Student finance

Who is responsible for student finance policy in the UK?

Higher education is devolved in the UK, which means England, Wales, Scotland and Northern Ireland each have their own funding arrangements and student finance systems. ⁵² House of Commons Library, ‘Student support for undergraduates across the UK in 2025/26’, research briefing, 4 April 2025.  This explainer focuses on student finance in England.

How does student finance work?

Student finance today includes loans for tuition fees and ‘maintenance’ loans to support students with living costs. Tuition loans generally cover the whole fee, irrespective of individual student circumstances, while maintenance loans vary according to household income.

Loans for English-domiciled students studying in the UK are provided through Student Finance England. ⁵³ Gov.uk, ‘Student finance for undergraduates’, gov.uk, (no date) retrieved 25 February 2026, https://www.gov.uk/student-finance/who-qualifies?step-by-step-nav=18045f76-ac04-41b7-b147-5687d8fbb64a  This is an operating arm of the Student Loans Company, an executive non-departmental public body sponsored by DfE.

Student Finance England pays tuition fee loans directly to higher education institutions, and maintenance loans to students. Once the money is borrowed, there is no distinction between the two types of loans in terms of liability or repayment ⁵⁴ House of Commons Library, ‘An introduction to student finance in England’, insight paper, 15 September 2021.  – the student is liable for both, according to the repayment rules set by the government.

Student eligibility depends on:

•    University or college 
•    Academic course 
•    If student studied a higher education course before 
•    Age (maintenance loans may be limited for students who are over 60 years old)
•    Nationality or residency status 

Repayment

Students become liable to repay their loans from the April after they leave university, that is, the beginning of the next financial year, known as the the “statutory repayment date”. ⁵⁵ House of Commons Library, ‘An introduction to student finance in England’, insight paper, 15 September 2021.  Students only begin repayments once they earn over the repayment threshold, however. Payments continue until either their total loan, plus interest accrued, is repaid or after a fixed length of time when any unpaid loan is written off.

The threshold for repayment, the repayment period, the interest charged, and the inflation index upon which interest is charged, depend on students’ university start dates, which determine their repayment plan. ⁵⁶ Gov.uk, ‘Repaying your student loan’, gov.uk, (no date) retrieved 25 February 2026, https://www.gov.uk/repaying-your-student-loan/what-you-pay  The government controls these parameters, and has used them in the past to adjust the level and timing of repayments that are required.

The government forecasts that around 56% of full-time undergraduates starting in 2024/25 will repay their loans in full. This is more than double the forecast for the 2022/23 cohort (32%) because of the government’s decision to lower the repayment threshold and increase the repayment horizon for its new Plan 5 loans. ⁶⁰ House of Commons Library, ‘Student loan statistics’, research briefing, 10 December 2025.

How has student finance evolved over time?

Until 1962 there was no uniform national approach to student finance – though far fewer students participated in higher education then. In 1950 just 3% of school leavers in the UK went to university; ⁶¹ Bolton P, Education: Historical statistics, The Stationery Office, 2012.  in 2025, over a third did (36%). ⁶² House of Commons Library, ‘Higher education student numbers’, research briefing, 20 February 2026.

The Education Act 1962 constituted the first significant step towards a standardised system of student finance. It obliged local authorities to provide students with non-repayable means-tested grants, both for tuition and for wider living costs. ⁷⁸ House of Commons Library, ‘Tuition fees in England: History, debates, and international comparisons’, research briefing, 23 February 2026.

Maintenance loans were introduced in 1990/91 through the newly established Student Loans Company, although these co-existed with maintenance grants for a time before their removal in 1998. At the same time, means-tested tuition fees of up to £1,000 per year were reintroduced, to be paid upfront each year.

The perceived unfairness of the upfront payment led to its abolition in 2006. Instead, universities could set their own fee rate, up to a maximum of £3,000, and students could receive a tuition fee loan which would be repaid contingent on income after graduation. ⁷⁹ House of Commons Library, ‘Tuition fees in England: History, debates, and international comparisons’, research briefing, 23 February 2026.  Maintenance grants were reintroduced in 2004/05.

The 2010 Browne report recommended that the tuition fee cap be abolished, but this was not taken on by the coalition government which in 2012 set a basic tuition fee threshold of £6,000 a year and an upper limit of £9,000 to be charged in “exceptional circumstances” ⁸⁰ House of Commons, Hansard, ‘Higher Education Funding’, 3 November 2010, col. 943.  (almost all universities immediately charged the maximum). 

