Martin Lewis: Five things all new English university starters should know

1. The student loan price tag can be £60,000, but that's not what you pay.

Students don't pay universities or other higher education institutions directly. Tuition fees, typically up to £9,250, are paid for you by the Student Loans Company. Over a typical three-year course, the combined loan for tuition and maintenance can be over £60,000, but don't get overly hung up on that, as what counts is what you repay...

• You only start repaying from April 2026 at the earliest.
• Then you only repay if you earn over £25,000 a year. Earn less and you don't pay anything back.
• You repay 9% of everything earned above that amount, so earn more and you repay more each month.
• The loan is wiped after 40 years – whether you've paid a penny or not. This means many people will be repaying their student loans for most of their working lives.
• There's no worry of debt collectors as it's repaid via the payroll. In other words, it's taken off what you earn before you get the money, just like income tax is. And the debt doesn't go on your credit file.
  

See full how the student loan is paid info.

3. The amount you borrow is mostly irrelevant day to day – it works more like a tax.

This bit is really important to understand, as frankly it turns the way you think about student loans on its head. So take your time.

What you repay each month after university depends solely on what you earn. It's set at 9% of everything earned above £25,000. To emphasise this point, for a graduate who earns, for the sake of easy numbers, £35,000...

- Owe £20,000 and you repay £900 a year.
- Owe £50,000 and you repay £900 a year.
- In fact, let's be ridiculous and say tuition fees have been upped to £1m a year, so you owe £3m+, you still ONLY repay £900 a year.

So as you can see, what you owe DOESN'T impact what you repay each month or each year. The only difference it makes is whether you'll clear the borrowing within the 40 years before it wipes.

It's predicted that 52% on the new loan system will clear their debt in full within 40 years, and 48% will be paying off their loan for the full 40 years. So unless you're likely to be a mid to high earner AND/OR don't take the full loan AND/OR are lucky enough to have access to large amounts of spare cash, just ignore the amount you 'owe'.

Instead, in practice what happens is you effectively pay an extra 9% tax on your income (not including national insurance) for 40 years. At current rates, it works like this:

This doesn't make it cheap, far from it, but it does mean that all the talk of burdening students with debt may feel misleading. Instead, we're burdening graduates with something closer to a 9% extra tax – frankly it shouldn't be called a debt, it really doesn't work like one (I argue it should be renamed a graduate contribution system).

Another way to look at it though is the more you earn, the more you repay each month. So, financially at least, this is a 'no win, no fee' education.

5. The system can and has changed.

Student loan terms should be locked into law, so only an Act of Parliament can negatively change them once you've started uni – but they're not. And a few years ago we saw a very bad change imposed, though thankfully after much campaigning it was overturned.

Most of the past changes were about the repayment threshold (the £25,000) rather than bigger structural issues, and indeed I would view the repayment threshold as 'variable' – it can be changed at the whim of administrations.

You can take some reassurance from the fact this new system only impacts new starters, as that means governments are wary of major systemic retrospective negative changes. So big bad changes for individuals once they've started are unlikely (though not impossible). Even so, the last of my need-to-knows has to be the caveat of 'unless things change'.

Why will the new system cost so much more for many?

The cost of a student going to university has long been split between the state and the individual (paid in the years after they've studied). The Government decided to swing the pendulum even further towards the individual and away from the state with three big changes for 2023 starters.