Student loan statistics in UK

Student loan interest rates, credit requirements, repayments, defaults in the United Kingdom

 

Overview

Most students who go to universities in the UK take out two types of loans, one for the tuition fee and one for living costs (maintenance loan). Maintenance grants that don’t have to be repaid are also available to students from low-income households.

The basic guideline for student loans in the UK is that those who graduate or leave university and earn high salaries will repay higher amounts, and those who don’t gain financially will repay very little or not at all.

In the UK, outstanding student loans touched £121.8 billion (US$148.7 billion in May 2020) at the end of the 2018-2019 financial year. Student loans are the main method of government support to students pursuing higher education, and the government generally provides about £17 billion to 1.3 million students in England a year.

In the 2018-19 financial year, £16.2 billion was loaned, an increase of 8.4 percent over the previous financial year. The amount loaned for postgraduate education was £665.8 million.

The average loan balance for higher education loans per student was £35,950 in 2019. The total number of borrowers owing higher education loans was 5.3 million at the end of April 2019. The number of borrowers who had fully repaid their education loans was 991,500, comprising 19.3 percent of those who had become liable to pay.

In 2015, the UK government announced that maintenance grants would be replaced by loans from 2016-17. In October 2017, the then UK Prime Minister announced that the fee cap would be frozen at £9,250. Students in the UK going to universities in the country pay tuition fees ranging from £4,275 to £9,250 a year depending on where in the UK they study and where in the country they come from.
 

Repayment and default

The UK government expects that 30 percent of current full-time undergraduates who take out loans will repay them. You will be due to start repaying your loan the April after you complete or leave your course. For example, if you complete your course in June 2020, you will start repayment in April 2021.

Repayment amount depends upon how much you earn. Graduates have to start repaying their loans once their earnings cross the “income threshold.”  The repayment is 9 percent of your income over the threshold. If there is a change in your income, the repayment amount would change accordingly.

Repayment depends on which loan plan you’re on: Plan 1, Plan 2, and Postgraduate Loan, depending on where in the UK you’re from, and when you started your program.

For courses that commenced before September 1 2012, or for loans taken from Northern Ireland or Scotland, plan 1 will be applicable in which repayment the threshold would be £19,390 a year, £1,615 a month or £372 a week.

If you began your course after 1 September 2012 in England or Wales, plan 2 will apply. The repayment threshold would be  £26,575 a year, £2,214 a month or £511 a week.

For postgraduate loan, you’d pay 6% of what you earn over the threshold. The threshold is £404 a week or £1,750 a month (before tax and other deductions).

For those who took loans for courses that commenced before September 1998, ‘mortgage style’ loan or ‘fixed term’ loan would be applicable.

For full-time courses, the repayment starts the April after course completion if your earning is over the repayment threshold.

For those pursuing part-time courses, the repayment would start in April, four years after the course commencement or the April after course completion, whichever is earlier, and if your income is above the threshold.

Depending on your repayment plan, all debt is wiped out after 25-30 years, or after you are 65. Your house or belongings won’t get repossessed if you don’t make repayments.

As per reports from April 2019, 60,000 graduates who studied in the UK owed £1 billion in student loans. As many as 42,000 home students with loans of £18,000 each are reported to be untraceable, while 18,000 “missing” students owe £214 million. An estimated 8.1 million people have taken out student loans from the SLC, or Student Loans Company, a non-profit, government-owned company that administers loans and grants to students.
 

Interest rates

Interest rate is charged from the day your loan provider pays the first payment until you repay the loan. The interest amount doesn’t affect the amount you will repay each month. The rate depends on your circumstances and your repayment plan. Under Plan 1, it is 1.1 percent. While you’re studying, the interest rate will be Retail Price Index (a measure of the cost of living) plus 3 percent.

From the April after you’ve left your course, the interest will be based on your income up to a maximum of RPI plus 3 percent. If you are still a student, you will be charged RPI plus 3 percent a year (in January 2020, this came to 2.4 percent plus 3 percent, that’s 5.4 percent).

Also read:
Guide to Education Loans to Study Abroad
Graduate School Funding for Masters Degree Programs