending on when the course was first started, and in which region study was conducted. The terms of the different plans vary greatly. In general, the newer systems are less generous than older systems. Graduates with Plan 2 loans can expect to make higher repayments than if they had been on Plan 1. The transition from Plan 2 to Plan 5 in particular will lead to higher repayments from lower earning graduates, while higher earning graduates will pay less. Income-contingent loan repayments are usually made via the tax system. For employed borrowers in the PAYE system, this means the repayments can vary even from week to week. If this results in the total repayments for a tax year being more than the required annual amount, the excess may be reimbursed on request. Outstanding income-contingent loans are written off if the borrower dies, through disability becomes permanently unfit for work, or after a set period. The write-off periods have been changed several times, and are listed along with the terms for each loan plan below. Any graduate with annual gross income below this deferment threshold is eligible to apply to defer their repayments for 12 months at a time. This system was criticized because no matter what the size of the loan, it had to be repaid in 60 (for up to 4 loans) or 84 (for more loans) monthly instalments. Mortgage-style loans were written off if one of the following occurred: • The borrower reaches age 50 and the borrower was aged below 40 when they took out their last loan • The borrower reaches age 60 and the borrower was aged 40 or over when they took out their last loan • The 25th anniversary is reached from when the borrower took out their last loan The vast majority of these loans have been paid off or cancelled, given the fact that they have not been awarded since the late 1990s and had a 25-year rule. The last group were written off in August 2025. The only loans from this system that remain today are for borrowers who were in default at some point, as these may last longer than 25 years. Plan 1 & 4 (1998–present) Plan 1 loans were offered from 1998 to 2012 nationwide. They are no longer used in England and Wales, which moved to Plan 2 in 2012, but are still offered in Northern Ireland. In Scotland, students were transitioned to Plan 4 after 2012- which is identical albeit for a higher repayment threshold. Repayments do not begin until the April after graduation or leaving a course. Thereafter, repayments are fixed at 9% of gross income above a threshold, as shown in the table below. The interest rate for these loans is the lower of either the Bank of England base rate plus 1%, varying throughout the year, or the RPI measure of inflation, set each September to the value from the previous March. Plan 1 & 4 loans are written off after the following periods: • For loans taken out from September 1998 to August 2006 (England, Wales & Northern Ireland): when the borrower reaches age 65 • For loans taken out from September 1998 to August 2007 (Scotland): earlier of when the borrower reaches age 65 or 30 years after they became eligible for repayment (this was originally at age 65 only but was amended in 2018) • For loans taken out from September 2006 to August 2012 (England and Wales): 25 years after they became eligible for repayment • For loans taken out from September 2006 onwards (Northern Ireland): 25 years after they became eligible for repayment • For loans taken out from September 2007 onwards (Scotland): 30 years after they became eligible for repayment (this was originally 35 years but was amended in 2018) Such loans did not enter repayment until at least April 2016. Under this scheme, repayments are also calculated as 9% of annual gross income, but relative to a higher initial threshold than Plan 1. The interest for these loans will initially accrue at the rate of RPI plus 3% until they become eligible for repayment (the April after graduating), after which there will be a progressive rate of interest dependent on income. The rate will range from RPI for those earning up to £21,000 per annum, up to a maximum of RPI+3% at a salary of £41,000 and above. On average students with loans taken after September 2012 would initially accrue £44,000 of debt. Plan 3 (2016–present postgraduates) Postgraduate student loans are a separate system introduced in England in 2016. They are not offered in the devolved regions. †Like Plan 2 loans, the interest rates are at times capped when prevailing market rates or government policy caps are lower. Plan 5 (2023–present) Plan 5 loans are offered in England only, and cover most courses started after 2023. theoretically to provide the Student Loan Company with a way of fixing repayments during that time in fixed instalments over twelve months. This fixed schedule highlights another inflexibility of the overseas repayment mechanism when compared to the UK PAYE scheme. In addition a reassessment can be applied for when moving between countries with different threshold bands. If a recipient of a loan does not return an Overseas Income Assessment Form, a default monthly repayment amount, which also varies by country, will be applied. This figure is based on twice the country's national average income and so is potentially quite large. Since 2017, there has been no attempt at legal action against overseas borrowers who do not pay. The cost of legal action overseas may well be higher than the debt accrued by an individual. == Private student loans ==

