Money series: all about student loans

If you are about to head to university or college you will likely be receiving some form of student loan, grant or bursary, but what do each of them mean and how do you pay back your student loan?

Here at Source we know our stuff when it comes to student loans. If you are Scottish and plan to go to university here then your tuition will almost always be covered by Student Awards Agency Scotland aka SAAS.

Grants and bursaries

Dependant on your household income and course, you might be eligible to receive a grant or bursary while you are studying. You can read more about the eligibility criteria and different types of grants and bursaries here.

You will most likely be eligible to receive a Young Students’ Bursary of between £500 and £1,875 for each year you study. This type of funding isn’t a loan and doesn’t have to be paid back.

Student loan

In Scotland we don’t have to pay to go to uni and that also means we don’t have to repay our tuition fees once we have the degree in hand. Unfortunately your student loan does have to be paid back.

Student loans are optional but the majority of students opt to take one out. When applying for a student loan through SAAS you will be eligible to receive between £4,750 and £6,750 for each year of study. You can find out how to apply and what amount you will receive here.

Repaying your student loan

Once you have finished your course, graduated and celebrated, it’s time to think about repaying your student loan. We know what you’re thinking – how do I even do that?

You will pay your student loan back to the Student Loans Company (SLC) from your wages each month. This doesn’t start until the beginning of the next tax year after you graduate, so if you graduated in July 2022 you wouldn’t start repaying your student loan until April 2023.

It isn’t all doom, gloom and debt. Your student loan repayments are so small you might not even notice them coming off your wages each month and unlike other loans, your student loan won’t affect your credit score.

You won’t start to repay your student loan until you earn over a certain threshold. The current threshold is £18,330, but this changes each year so keep an eye on the SLC website for updates.

Once you start earning over this amount you’ll pay 9% of it back to the SLC. You only pay back a percentage of what you earn over the threshold, not of your whole wage. That means if you earn £20,330 you will pay £180 back in a year not £1,829. That’s only £15 a month so there will be plenty of money left to treat yo self.

If you haven’t paid off the full amount of your loan 35 years after you graduate then the SLC will cancel your loan and any interest it has earned in that time. The current interest rate for student loans in Scotland is 1.25%, you can read about how interest works in our first money series post, all about ISAs.

Find out more about repaying your student loan on the SLC website.

Read more from our money series – all about ISAs, all about credit cards and the emotional side of money.

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