The Salary Calculator

Student Fees, Finance, and Funding: What You Need to Know 

by Madaline Dunn

With the new school year commencing, millions of students across the country will be mulling their university choices — and how they’ll fund their education.

But while record numbers are being accepted into universities and colleges this year, research shows that students are concerned about costs.

At the same time, recent data from the Higher Education Policy Institute (HEPI) shows that misconceptions about student loans abound.

To clear up the confusion, this week at The Salary Calculator, we’ll answer:

• How have loans, fees and thresholds changed?
• How much can students borrow?
• Is student finance enough to cover costs?
• How can students financially prepare for university?

How have loans, fees, and thresholds changed?

Over the last two decades, a lot has changed across student fees, finance, and funding. With tuition fees hitting £9,535 this year, the days of the £1,000-a-year courses seem but a distant memory.

Meanwhile, maintenance grants, which previously offered students up to £3,387 a year, were scrapped back in 2017 and replaced with maintenance loans for living costs.

And interest rates? That depends on your plan. Currently, it’s:

• 3.2% if you’re on Plan 1 (you started your course before 1 September 2012)
• 3.2% to 6.2% based on annual income if you’re on Plan 2 (you started your course between 1 September 2012 and 31 July 2023)
• 3.2% if you’re on Plan 5 (you started your course after 1 August 2023)
• 6.2% if you’re on a Postgraduate Loan plan

That said, you’re charged interest from the day your first payment is made, regardless of your plan.

Your plan will also determine the salary threshold at which you’ll start repaying your loan.

For Plan 1, you’ll start paying back your loan at £26,065. With Plan 2, this is £28,470, and for Plan 5 it’s £25,000.

For Plans 1, 2 and 5, you’ll pay 9% of your income.

For postgraduate loans, the threshold is £21,000, at which point you pay 6% of your income over the threshold.

If you would like to see how much this will take off your pay each month, use The Salary Calculator‘s Student Loan options to get an illustration.

For those commencing university in 2025, loans will be wiped after 40 years — up from 30. However, many students will never pay back their loans in full. For full-time undergraduates starting their courses in 2024/25, government forecasts are that this figure stands at just 56%.

How much can a student borrow?

While tuition loans cover your course fees and are paid directly to your university, maintenance loans are means-tested. When you apply, your household income and where you live and study will be factored into how much you’ll receive.

For those from households with an income of £25,000 or below and living at home, you’ll be entitled to £8,877. This rises to £10,544 if you live away from home outside London.

Earlier this year, figures from the Student Loans Company (SLC), the organisation which administers loans and grants to students in colleges and universities, revealed that in 2024-25 the amount of debt students graduated with was up nearly 10% from the year prior, reaching an average of £53,000.

Indeed, this echoes numbers obtained by the BBC last year, which found that 1.8 million people owe at least £50,000 in student loans, and an additional 61,000 have “balances of above £100,000.”

Despite this data, a recent report from King’s College London found that people “underestimate” the true level of debt students take on by £10,000, with average student debt exceeding the US by “nearly £6,000 more than the equivalent figure in the US.”

Is student finance enough to cover costs?

But while student debt is increasing, research suggests that students are still struggling. According to the Centre for Research in Social Policy (CRSP) at Loughborough University, the maximum maintenance loan covers “only half of what is needed for a minimum socially acceptable standard of living.”

“The financial landscape facing current students is among the trickiest ever”

Findings from the study, conducted with HEPI and TechnologyOne, revealed that for a three-year course, students would need £61,000, increasing to around £77,000 in London.

“The financial landscape facing current students is among the trickiest ever. Our long-running Student Money Survey has routinely found that Maintenance Loans are not enough to live on, but in recent years, the situation has become significantly worse,” said Tom Allingham, student finance expert at the money website Save the Student.

Allingham shared that Save the Student’s latest survey found that funding now falls short of living costs by an average of £504/month. This, he said, is over double the shortfall the organisation discovered in 2020 (£223).

“As a result, students are having to cut spending on even the most basic of necessities, with 9% telling us they’d used a food bank in the past year, and 67% saying they skip meals at least some of the time,” added Allingham.

Leacsaidh Macdonald-Marlow, student voice assistant at Student Minds, echoed this, noting that the current financial landscape, in particular the cost of living crisis, is putting “immense pressure on students.”

“A majority of students now do part-time or full-time work alongside their studies in order to afford necessities like rent, and this affects overall student wellbeing, time management, energy, and subsequently academic stress and performance,” noted Macdonald-Marlow, who said that maintenance loans fail to provide students with “any real sense of financial security,” across almost all socioeconomic backgrounds.

“Students also have a lot of worries surrounding debt”

Indeed, earlier this year, a survey published by Advance HE and the Higher Education Policy Institute (HEPI) found that over the last few years, there’s been, what they called a “dramatic rise” in the number of full-time students working during term time. In 2025, the figure sits at just under 70%, up from 56% the year before and 42% in 2020.

“Students also have a lot of worries surrounding debt, and often feel ashamed or unable to talk to anyone about these anxieties, which only compounds financial stress and a desire to work even longer hours during term-time,” commented Macdonald-Marlow.

Allingham says that a lack of funding underpins this financial struggle. He explained that, in recent years, funding has fallen “drastically short” of inflation, amounting to “huge real-terms cuts” of up to £1,906 in 2024/25, according to the Russell Group.

“We’re urging the government to increase Maintenance Loans above and beyond the rate of inflation, to restore funding to previous levels and prevent students from being condemned to a never-ending cost-of-living crisis,” said Allingham.

Meanwhile, Macdonald-Marlow noted that, as outlined in its Student Mental Health Manifesto, Student Minds recommends the reintroduction of maintenance grants, increased maintenance loans and a fairer repayment scheme.

How can students prepare financially for university?

But, with no current plans to increase the maintenance loan, or indeed reintroduce maintenance grants, how can students best financially prepare for university next year?

“The first thing any student should do to get their finances in order is open the right student bank account,” said Allingham, who explained that instead of being swayed by sign-up freebies, students should prioritise those accounts with interest-free overdrafts instead.

“This is probably the safest and most easily-accessible form of emergency cash at uni, and will be far more useful than any freebie a bank can offer,” added Allingham.

Meanwhile, Leon Ward, CEO of financial education charity Money Ready, recommended that students create a clear picture of their finances. “Work out what you need to spend money on (rent and food, for instance) vs what you’d like to spend money on (such as new trainers) and check that against the money you have coming in.”

Once students understand their financial situation, Ward suggests looking at ways to fill any gaps. “If you need to spend less, check out special student discounts on sites like Student Beans, UniDays or NUS Extra, and get savvy with meal-planning to avoid food waste. By budgeting like this, you’ll enjoy your uni experience without getting into too much debt.”

The money charity provides guidance on this via the hashtag #GetUniReady on its socials and website.

Alongside bank accounts and budgeting tips, Allingham advises that prospective students should also look into bursaries, scholarships and grants to see if they’re eligible for any free cash.

“Despite what many people think, this money isn’t just reserved for those with the highest grades, from the lowest-income backgrounds or who excel in a particular subject,” he explained, adding that there are funds for all kinds of “unusual reasons,” including being a vegetarian or having the surname ‘Graham.’

The Student Minds website similarly offers advice on how students can access additional financial support, such as bursaries or hardship funds.

And, for those already eyeing part-time job opportunities, Macdonald-Marlow recommended looking within your university or Students’ Union, noting that jobs are often advertised via the SU website and/or Unitemps.

“These employment opportunities are built for students, offering hours that fit around your university work, and paying fair wages,” she added.

Tags: student finance, student loans, tuition fees