Publication date: 31 December 2014
The following was originally a PDF document held on our previous Practitioners' site, it contains information created for learners to address some of the key questions or concerns they may have.
Key questions about Advanced Learner Loans answered.
If you are aged 19 or over and take certain further education courses you may be eligible for government loans. These loans help pay your college or training organisation for your course fees. This guide aims to give you the information you need in order to decide if taking out a loan is the right choice for you. If you’re considering studying, you might be surprised by how affordable it can be.
Does applying for the loan involve a credit check?
There’s no credit check or upper age limit and it doesn’t matter what your household income is, you could still get a loan.
Is this a good way to fund my course?
You don’t have to take out an Advanced Learner Loan if you would prefer to fund your course through a different route. The loan enables you to pay for the cost of your course upfront in a manageable way, but there are other options.
If you are 19 to 23 and are studying your first full Level 3 qualification you might be able to get a grant to help pay for your course. You can choose to fund your Level 3 qualification with either a grant or an Advanced Learner Loan, but you choose to fund it with an Advanced Learner Loan, you lose your entitlement to grant funding.
If your Learning Provider does not offer a grant-funded course, you’ll need to find a Learning Provider that does. The National Careers Service will be able to advise you which Learning Providers in your local area offer the course you want to do with grant funding.
Alternatively, you could use savings to pay for your course fees or get a loan from elsewhere. You need to decide if it’s the right choice for you, depending on your circumstances.
Before taking out any loan, you should consider all your options. If you want advice on managing your finances, you can get impartial money advice from the Money Advice Service at moneyadviceservice.org.uk
Can I afford to pay the loan back?
The way repayments are worked out is directly linked to how much you earn, not how much you borrow. You only pay back money when you are earning more than £21,000 a year. You then pay 9% of the money you earn over £21,000, before tax.
The rule applies to the equivalent weekly and monthly amounts too.
The 9% rule.
Let’s say you earn £22,000, that’s £1,000 more than £21,000. So you pay back 9% of £1,000 per year. 9% of £1,000 = £90 a year = £7.50 a month
It doesn’t matter how much you borrow.
The repayments are always worked out in the same way. If you earn £22,000 a year, it doesn’t make any difference whether you borrowed £300 or £10,000, your repayments will still be £7.50 a month until you have paid your loan off, unless your income changes.
The loan repayments are calculated on the basis that you pay back what you can reasonably afford, not on the basis of how much you borrowed.
You pay back if you go over the limit in one week or one month
A salary of £21,000 a year works out at £404 per week. Let’s say you were paid overtime one week and that increased your weekly earnings to £804 before tax. That’s £400 over the weekly limit so you would pay back 9% of that £400 (£36). The same applies if you earn more than £1,750 per month.
How much interest will I have to pay?
Interest will start to be applied to the loan as soon as payments to your college or training organisation begin. The rate of interest will be 3% +RPI until the April after you leave your course.
This interest applies to the loan, not your monthly repayments. They are fixed at 9% of your earnings above £21,000.
After you’ve finished your course, the interest will depend on your income. The interest on your loan will change - The rate of repayment stays the same.
If you're earning less than £21,000 the interest on your loan will be RPI
If you're earning between £21,000 and £41,000 the interest on your loan will be RPI + 3% or less
If you're earning more than £41,000 the interest on your loan will be = RPI + 3%
What is RPI?
RPI stands for Retail Price Index. It’s a way of working out inflation – the changing cost of typical goods and services that people buy. So, if inflation was at 4%, a basket of shopping that cost you £100 this year would cost you £104 next year. If the cost of goods and services goes up or down, the value of your loan will go up or down at the same rate.
When will I pay my loan back?
You will only start repaying from the April after you leave your course and once when you are earning more than £21,000 a year, however, you can make voluntary repayments at any time. Some people may choose to do this as interest is added to the loan as soon as the payments begin to your college or training organisation. Making early repayments will mean you pay your loan off sooner.
If I overpay my loan, will I get the money back?
When you have paid off your loan, your repayments will stop. However, as repayments are calculated after the end of the tax year, it’s possible that you could overpay. To avoid this, some people may choose to make direct repayments when they are close to paying off their loan.
If you do overpay, you get the money back. It’s similar to getting a tax rebate if you overpay income tax.
If something happens and I can’t finish my course, will I end up paying for it anyway?
No payment from your loan will be made to your college or training organisation until you’ve attended your course for more than two weeks. If you leave after more than two weeks, you’ll have to pay back any loan payments that have been made, based on the length of time you attended your course. Once you stop attending, the loan payments will stop.
I want to set up my own business. Will paying back my loan be really complicated?
Instead of your employer deducting your repayments along with your income tax, you will make repayments based on your self assessment tax return. It’s exactly the same method the government uses to calculate your tax and National Insurance contributions. And you still only make repayments if your income is more than £21,000 in the tax year.
I’m going abroad when I’ve finished my course. Will I have to pay back my loan?
If you move abroad, you are still required to repay your loan. Arrangements will be made to collect repayments while you are outside the UK. The only difference is the way repayments are calculated. That will be based on price level indices for the country you’ve moved to (their version of the RPI). You will be required to pay a fixed instalment.
If I can’t find work after I’ve finished my course, how will I repay my loan?
If you aren’t earning any money, you won’t have to make repayments. The payment terms depend on you earning £21,000 a year (or the equivalent). Until then you don’t repay anything. And if you haven’t paid the loan back within 30 years, any remaining amount will be written off.
Is there additional funding available for special circumstances?
The Advanced Learner Loan covers course costs only, and not the wider living costs that may be incurred by learners. There is a bursary fund dispensed by colleges and training organisations to help vulnerable learners such as those with learning difficulties or disabilities, parents who need help with childcare and ex-military personnel.
Repayments at a glance.
If you borrowed up to four loans with total value of £300 to £10,000
If you earned up to £21,000 or the equivalent per week or month, you'd repay £0
If you earned over £21,000 or the equivalent per week or month, you'd repay 9% of money earned above £21,000 before tax.
For more information
Visit the National Careers Service website or speak to your college or training organisation.
Advanced Learner Loans are administered by Student Finance England (SFE).
Student Finance England is a Student Loans Company service, providing financial support to students on behalf of the UK Government.