School Sponsored Loans:
Although there are no student loans sponsored by universities, there is student financial assistance available through the institution of higher education in the way of bursaries, scholarships and grants. These are non-repayable and based on financial need (bursaries, scholarships and grants) and merit (scholarships).
Bursaries provide assistance such as, discounts on accommodation, discounts on books and materials, and free transport (for example, providing the student with a bicycle).
Grants exist to help students receive an education who come from disadvantage, whether that is because of their background or any kind of disability. Because of this, grants are solely based on income. It is possible to get partial grants, or to qualify for different types of grants depending on the situation of the student. More information can be obtained from the Educational Grants Advisory Service (EGAS).
Bursaries and grants can be applied for through Student Finance Direct.
Scholarships are offered to students for a multitude of reasons, such as top-level grades, subjects studied, or even where the student lives. Students can request information on the scholarships available from the university of college website, or from their student support office.
Government Sponsored Loans:
There are two types of government student loans: Student Loan for Tuition Fees, and Student Loan for Maintenance (living expenses). The advantage of government sponsored student loans is that they will be deferred while the student is in school, and repayment will be deferred until the student reaches the income threshold of £1,250 per month. Also, the loan is not based on credit history, but rather on the financial need of the student. The downside of these loans is the amount borrowed is capped, requiring students to work while attending classes and to budget very carefully.
Repayment of these loans does not start until the student is finished with their programme, and they are earning £1,250 per month. The repayment per month will be equal to 9% of the amount earned in excess of the income threshold. The interest rate charged on student loans is linked to the rate of inflation, based on the Retail Prices Index. Taking inflation into account, the value of the amount you pay back will be more or less the same as the value of the amount you borrow; no one makes any profit on the loan.
In terms of deferring a loan sponsored by the government, the student can apply to the Student Loans Company if their gross monthly income falls below the deferment threshold of £2,161 per month (equivalent to £25,936 per year). Interest will be charged during any deferment period, and deferment lasts 12 months. Lastly, any repayments that have not been met after deferment has been accepted are due for repayment. If a student applies late for deferment, after financial hardship has caused missed payments, any arrears will be due at that time.
The advantage of taking out a private student loan is that the student can take out the full cost of attendance, including living costs, commuting costs, and other expenses. This is a great situation for a student who is in need of extra funds to finance their education. However, there are negative aspects to taking out a private loan, and one should consider this option carefully before entering into a credit agreement.
Private loans are based on credit history; therefore, the interest rate of the loan may reflect any negative credit history the borrower may have. Additionally, the private student loan does not have a grace period for repayment, and the loan does not enter deferment while the student attends classes. Rather, payments on the private loan begin immediately after entering into the credit agreement.
To find a private student loan, the student can contact their banking institution. Currently, Sallie Mae UK and the IEFC-International Education Finance Corporation are no longer accepting applications for private loans.