What is a Student Loan and How Does it Work?

When it comes to higher education, not everyone is going to be able to pay for their courses out of pocket. Tuition, boarding, supplies and materials, transportation and all of the other expenses of education add up quickly and largely. This is where student loans come in handy and help to lighten the burden for students. Before we dive into the specifics of student loans, first it’s important to learn what a student loan is, and if it’s right for you and then we can focus on the mechanics of repayments of the loan.

Student Loan

What is a Student Loan?

A student loan is a sum of money, provided by the government to a student for the payment of educational expenses, to be paid back at a later time by the student. That’s more a less technical definition of what the loan is but really, it’s a way to help financially-disadvantaged students to access higher education. The loan provides the student the means to pay for most of, sometimes all, of the expenses demanded of them by their universities. In the United Kingdom, the repayment process is very streamlined, which we will get into later.

Now, there are other means of paying for education, like scholarships and bursaries, that do not require repayment, but this article focuses on loans.

Who needs a Student Loan?

A student loan is for any student who needs assistance paying their tuition fees and may need assistance paying other expenses as well. Students who are from low-income households, are their own providers, or are dependents but are not receiving assistance for their education may want to consider applying for student loans. If you are lucky enough to have an occupation that covers your tuition and other costs, it may still be worth applying for student loans, so you have more capital available while you are going through your studies. Student loans are not limited by income level and, as previously stated, they are designed to help lessen the financial burden for students, so they may focus more on their studies.

The Cogs of the Machine

Like any other loan, there are a lot of gears and machines that go into the operation of the loan. This article will provide an overview of those loan machinations, but make sure to review the government’s website for more detailed information. It is critical to take your time and read everything very carefully. You do not have to memorize the information but loans are a large and long commitment, so consider everything before applying. Also, I cannot stress this enough, read the terms and conditions of the loan before finalizing anything (that especially applies to non-government loans)! Most people get in trouble when they do not read the terms and conditions carefully and understand them fully. They are long documents but they are the key to ensuring a smooth loan experience, so take your time when reading them. Now, let’s start with the application process and then move on to the more complicated components of the process.

How to Apply for a Student Loan:

The government website provides a full and detailed account of the application specifics. They recommend checking eligibility before proceeding through the application process. They also have a finance calculator that will show you how much money you could receive to assist you with your studies. These are great tools to get you prepared before going into the application process. The actual process for submitting an application is very simple. You create an account on the student finance website and complete the required components of the site. The site will ask you for two main documents, proof of identification and proof of household income. Make sure to have these handy before you start the application. Also note, there are separate websites for England, Wales, Scotland and Northern Ireland.

To ensure you are able to acquire any maintenance loans you qualify for, set up a bank account for the government to transfer your funds to you. These loans are made to help pay for expenses aside from your tuition fees, they make it so you have money to eat, sleep and otherwise be comfortable while attending to your studies.

I Got My Loan, Now What?

Now that you have your loans and you are a full-fledged student, there are some things you want to keep on top of, mainly changes and applications. Per the terms and conditions of the loan, you are required to inform the government of certain changes, like residency; enrollment; early completion or expulsion. Make sure to inform the government of these changes as soon as you can. Another thing to keep in mind is that you have to reapply annually for your next round of loans. The government’s website has a detailed list of application windows, and they allow 90 days to apply for loans from the start of the academic year. I do not recommend waiting that long, but things happen and you may only be able to apply late.

Graduation and Beyond

Once you have graduated, there is the small matter of paying your loans back to the government. This may sound like a daunting task but it is a relatively easy process. Repayment is based on income and does not start until two conditions are met:

    1) The April after graduation has arrived:

        a) This is the earliest you would start making payments and only if the second condition is met

    2) You earn at least:

        a) 27,295/year

        b) 2,274/month


        c) 524/week

If you are not earning the above amounts or you are unemployed, you do not have to pay your student loans. However, once these conditions are met, the repayment process is as simple as the amount due being deducted from your paychecks by your employer. Your employer then pays your amount forward to the government, along with your taxes. This means, you do not have to take extra steps to repay, they even adjust automatically as your salary increases. This limits the amount of work you have to do to satisfy your loan repayments. However, if you are self-employed, you will need to go through the self-assessment process and submit your loan payments with your taxes. Additionally, you do have the option to make additional payments, if you desire to pay off your loans sooner.


Student Loans are a serious commitment and can be very complicated. However, they do provide more people with access to higher education, with all that entails, and subsequently, future career options and financial potential. Take your time while considering if student loans are right for you.