Private loans are generally only sought in addition to government student loans, rather than in place of them (for example if their student loan does not cover accommodation costs). These loans are not guaranteed by a government agency and are made to students by banks or finance companies. Unlike Government loans the repayments do not vary based on future earnings, and the loan will not be written off after a certain period. Private student loan types Private student loans generally come in two types: school-channel and direct-to-consumer. School-channel loans offer borrowers lower interest rates but generally take longer to process. School-channel loans are "certified" by the school, which means the school signs off on the borrowing amount, and the funds are disbursed directly to the school. Direct-to-consumer private loans are not certified by the school; schools don't interact with a direct-to-consumer private loan at all. The student simply supplies enrolment verification to the lender, and the loan proceeds are disbursed directly to the student. Although direct-to-consumer loans generally carry higher interest rates than school-channel loans, they do allow families to get access to funds very quickly – in some cases, in a matter of days. Private student loan rates and fees Private student loans typically have variable interest rates while government student loans have fixed rates. Private loans often carry an origination fee. Origination fees are a one-time charge based on the amount of the loan. They can be taken out of the total loan amount or added on top of the total loan amount, often at the borrower's preference. All lenders are legally required to provide you with a statement of the "APR (Annual Percentage Rate)" for the loan before you sign a promissory note and commit to it. Unlike the "base" rate, this rate includes any fees charged and can be thought of as the "effective" interest rate including actual interest, fees, etc. When comparing loans, it may be easier to compare APR rather than "rate" to ensure an apples-to-apples comparison Most private loan programs are tied to one or more financial indices, such as the BBA LIBOR rate, plus an overhead charge. Because private loans are based on the credit history of the applicant, the overhead charge varies. Students and families with excellent credit generally receive lower rates and smaller loan origination fees than those with less than perfect credit. Private loans in the UK are offered by the following companies: • HSBC - Postgraduate loans. • Barclays/Co-op - Professional and career and development loans. • Future Finance - Student and Graduate loans. • Lendwise - Postgraduate Student Loans and Professional Qualifications Student loans. ==Criticism==

Overpayment problems Since at least the 2000s there have been issues with overpayment; these problems are ongoing as of 2025. Historically payments were transferred only annually by HMRC to the SLC; this resulted in up to a year of extra payments being taken, even after the balance had nominally been cleared. In 2011/12, the money wrongly taken because of these practices amounted to £36.5 million. In 2009, a new direct debit system was introduced to try and address this problem for graduates who were estimated to have fewer than two years' repayments left to make. However, the system was hampered by administrative issues which led to the SLC missing the transfer window to the second system, or in some cases sending demand notices to graduates who have already paid off their loan. The transfer of information and even money between HMRC and the SLC has also been hampered by administrative issues. Some graduates have found that large sums of money have gone missing in the records. The SLC will alter their records on receipt of the relevant payslips and P60s showing the missing payments. Graduates are advised by Student Finance England to check all paperwork and ensure that the repayments are going in according to schedule, and not be afraid to complain or otherwise draw the SLC's attention to the matter should they make a mistake. Lack of mechanism to pursue borrowers overseas Because loans are normally collected through the UK tax system, there is no automatic system for collecting from borrowers who have moved overseas. Borrowers are asked to update SLC on their overseas income, so that they can be charged the correct amount; those who do not return this information are assigned a flat fee. Payment is normally collected by asking the borrower to set up a direct debit, but many overseas do not maintain contact with SLC, or simply decline to pay. An estimated 368,000 borrowers had "slipped out of contact" by 2013. As of 2024, there are 