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It probably won't surprise you that many British students get student loans, just like American students.
But you might be surprised to hear that their student loan system isn't all that different from ours – with the main difference being the repayment program.
Let's take a basic look at how student loans in the UK compare to those here in the United States, and what the US could learn from our friends across the pond.
Obtaining a UK Student Loan and the Cost of Tuition Fees
There are two different types of student loans in the UK:
- Tuition Fee Loan: This is the loan that covers your tuition fees
- Maintenance loan: This is the loan you can get that covers your living expenses
This is different than in the United States, where all of our loans essentially cover both tuition and living expenses if necessary, as well as anything else a student wants to spend the money on. The UK government limits the maximum amount students pay for tuition fees each year.
Currently the cap is £9,250 (which was about $11,700 in 2024). This means that no matter what happens – whether a student gets a loan or not – tuition fees will be a maximum of £9,250 per year. As for this loan? The UK also gives out loans of up to £9,250 each year, so you can always take out a loan to cover your entire tuition fees per year if you need to. And even if you don't take out a loan, that's still the maximum amount you'll pay in tuition. This makes planning and budgeting much easier.
The US federal government has also set limits on lending, but not on the amount that universities can charge.
There are upper limits on the loan amount for the maintenance loan, which vary depending on your life situation. Here are the UK maintenance loan caps for the 2023-24 school year:
- Live with your parents – up to £8,400
- Live outside London with your parents – up to £9,978
- Living outside your parents in London – up to £13,022
- You'll spend one year of a UK course abroad – up to £11,427
- If you are aged 60 or over on the first day of the first year of your course – up to £4,221
This means that if you take out loans for tuition and living costs and go to school for four years while living separately from your parents in expensive London, the most you will ever owe is £89,088 (about $113,000 in 2024). ). And although that seems like a lot (it is), it is the absolute maximum. This is different than here in the United States, where students can borrow almost any amount they want and spend as they please.
The average amount of student loan debt in the UK for students who started school in 2022 is expected to be £45,600 (approximately $58,263). For comparison, the average student loan debt for the 2023 senior year is estimated at $37,650. While this isn't a perfect comparison, it's still surprising that UK students have, on average, more student loan debt than students in the US.
Related: This is how student loans work: application, acceptance and repayment
UK Student Loan Repayment
Just like in the United States, you must pay back your student loans. However, there is an interesting repayment process in the UK that makes it easier for borrowers to get started without drowning in student loan debt.
Firstly, you will only make payments on your student loan if your income is above a certain threshold, depending on which loan plan you are on (which varies depending on which part of the UK you are in) and the frequency of payments .
To repay your student loans, you must pay a percentage of income above these thresholds. You will repay 6% of your over-threshold income if you are on a postgraduate loan plan and 9% of your over-threshold income if you are on another plan.
Additionally, just like in the United States, you will have to pay interest on British student loans. How much interest you will be charged depends on which plan you use. As of 2024, the interest rates were:
The interest rate is linked to the inflation rate and can therefore vary over time.
The average student loan payout in England is £85 per month (around $108). While the average student loan payout in the US is $503. This is where the issue of affordability comes into play for the US.
In addition, in this income-based repayment system, the loans are canceled even if they are not fully repaid in the following cases:
- After 30 years
- If the borrower dies or becomes disabled
Unlike in the United States, where you have your loans forever if you can't pay them back, in the British system they are paid off after 30 years under all circumstances.
Another interesting feature of student loan repayment in the UK is that it is treated like payroll taxes once you are employed. Since all loans are administered by the government, once you start working, the repayment amount is deducted from your paycheck along with your taxes. So you don't have to worry about it unless you work abroad.
While there are private student loan lenders in the UK, these loans do not receive any special treatment and are treated like any other private loan. The payments are not dependent on income and are not amortized after a certain period of time.
Related: How to Pay for College: The Best Practice
Here's a takeaway for the United States
Although loans in the UK are actually higher, the monthly payments are much lower and are then paid off after 30 years. It is an interesting system which, if implemented here, would bring great relief to borrowers.
The fact that we have a thriving private student loan industry here complicates things a bit, but starting with changes to federal loans would be a good place to start.
What do you think of the British student loan system and what could we do better here in the United States?
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