The school holidays are over and the kids are back at school. But you might have older kids who are eagerly anticipating the start of their next big adventure – university.
Here are some key points to note about how student loans work in Scotland.
University is essentially free for Scottish students
If you are a Scottish student studying towards an undergraduate degree at a Scottish university, you do not have to pay for your tuition fees. Instead, you must apply via the Student Awards Agency Scotland (SAAS) at the beginning of each academic year to request that they cover your fees. This is not a loan and therefore you will not be asked to pay it back.
If you choose to study for a postgraduate degree at a Scottish university, you will be eligible for a loan of up to £7000 to cover your tuition fees. This will have to be paid back under the Plan 4 system (we’ll cover that later). To receive this loan, this must be your first postgraduate degree, you must be a UK national and you must have been a Scottish resident for a minimum of 3 years.
A loan or a bursary? What is available?
In Scotland you have a few options for how to cover your living costs. You can apply for a maintenance loan or a non-repayable bursary, or both.
The maintenance loan is provided via SAAS on a monthly basis throughout your academic term (bear in mind you won’t get payments over summer so plan for this accordingly). The amount that you receive is dependent on your household income which for most students really means parental income.
The non-repayable bursary does what it says on the tin. It’s a bursary of up to £2000 that you won’t have to pay back. As with the loan, the bursary is means tested and therefore dependent on household/parental income. For more information click here.
I’ve got the money – how do I pay it back?
The good news is that loan repayments of Scottish student loans are very lenient. We have a system in place called Plan 4 which states that you will not have to make any repayments during your time at university. In fact, you won’t have to pay anything back at all until you start earning more than £31,395 per year (figure accurate at time of publishing – August 2024). When you do start making payments, they will be fixed at 9% of your total income and will be taken as part of your income tax. Your payments will only increase or decrease dependent on your income. If you get a pay rise, you pay more and if you get a pay cut, you pay less.
If you unfortunately lose your job, your student loan payments will automatically stop and if you find yourself permanently disabled and unable to work, your loan will be wiped. Also, regardless of how much of your loan is left, once 30 years have passed from the first April after your graduation, your loan will be wiped. For example, for students who graduated this summer, they will only be required to make repayments if their earnings exceed the threshold and only until April 2055.
It’s a debt, so surely I should try and pay it off ASAP?
A Scottish student loan isn’t like a regular debt. Think of it more as a tax as your repayments will be made via the income tax system. If you’d like to pay it off, you can. However, a student loan will not affect your credit score and will not have an impact on your eligibility for a mortgage. Also, it will be completely wiped after 30 years. So, it might make more sense to just take the amount that you were considering putting towards your student loan and saving it instead.
It is important to bear in mind that if you do not fully repay your loan and you pass away before 30 years have passed, the debt will be wiped and will not be passed on to your next of kin like other debts.
If you have any concerns regarding student finances, get in touch with the university’s student services or finances department. They’re always ready to help put any worries to rest. So, if you or one of your kids is heading to university this autumn, we hope that you’re ready to enjoy the experience without any student loan worries hanging over you!
Please bear in mind that the information provided in this article applies to Scottish students studying at Scottish universities and is accurate at the date of publication (August 2024).
It is important to take professional advice before making any decision relating to your personal finances. Information within this article does not provide individual tailored investment advice and is for guidance only. We cannot assume legal liability for any errors or omissions it might contain. Ethical Futures llp is authorised and regulated by the Financial Conduct Authority.