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All You Need To Know About International Student Loans in UK
So you've decided to move to UK and pursue your Masters, PhD, MBA or whatever it is that you want to pursue. You’ve filled the forms, written your application essay and have been accepted. The next step is figuring out how to fund your education, which loans to take and how to repay them when the time comes. In this blog, you’ll find solutions to all these problems.
Eligibility Criteria you Need to Meet to Qualify for a Students’ Loan in UK
The eligibility criterion to study in UK is slightly more complex than that of the US. Your eligibility is dependent on multiple factors such as -
• The country you belong to, or in other words, your residency status or nationality
• The college or university you’re applying for
• Your age
• The course you’ve chosen to study
And whether you’ve studied for a higher education course in UK before or not.
If you're a part-time student in UK, your course's length must be at least 25 percent of a corresponding full-time course for you to qualify for student funding.
The residency qualification is where it gets a little tricky. You can apply if -
• You were living in UK on the very first day of your course
• You generally live in England or have obtained a ‘settled status’ (there’s no restriction on the duration of this)
• If you’ve have been living in the country three years prior to the commencement of your course.
Alternatively, if you’re a non-UK national, you must have obtained the ‘settled status’ before you apply for a loan. This means getting the status on the first day of your course which can be either: September 1st, January 1st, April 1st or July 1st.
It's also possible for you to get an international student's loan if you’re a refugee or have a family member who is one. If you're an asylum seeker and have humanitarian protection, then too, you qualify for an international student’s loan.
You are also eligible if you’re under the age of 18 and have been living in the country for a minimum of 7 years or if you’re above 18 and have been living in UK for a minimum of 20 years.
You’ll also need a Tier 4 student visa along with a sound knowledge of English language to qualify.
Note - The above guidelines have been specified by the government as the UK government does offer educational funds to international students. We will be discussing the eligibility criteria for bank loans in the following sections.
Types of International Student Loans you can take in UK
As is the standard norm, students can opt for both short-term and long-term loans. One another type of loan students can opt for in UK is the private loan. Each type of loan has been discussed in detail below.
Short-term loans are offered to students by their respective colleges or universities in case of emergency situations. Almost all universities in UK offer such loans to their students when they need it. It is important to keep in mind that universities only lend small amounts due to limited funds. You can expect to get around £250 and above from this type of loan. However, as it is mandatory, you first need to fill the eligibility criteria before you’re entitled to get the loan.
• You must be an enrolled student at the university whose classes have begun
• You must provide proof that all other sources of payment have been exhausted and therefore, you need one
• You must answer any questions the university asks regarding financial status to determine if you qualify for the loan
• You must provide proof of your bank statement, and you should also provide proof that you're a student of the university.
Remember that this loan is only to help you out with your cost of living and does not cover your tuition fee. You can avail this loan if you have experienced a delay in getting money from the main source that tackles your educational expenses including cost of living.
Part of the eligibility criteria is that you must be in the condition to repay the loan within three months of getting it.
How to apply – To apply, you need to visit the cashier of your college or university who will first verify whether you qualify for it or not and will then proceed to give you the forms accordingly. You may be asked to attend a meeting to determine your situation as well. Once you're done filling in the application form, you will be required to submit it to the cashier's office along with your current bank statement and other evidence that are necessary. You will be given the money within two-three days at the maximum.
Long-terms are offered to students either by the government or by private banking institutions, and the student has the option to defer the payment of this loan till his or her course is over and he or she gets a job. Unlike short-term loans (which are mostly free of interest), for long-term loans, you have to pay the interest as well as the principal amount. These loans are specifically designed to help you cover the cost of your education along with you living expenses. However, you will not get holiday expenses out of these loans so be sure to spend your money wisely.
To get a long-term loan from any private bank, the students must fulfil two sets of eligibility -
• Personal Eligibility - This refers to your residency status as well as your bank statements and details.
• Course Eligibility - The course and university you've chosen must come under the list of universities and courses that particular banking institution provides loans for. This also implies that you must already be an existing student of a legit course in a legit university.
How to apply – It is advised that you get in touch with a financial planner in the country before you go loan shopping. The process of loan application is much more complex in UK than any other international education destination. You will get the option of online application too for many such private loans. Since many different types of loan plans will be on offer, it's best that you consider all options with your budget as a priority. Consulting with someone who’s been an international student in UK can greatly help you out in this regard, making the complex process much easier. Get in touch with your country’s British Council too before applying as they’ll help you understand and determine your eligibility criteria. You can even contact the government wing that offers funding to see if you’re eligible for government loans.