142,286 people overseas in arrears. While it claims that it "will obtain court orders" against overseas borrowers, it has not actually attempted to do so since 2017, and has not been successful in a case since 2012. The Public Accounts Committee described the repayments system as 'blatantly inadequate' and its chairman Margaret Hodge advised the Chief Executive that the SLC "knows very little about British graduates who live abroad or about graduates from the EU who have since left the country. Will they ever pay back their loans? The Student Loans Company simply doesn't know." The SLC does not sell debt to a debt collection agency, though it did use the DCA Transcom. According to a Transcom representative, the company “just handles customer service on behalf of the SLC, and has never taken legal action”. The SLC do also use publicly available information such as social media when tracing customers. People overseas have reported receiving large penalties for minor clerical errors when dealing with Transcom and the SLC. Debt collection activities were suspended during the 2020-21 financial year due to the COVID-19 pandemic. Transcom were replaced in August 2024 by Past Due Credit Solutions. Legal action The SLC has stated in the past that it will "actively trace those in arrears and will obtain court orders in other jurisdictions", actually doing so overseas is challenging, as the cost of legal action is likely higher than the amount that could be recovered. There are no international treaties or agreements to streamline this. • The 2017 pilot attempted to recover funds from a single borrower in Australia through overseas legal action, but failed. The 2009 and 2012 pilots also tried several people in Scotland. As of 2024 there have been no further attempts at legal action. Level of debt accrued A freedom of information request obtained by the BBC in 2024 revealed that the level of debt actually accrued by students was extremely high; and far outpaced estimates from the introduction of £9,000 fees in 2012. Estimates from the time suggested a student would leave with £43,000 in debt, but by 2024 some students had accrued debts as high as £231,000. One student has made over £110,000 in repayments, while another had been charged £55,000 in interest. The BBC interviewed a doctor who was making repayments of £1,000 but being charged £5,900 in interest each year. The director of the Higher Education Policy Institute Nick Hillman said that he had never "seen figures like this before" in 15 years of working in higher education. In 2024 the BBC estimated that around 1.8 million people in the UK are now in £50,000 or more in student debt, stating upwards of 61,000 have balances of above £100,000, citing figures from the Student Loans Company (SLC) and stated another 50 people each owe upwards of £200,000. ==Controversies==

Loan delays (2009) In the summer and autumn of 2009, many students experienced delays in being assessed for and obtaining student loans and grants. As courses began in September or October, the SLC said that up to 116,000 students would have to begin the term without their funding in place. By 10 November 2009, there were still 70,000 applications waiting to be processed and 3 out of 4 universities were using their own emergency funds to help affected students. Chair of the student group Unions 94 Michael Payne branded the situation "inexcusable" and the Million+ group of universities said the failures were "very disappointing". An inquiry into the problems was set up, chaired by Professor Sir Deian Hopkin. The inquiry reported on 9 December 2009. It found that the SLC processing system had faced problems with lost documents, equipment failures and difficulties with the online application system, and at peak times only 5% of phone calls were answered. The SLC was also forced to delay accepting applications for the 2010/11 academic year. Tax avoidance by the SLC (2012) In January 2012, a BBC Newsnight and Exaro investigation revealed that Ed Lester, the head of the SLC, was being paid his salary via a private firm, allowing him to reduce his payment of income tax and national insurance contributions. It was subsequently announced that he would be treated as a regular employee in the future. In May 2012, Lester announced he would be leaving the SLC at the expiration of his contract in January 2013 although he insisted that the controversy had no bearing on his decision. His replacement is Mick Laverty, a former regional development agency chief executive, appointed in October 2012 and incumbent from January 2013. Advanced Learner Loans system error (2025) A system error at the SLC meant that around 4000 Advanced Learner Loans (ALLs) persisted past the point at which they should have been wiped. ALLs are intended for access to higher education for those who do not have requisite qualifications and are wiped at the end of the degree programme; however, an error dating to at least 2019 meant that these loans were retained. Action to amend the problem did not come until 2025 after a complaint to the ombudsman. ==See also==