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British students are finding that the only way to fund their further education studies are with student loans. Companies have been set up to assist students in understanding their finance options.

In the last few years grants are no longer offered and students have had to pay their own tuition fees and most students find themselves in a significant amount of debt by the time they graduate. Usually a new loan is taken out for every year of study. The benefits of such are that interest rates are calculated on each loan individually.

Interest rates on these loans only cover the interest accrued by the lender, but usually after such a long period of borrowing with no repayments, the costs mount up. Repayments are not usually due until until the borrower is earning a set salary. Usually the lendor will issue the borrower with details of the minimum salary requirement in order to be eligible to start making loan repayments on annual basis. The borrower then returns proof of their income by way of wage slips covering the previous three months. If the borrower's income falls below the threshold repayments are deferred for another year and the cycle repeats itself. Although interest is calculated on each student loan separately, if each loan is taken out with the same company, repayment would be calculated to cover all four. This would mean that only one sum would be paid per month rather than four separate ones.

If the borrower's income never meets the minimum salary requirement within a set number of years, the loans are cleared and the debt written off. The reason behind this system being that the majority of university graduates will go on to earn higher than average salaries and so will pay off their loans meanwhile giving a safety net to those who fail to earn high wages as repayments can be quite high given the total sum many students borrow.

How They Work?

Student Loans are there to help with the costs of higher education. They’re issued by Student Finance Direct, a service managed by the Student Loans Company in partnership with local authorities and the government.

The interest on Student Loans is linked to the rate of inflation, so in real terms what you repay will be broadly the same as what you borrowed.

There are two types of loan available - you can take out either or both:

• a Student Loan to cover your tuition fees - called the ‘Student Loan for Tuition Fees’
• a Student Loan to help with your accommodation and other living costs - called the ‘Student Loan for Maintenance’