Private Student Loans
Last on our list are private loans which are similar to long-term loans with the only difference being that the government funds are not a part of it. These are solely given by private lenders or banks and help cover the cost of education of international students. These loans can be divided into two types:
• School Channel Loans – This type of loan offers a comparatively lower rate of interest but takes longer to process when compared to other loans. This loan is categorized as school ‘certified’ which implies that the school is regarded as the borrowing party and the amount is directly deposited in the school’s account.
• Direct-to-Consumer Loans – This kind is starkly different from the previous one, in a sense, it is not certified by the school, and the college or university has no direct involvement in it. This one is directly given to the student. You have to provide the lender a verification of your enrolment in the university concerned and the proceeds of the loan will directly reach you. Rates of interest are generally higher for direct-to-consumer loans when compared to school channel loans. The difference is that these are quicker to process, and you can expect to the get the amount in a matter of few days.
• Income-Contingency based Loans – This is the most popular form of private loan in the country and most students are currently repaying one or taking one. The repayment plan of an income-contingency loan is based on the salary you earn annually, and the money is deducted from your income accordingly. The current interest rate on this type of loan is 1.25%, and it is determined on the basis of the inflation rate in the country. This interest rate is not a constant, and you can expect it to fluctuate depending on the changes in the base rate.
How to Apply – The application process to this process is very similar to long-term loans so it’s best you scan the available options on your own before you pick one. Bear in mind that you will have to pay an origination fee which is basically a one-time charge that varies according to the amount of loan you’ve taken. You will have the option to add this fee on top of your total loan amount or to be subtracted from your loan amount, depending on your preferences and convenience.
Read the promissory note very carefully before you take the loan. Also, ensure you have a clear credit history and do not have any pending payments or a record of late payments or failure of payments before you take this loan as having any one of these can hamper your chances of getting a loan. In case you do have a good credit history, the rates of interest will be lower, and the amount of origination fee you have to pay will also be reduced. HSBC, Barclays, etc. are some of the banks that offer private loans.
How can you get an Education Loan if you’re an International Student and wish to Study in UK
As we all know, the cost of education in UK is extremely high, which can compel you to take loans in order to complete or even pursue your education in the country. While part-time jobs present an opportunity to pay off your tuition fee, they may not be enough to cover the entire costs. This is where loans can jump in as saviours. Before we tell you how you can get education loans in the country, let’s take a look at how expensive education in UK can really get.
If you’re pursuing an undergraduate course in UK, you can expect your fees to be -
• For arts and humanities degrees: £8,000 to £17,000
• For medical and/or clinical degrees: £11,000 to £28,000
• For foundation degrees: £6000 to £15,000
• For science based degrees: £9,500 to £24,000
If you’re in UK to do a post-graduate degree, expect yourself to shell out:
• For a masters degree: £9,500 to £52,000
• For arts and humanities degrees: £9,000 to £14,000
• For a clinical degree: £12,000 to £37,000
• For science based degrees: £10,000 to £29,000
If you’re going for further education which can also be referred to as education you undertake just before entering a university in UK, you can expect varying prices. These fluctuating prices are based on your choice of an institution, i.e. whether you choose a state-funded one or a private-funded one. Nonetheless, the rough estimates are as follows -
• For International Baccalaureate Diplomas: £3,500 to £19,000
• For Higher National Certificates or Diplomas: £4,000 to £12,000
• For career-based courses or BTECs: £3,500 to £8,000
• For A-levels and advanced subsidiary: £3,500 to £19,000
As you can see from these estimates, education in UK is very costly. Therefore, you are almost forced to take a loan and studies show the number of students who take education loans in UK is steadily rising.
To fund your education in UK, you have two options in front of you – you either apply for scholarships or you fulfil the eligibility criteria we’ve stated above and obtain a national citizen status in order to get a loan from the Students Loan Company (SLC) which is the government’s educational funding wing. It’s only after getting this status will you also be eligible for private bank loans in UK.
Conversely, you also have a third option in case you don’t manage to get a scholarship or even a “settled” status, and still wish to pursue your higher education in UK. You can contact the local banks in your home country or the Department of Education and find out if they provide loans to local citizens who wish to complete their education in UK. There will be several local banks that will offer different loan plans, from which you can choose the best one. Alternatively, you can also contact the UKCISA (UK Council for International Student Affairs) for advice on how to fund your education in UK.
Current Interest Rates on Student Loans in UK
Note - These interest rates are only applicable if you have been deemed eligible for a government loan in UK. To know about the rates of interest of banks that offer education loans to study in UK for your home country, contact your local banks.
