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Student borrowing: Questions and answers

22nd August 2021

I read that the average British student leaves university with a debt of around £30,000. I’m hoping to be a teacher, so how will I ever pay that back?

While its true that higher education is expensive when you add up tuition fees and living costs, student loan repayments are designed to be affordable and only start once your income reaches a certain level. Monthly repayments are based on a percentage of your earnings - 9% in most cases. For more detailed information, click here.

Can I get a credit card if I am a student? My friend thinks I should apply for one in case of emergencies.

Credit cards are available to eligible students* and getting one can help to build your credit rating. With some credit cards you can also earn benefits such as cashback.

They can help you to spread the cost of expensive items, such as text books, over a few months. Some purchases made on a credit card between £100 to £30,000 may have protection through Section 75 of the Consumer Credit Act 1974, meaning if there's an issue with the supplier of the goods, you may be able to claim a refund from your credit card provider. But be aware that not all purchases are covered by Section 75 for example it may not include purchases made by an additional cardholder or made through an intermediary such as Paypal, Amazon Marketplace or flight or hotel comparison sites.

However, there are things to be wary of when using your credit card. For instance, you can withdraw cash from an ATM using a credit card, but you will be charged fees. Also, if you do not clear the balance at the end of the month, interest rates can be high.

A credit card can be a useful part of your toolkit for managing your money at university, as long as you are careful with it, and mindful of the potential pitfalls.

*18+ and UK resident only.

Whats the best way to manage my student loan? I know it arrives in a lump sum and am worried about rushing through it.

Your student loan has two parts and the element to cover tuition fees is paid directly to your university.

If you're a student from England, Northern Ireland and Wales, you’ll receive your Maintenance Loan in three chunks throughout the academic year. Usually these arrive in September, January and April, but this may vary depending on when your university’s semester and term dates officially start. If you’re a Scottish resident and studying in Scotland, then your loan would be paid monthly.

The most sensible approach is to calculate a monthly budget based on your income from your loan, any part-time jobs and parental help (if you have it), and a detailed assessment of your outgoings.

Then put your loan into an instant access savings account where it can earn interest and youll be less tempted to spend it straight away, but you can withdraw it without penalties.

Will a student loan affect my credit rating? Id like to buy a house in future but worry about the impact of such a large debt on my chances of getting a mortgage.

Its sensible to think ahead - and the good news is, as long as you make the repayments in full and on time, student loan balances are not included on your credit reference files and should not impact your ability to borrow at a later date.  

You also need to bear in mind that other debts you accrue while studying, such as credit cards and overdrafts, could have an impact on your credit rating if you do not repay them on time.

And most mortgage lenders base their decisions on affordability - will you be able to comfortably meet the repayments, plus your other outgoings, which will include student loan repayments.

This is not intended to give financial advice or a personal recommendation. If you need a personalised recommendation based on your personal circumstances, you should seek the advice of your financial adviser