Paying for an Education? Student Finance 2025/26: What You Need to Know

If your child is heading off to university soon, or if you’re thinking about pursuing your first degree, diploma, or master’s course yourself (there’s no upper age limit for student loans), understanding how to pay for it all is crucial — and it’s a key part of your wider Financial Plan.

We’re regularly asked about the best approach to student finance. Should you, as a parent, cover the costs directly and help your child avoid debt? Or perhaps encourage them to take out the loan and then pay it off for them? Maybe let the loan run its course, particularly if your child’s future income might stay below the repayment threshold?

This remains a complex area — not just for the student, but for the whole family’s financial future. There’s comprehensive information available on the government website, and if you’re already familiar with the ins and outs of student finance, you can begin or check an application online.

Here’s our updated overview of the main rules for 2025/26, along with our recommendations for making the most of the current system.

Tip: While it might seem like a short-term decision, how you approach student finance can affect your cashflow, retirement planning, and your ability to support children later on — which is why it’s smart to view it in the context of your overall financial plan.

Please note: These rules apply to students beginning courses in 2025/26 or later. Different rules may apply for those already at university.

Applying for Financing

Applications for student finance for the 2025/26 academic year are now open.

If you or your child haven’t applied yet, you can still do so, but time is of the essence. You’ll need to work efficiently to complete the application and provide all the required documentation.

Once your application receives approval, students become entitled to a Tuition Fee Loan and a Maintenance Loan. Additional support may be available in certain circumstances, including maintenance grants for financial hardship or disability support, though most students will rely on these two main components.

We strongly recommend checking what’s available before the course begins. You can do this using the student finance calculator on the government website.

Types of Financing Available

Undergraduate Courses (2025/26)

Tuition Fee Loan: Up to £9,535 for full-time students

Maintenance Loan: The amount depends on living arrangements:

The maximum tuition fee has increased by 3.1% from the previous year, reflecting ongoing adjustments to the system.

The maintenance loan amount you receive depends on your household income and where you’ll be living during your studies.

Postgraduate Courses (2025/26)

Postgraduate Master’s Loan: Up to £12,858

This is paid in three instalments throughout the course and is intended to cover both tuition fees and living costs.

How Student Financing Actually Works

Tuition Fee Loan

For undergraduate degrees, this money goes directly to your university in instalments at the start of each term to cover course costs. You’ll repay this as part of your overall student debt.

Maintenance Loan

For undergraduate degrees, this money lands in the student’s bank account at the start of each term and is designed to cover living expenses. The amount varies depending on living arrangements and household income, as outlined above.

This loan is also repayable as part of the overall student debt.

Postgraduate Loan

For postgraduate degrees, the loan is paid in instalments directly to the student. It’s then the student’s responsibility to use this money for both tuition fees and living costs.

Repayment Rules for 2025/26

Since August 2023, both undergraduate and postgraduate courses have been on repayment plan 5. Repayments begin once you’ve finished your course and start earning above the threshold.

2025/26 threshold: £25,000 per year (£2,083 per month or £481 per week)

Repayment rate: 9% of earnings above the threshold

If your income drops below this level at any point, repayments are suspended until you’re earning above the threshold again.

Example 1: You’re paid weekly and earn £600 this week. This is £119 over the threshold (£600 minus £481). You’ll pay back £10.71 (9% of £119) this week.

Example 2: Your annual income is £30,000, meaning you earn £2,500 monthly. This is £127 over the monthly threshold (£2,500 minus £2,373). You’ll pay back £11.43 (9% of £127) each month.

Any outstanding loan amount is written off 40 years after repayments first become due. The earnings thresholds typically rise each year in line with average earnings.

If you move abroad, you’ll continue to be liable for the debt, with repayments calculated based on equivalent minimum income levels in your new country. You must let the Student Loans Company (SLC) know when you move abroad. If you don’t they can charge penalties on your loan.

Interest Rates for 2025/26

Interest begins accruing from the date the first instalment is paid to you or your educational institution and will continue to be charged until you have fully repaid the loan.

For repayment plan 5, the interest rate charged on 1st September and is equal to the annual Retal Prices Index (RPI) from the previous March. However, during some period, the SLC will apply an interest rate cap to ensure that you are not being charged a higher rate of interest than comparable commercial market rates. This cap will likely be applied at times when RPI is high, but interest rates are low.

Should You Repay Early?

The best approach really depends on your individual circumstances.

Currently, with interest rates of 4.3% and the increased number of years until the loan is waived, the maths around early repayment has become more compelling than in previous years.

If you have cash available, you’ll need to compare the interest rate on the loan with what you could realistically earn from savings or investments. At the time of writing, the most competitive fixed rate savings accounts are earning interest at a similar level, and the interest rate cap should ensure that this remains broadly the case.