In UK, the interest rates on loans vary depending on the type of course you’ve undertaken. If you’re under the income contingent repayment Plan 1, the interest rate for your loan is 1.25% till you’re notified otherwise. This is only applicable if you took your loan before 1st September 2012.
Under Plan 2, the rate of interest is entirely dependent on your circumstances, which have been listed below. Bear in mind that these rates are applicable if you’ve taken your education loan after 1st September 2012. So the interest rates are-
Till you’re studying and until the month of April after your course is over the rate is the current RPI (Retail Price Index) + 3%, which comes up to 4.6% of for the year 2016-17.
After graduating, from 6th April onwards, the rate of interest changes again. The variable interest rate of your student loan is dependent on how much you earn in a year. If your income is £21,000 a year, the interest rate will be 1.6%; and if your income is £41,000 or more, the interest rate is 4.6% (RPI + 3%).
In case of lack of evidence on your part, despite the lender contacting you to provide it, you will have to pay an interest of RPI + 3% no matter what your present income status is. You will have to pay at this rate till the loaning company has all the information they need.
For post-graduate loans, the current interest rate is 4.6% taking the RPI + 3% into account. However, this rate is set in every September based on the RPI of March of the same year.
How to Repay the Students Loan you’ve taken for your Education in UK
Both short-term, as well as long-term loans will have different terms for repayment. You must follow these terms to ensure a smooth and successful repayment. Let's first take a look at the terms of repayment for a long-term loan.
One of the things you must keep in mind is that the repayment of your loan will be dependent on the type of loan you've taken and when your course started. To pay back your loan, you must -
• Have a minimum earning of £28,828 annually
• If your earnings are below this threshold, you have the option of deferring your payment for a period of 12 months at once
• The interest rate for your loans will be set in September based on the market
• Despite the size of your loan, the repayment must be made in either 60 monthly instalments (if you've taken 4 loans or less) and 84 monthly instalments (if you've taken a minimum of 5 loans)
• The loan you have taken will be cancelled if you become permanently disabled and unfit for work or if you die before the completion of the payment
• It will also be cancelled if you're presently above 50 years of age and took out your last loan when you were below 40
• It will also be cancelled if you're presently 60 and took out your last loan when you were above the age of 40
• Or when you’ve completed 25 years since you took out your last loan.
These were the rules for mortgage-style loans. For loans that you’ve taken after the year 2012, a different set of rules apply. These are -
• If you earn more than £21,000 a year, you will have to pay 9% of the amount above the income as repayment for your loan. This base amount can change depending on the present average earnings of citizens of the UK
• Your employer will be obligated to deduct your education loan amount from your salary once you start earning above £21,000 annually
• If you do not ensure that the repayment process kick-starts when you begin to earn £21,000, you will be liable to the payment of HMRC fines
• The rate of interest for your loan will be the current RPI plus 3% until you’re fit for repayment i.e. till you’re employed
• The repayment process will begin in April after you've graduated
• If you’ve been overseas for more than a period of 3 months after your graduation, you will be required to fill out an Overseas Income Assessment Form, which will allow the lending company to fix a viable plan for your repayments.
These were the terms and conditions of repayment for long-term student loans. Now let’s take a look at the rules and regulations of the repayment of short-term loans.
• Short-term loans are to be paid back to the university within a month of getting them or by the date has been agreed on by both parties
• The inability to repay the loan within the specified deadline can result in the university charging a nominal amount of interest (usually emergency student loans are interest-free)
• If you do not repay on time and owe the college a debt by failing to repay, your case can be referred by the college to an external debt collection agency. This can affect your credit ratings in a negative manner
• Certain colleges even hold the right to disallow you from attending your graduation ceremony if you do not repay on the stipulated deadline
• Universities and colleges also have the right not to grant you any further loans shall you fail to pay the amount due within the specified time frame.
In case your financial troubles continue longer than expected which is why you can’t pay back and are in need of additional loans, the college may recommend you to apply for private student loans. Remember that this failure of repayment can also cause a decrease in the future financial help you get from these universities, and you can even experience delays in registrations. So it’s wiser for you to pay all your loans on time.
To pay your short-term student loan (or emergency loan as it is also commonly referred to), you need to visit the cashier’s office of your university/college with all the necessary documents during working hours. Once the payment is over, ensure that you keep the receipt handy as proof that you’ve repaid your debt.
To conclude, we’ve summed up all the possible points you may need help when applying for education loans to study in UK. However, it’ll be wise for you to perform some extra research on your own too so that you don’t miss out on anything that is important to you.
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