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Student Loans Go High Tech

Students will now be able to apply for student loans online. This is one of a number of measures to make the student loans application and assessment process simpler and more efficient.

The changes to the student loan system are designed to result in:

• an integrated assessment and payment system that provides uniform treatment for students across England
• better information and guidance, more information on bursaries and an online financial calculator for students
• faster decisions and payments based on students' individual profiles

The student loans scheme was reviewed by former education secretary Ruth Kelly. These changes are a result of the reforms she proposed. The current application system is cumbersome. It is intended that students will be able to apply for loans at the same time as they apply for university, taking one step out of the application process.

The number of students using the loan scheme has increased from 180,000 in 1990/91 to more than 850,000 in 2004/5, This is 79% of the students eligible to take up loans. The total estimated loan value in 2004-2005 was £2,786 million, with an average loan amount of £3,260. The maximum loan amount for the current academic year for students ranges from £3,085 to £6,170 depending on what year of university students are in and where they are living.

Students usually leave university with high levels of debt. A 2004 study found that the average student in England and Wales leaves university with a debt of more than £12,000. This is likely to increase with the introduction of top-up fees for university places.

The way in which student loans are paid back varies depending on when the loan was taken out.

• Mortgage style student loans from before 1998 allow students to have a high earnings threshold before beginning repayments. It is also easier to defer payments if student's earnings drop far below the national average.
• The current student loan scheme means that students start making repayments once their annual income exceeds £15,000. The Inland Revenue takes 9% of the former students' income over this level.

Many students take prefer to have a small student loan and to work while studying. Instead of a student loan, they may negotiate an overdraft with an understanding bank manager. This can then be converted to a graduate loan at a competitive interest rate after graduation.