In 2017, the cap increased to £9,250; maintenance loans also replaced grants for new students from 2016/17. ⁸¹ House of Commons Library, ‘The value of student maintenance support’, research briefing, 9 December 2025.  The next increase in the fee cap did not come until November 2024, when it was raised to £9,535. High levels of inflation over the last decade have meant that this nominal fee cap increase represents a real-terms cut (in 2025/26 prices the 2012/13 cap would be £12,947). ⁸² IfG analysis of Office for Budget Responsibility, Public finances databank, January 2026, at 2025/26 prices

How do student loans affect the public finances?

Student loans are separated into two components in the public finances: a loan (a financial asset, which will be repaid) and government spending (which will not), in recognition that “a significant proportion of student loan debt will never be repaid”. ⁸³ ONS, ‘Student loans in the public sector finances: a methodological guide’, ONS, 22 January 2020, retrieved 27 February 2026, https://www.ons.gov.uk/economy/governmentpublicsectorandtaxes/publicsectorfinance/methodologies/studentloansinthepublicsectorfinancesamethodologicalg…  Previously, unpaid student loans did not show up as public spending until the loan was cancelled, decades in the future. ⁸⁴ Wheatley M, ‘Student loans were an accounting wheeze – now they are a fiscal headache’, comment, Institute for Government, 18 December 2018, retrieved 25 February 2026, https://www.instituteforgovernment.org.uk/article/comment/student-loans-were-accounting-wheeze-now-they-are-fiscal-headache

The Resource Accounting and Budgeting (RAB) charge

Overall, student loans operate at a ‘loss’: the government, and by extension the taxpayer, is liable for the gap between what is lent out and repaid. This cost is known as the Resource Accounting and Budgeting (RAB) charge. ⁸⁵ House of Commons Library, ‘An introduction to student finance in England’, op. cit  It is based on future loan write-offs and interest subsidies in net present value terms. ⁸⁶ Department for Business, Innovation & Skills, The RAB charge, BIS/16/131 (no date); Explore education statistics, ‘Student loan forecasts for England’ gov.uk, 3 July 2025, retrieved 25 February 2026, https://explore-education-statistics.service.gov.uk/methodology/student-loan-forecasts-for-england

In the latest government statistics the expected RAB charge for Plan 2 loans is 34%. ⁸⁷ Note: for higher-education full-time  This means that just over a third of loan outlay issued under Plan 2 repayment terms in the 2025/26 financial year is not expected to be repaid. ⁸⁸ Explore education statistics, ‘Student loan forecasts for England’, Department for Education, 3 July 2025, retrieved 27 February 2026, for full-time higher education study  The Plan 5 RAB charge for the same financial year is 30%; Plan 5 charges are generally lower than Plan 2 because of their longer repayment terms and lower repayment thresholds, which mean a higher proportion of loans are expected to be paid back.

What are the criticisms of the current system?

Critiques of the student finance system cover both specific aspects of the current system and its overall nature.

Some, including a former Office for Students director and money-saving expert Martin Lewis, have criticised the freezing of tax and salary thresholds for repayments, ⁸⁹ Woolcock N, ‘Graduate tax could replace ‘doomed’ student loans, says ex-watchdog’, The Times, 4 February 2026, retrieved 25 February 2026, https://www.thetimes.com/uk/education/article/graduate-tax-replace-doomed-student-loans-dpsg5bsfh  deemed a “deliberate fiscal drag” for students. ⁹⁰ Lewis M, ‘Martin Lewis: On a Plan 2 Student Loan? Beware! The Government is freezing the repayment threshold. Should you overpay now (spoiler: for some yes, many no)?’, blog, MoneySavingExpert, 26 January 2026, retrieved 25 February 2026, https://blog.moneysavingexpert.com/2026/01/beware-plan-2-student-loan-repayment-freeze/  The long-term freeze on tuition fees has also come under criticism by universities themselves for putting their financing under strain.

More broadly, initial concerns that loans might deter people from entering university seem to have been largely unfounded: student numbers have increased since the introduction of loans and increases in the tuition fee caps, ⁹¹ House of Commons Library, ‘Higher education student numbers’, op. cit  although there is some evidence that the number of lower-income applicants is shrinking. ⁹² Explore education statistics, ‘Widening participation in higher education’, Department for Education, 3 July 2025, retrieved 27 February 2026, https://explore-education-statistics.service.gov.uk/find-statistics/widening-participation-in-higher-education/2023-24