There are no early repayment penalties, so you can pay off part or all of the loan at any time without additional charges.

However, it’s worth remembering that if future income is likely to remain below the repayment threshold, actual repayments may be minimal, and the loan could eventually be written off.

The “Wait and See” Approach

Given the higher interest rates duringthe loan, and the extended 40 year loan period, a student loan isn’t as cheap as it once was compared to other forms of borrowing. However, if a graduate ends up in a role paying below the threshold, repayments are likely to be limited, and the loan may well not be paid in full before it is waived. Part-time working or career breaks might also reduce both interest charges and repayments for extended periods.

If you need to take the loans initially but have the option to repay them upon graduation, it might be sensible to wait and see which career path unfolds before deciding whether to repay in full. Depending on earnings prospects, you might never pay back the full amount originally borrowed.

Other Considerations

The cost of higher education isn’t the only expense many of our clients want to provide for their children. Often, a choice needs to be made between funding university costs or perhaps providing a deposit for their first property.

If you use available resources to ensure your child leaves university debt-free, their options for getting onto the property ladder might be limited, especially given current deposit requirements. First-time buyers are currently putting down an average of over £40,000 as a deposit.

While the interest on student loans isn’t cheap, it might still be less expensive than mortgage finance if that’s needed later on. This decision depends partly on your overall financial situation and future expectations.

Planning point: This is where structured financial planning makes a real difference. Reviewing your current assets, income, and longer-term goals helps clarify what’s possible — whether that’s fully funding university, saving for a house deposit, or keeping flexibility for the future.

If you’ve set aside funds for your children’s higher education and potentially to help them onto the property ladder, you might consider keeping options open by encouraging them to take the available loans. This gives you the choice post-graduation to either help clear the accumulated student debt or assist with property purchase.

It’s Not Just About Money

It’s important to recognise that these decisions aren’t always simply about money (in fact, they rarely are). You might feel that an approach which makes clear to your children the real cost of university education will help focus their minds on their studies and foster a spirit of self-reliance – one of the key reasons for attending university in the first place.

As always, clear intention and good communication are paramount, and this is where our team at Chesterton House can genuinely help. Our expertise in values-based, family-oriented financial planning and extensive experience in helping people navigate complex financial decisions can be invaluable in developing a successful approach that aligns with your family’s values and circumstances.

Student loans might seem like an isolated decision, but they form part of a much bigger picture — one that includes your retirement planning, legacy goals, and the long-term wellbeing of your family.

All figures and thresholds mentioned are for the 2025/26 academic year and are based on repayment plan 5. This information may be subject to change and other repayment plans will have different thresholds. For the most current information, always consult the official government student finance website.

Thinking it through? If you’d like to explore how student finance fits into your broader financial plan, or discuss the best approach for your family, we’re here to help. Contact us to arrange a conversation with one of our Qualified Financial Planners.

 

 

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Frequently Asked Questions

How much can I borrow for university in 2025/26?

For undergraduate courses, you can borrow up to £9,535 for tuition fees. Maintenance loans range from £8,877 (living at home) to £13,762 (living in London). Postgraduate students can borrow up to £12,858 for their master’s degree.

When do I start paying back my student loan?

You’ll start repaying your loan once you earn more than £25,000 per year (£2,083 per month).

Do I have to pay back my student loan if I move abroad?

Yes, you’ll still be liable for repayments if you move abroad. The repayments are calculated based on equivalent income thresholds in your new country of residence. You must let the Student Loans Company (SLC) know when you move abroad. If you don’t, they can charge penalties on your loan.

Can I pay off my student loan early?

Yes, you can repay your student loan early, either in part or in full, without any penalties. Whether this is the best approach really depends on your individual circumstances, so getting advice is highly recommended.

What happens if I never earn enough to repay my student loan?

If your income stays below the repayment threshold, you won’t make any repayments. Any outstanding debt is automatically written off 40 years after you first became eligible to repay.

Should parents pay for university or let children take student loans?

This depends on your family’s financial situation and values. Depending on current interest rates, paying upfront may be financially beneficial if you have the funds. However, keeping cash available for other goals like house deposits might be more valuable long-term.

How does household income affect student maintenance loans?

Your maintenance loan amount decreases as household income increases. Students from lower-income families receive the full amount, whilst those from higher-income families receive reduced maintenance loans.

When is the deadline to apply for student finance 2025/26?

Applications are open now for 2025/26. Whilst there’s no absolute deadline, it’s recommended to apply as early as possible to ensure funding is in place before your course starts.

Will my student loan affect my credit score?

Student loans don’t appear on your credit file and won’t affect your credit score. However, lenders may consider your student loan repayments when assessing affordability for mortgages or other loans.