Government Student Loans
Students or prospective students in the UK have a number of options to choose from if they want to get a student loan to help them to finance their studies (including their tuition fees and living costs). However, the best option is usually to get a loan through the government, either directly or indirectly. People can find out more by visiting either the Student Loans Company site or the Direct.gov site. These two sites are closely related.
Why get Government Student Loans?
The main reason to get a loan from the Government is because it is probably the most trustworthy lender that you will ever come across (for student loans anyway!). Secondly, if you compare the interest rates on student loans from 2001-2011, they are far lower than the interest rates on normal loans. A government student loan also gives you much more flexibility on repayments than any other type of loan.
When you take out a normal loan, you normally agree to some sort of regular repayment. This should be paid regardless of your situation. So, even if you have little or no income at the time, the lender still requires you to pay them back. A government student loan is different. You have to be earning over a certain threshold before you are required to start paying back your loan. The threshold was £15,000, but as tuition fees have gone up to £9,000 per year in 2012, the threshold is now £21,000.
Before 2012, the interest rates were calculated by using the lower of the two following figures: either the Bank of England base rate plus one per cent, or the rate of inflation (calculated by looking at how much the price of retail goods increases). From 2012 onwards, the interest rate is the same as the inflation rate; but during your time of study and when you earn more than £41,000 per year, it is the inflation rate plus three per cent.
A Government Student Loan is usually the best option
One thing is for sure, a student loan is normally the cheapest possible option. In fact, it will probably be very difficult to get any other type of loan because most people start University before they are 21, meaning that they have rarely had the opportunity to build up a good credit history for themselves. In the absence of a (good) credit history, you will usually find it very hard to get a loan; and it is highly unlikely that the terms will be anything like as favourable as a government student loan.
What you have to think about
You must decide whether you need a student loan. Even though the Government lends money to students on very favourable terms compared to most other loans, it is still money which has to be paid back. The type of loan that you are entitled to depends very much on your individual circumstances such as your household income. You can usually get help with either your tuition fees or your living and maintenance costs, or both.