Postgraduate Student Loans vs Career Development Loans - Which are best for Masters Students?
The arrival of student loans for Masters degrees will be a landmark development in UK higher education. But this isn't the first government-supported finance to be offered to postgraduates.
Professional and Career Development Loans have been available since 1988 - and around 75% of them are used to fund Masters degrees.
So, with student loans on the way, are Professional and Career Development Loans still worth considering for a Masters degree? We've compared both options to find out.
Career Development Loans are often used for Masters degrees, but aren't specifically intended for them. Postgraduate student loans are much more specific, but have their own restrictions. So how do they compare when it comes to course eligibility?
Career Development Loans
You can study any course with a Professional and Career Development Loan, provided it will enhance your career and doesn't exceed two years (or three years with a work placement).
This means you can use a PCDL for most Masters courses with a professional focus. You can also use a PCDL for a Postgraduate Diploma (PGDip) or Postgraduate Certificate (PGCert) but not for a PhD (which takes longer than two years).
Postgraduate student loans
The postgraduate loans being introduced this year are specifically for Masters degrees (though a PhD scheme is planned for 2018). You don't need to demonstrate that the qualification will have an impact on your career and can study a taught or research course in any subject. Masters loans are also available for longer: you can study for two years full-time, or for up to four years, part-time.
However, postgraduate student loans are only available for full Masters degrees - not for PGCert or PGDip programmes.
Winner: Career Development Loans
It's a close call, but the availability of PCDLs for multiple types of postgraduate qualification just about swings it.
That said, you'll need to remember that Career Development Loans are intended for career-enhancing courses. Postgraduate loans are more flexible.
Postgraduate loans are offered by the government to most English students without restriction. Career Development Loans are offered across the UK, but subject to conditions set by commercial lenders.
Career Development Loans
PCDLs are available to UK, EU or EEA nationals who intend to work in one of these territories after graduating.
Age restrictions are fairly relaxed. You'll need to be over 18 (not a problem for any but the most precocious of Masters students) and, if you're applying for a loan from the Co-operative bank, you'll need to be under 69.
Unlike the postgraduate loans though, PCDLs are means-tested. You can't have savings of £16,000 and the number of hours you work whilst studying will also have an impact on how much you can borrow for living expenses.
As bank loans, PCDLs are also subject to status - you could be refused if you have a poor credit history.
Postgraduate student loans
The new postgraduate Masters loans come with one strict eligibility restriction: UK nationals must be ordinarily resident in England in order to apply.
Other eligibility criteria for the new postgraduate loans are far more relaxed than those for PCDLs. They aren't means tested and the amount you can borrow is not affected by savings or income. Your credit rating and history are also ignored - provided you aren't currently behind on any other payments to the Student Loans Company.
You will need to be under 60, but this has actually been relaxed from an initial age restriction of 30.
Winner: a tie
Across the board, eligibility criteria for the new Masters loans are much more relaxed. But, so far, this only matters if you're an English resident (or an EU applicant from outside the UK). Other loans are being developed in Scotland and Northern Ireland, but neither of these schemes will be in place for 2016.
Career Development Loans are subject to much stricter requirements, but are technically available to many students who won't yet be able to take out a postgraduate student loan.
Both loans offer the same maximum amount of £10,000, but their payment process is slightly different.
Career Development Loans
You can borrow between £300 and £10,000 with a Career Development Loan.
Up to 80% of this can be used course fees (unless you've been out of work for 3 months, in which case the figure rises to 100%).
In practice, this means you'll probably be able to receive up to £8,000 for your course. That should be enough to cover the cost of most Masters programmes (average fees for taught courses in 2015-16 were £5,901).
Whatever you borrow for tuition will be paid directly to your institution. You can borrow extra for living costs, but only if you are working less than 30 hours per week. This money will be paid directly to you.
Postgraduate student loans
Like PCDLs, postgraduate loans are available up to a maximum of £10,000
There is no minimum amount. Instead you can request whatever loan you require for course fees and / or living costs. All money is paid directly to you.
Winner: postgraduate loans
Both options allow you to receive the same maximum amount, but the new postgraduate loans are far more flexible.
Repayments and interest rates
This is where the two loans really differ.
The postgraduate student loans have very favourable interest rates and repayment terms designed to minimise their impact on your salary. Career Development Loans are still more generous than some personal loans, but interest rates are eventually a lot higher, with a shorter repayment window.
Career Development Loans
You'll begin accruing interest on a PCDL as soon as you receive your first payment. But, so long as you're studying, this interest will be paid for you by the government.
Repayments will commence one month after you finish your course (regardless of whether you complete it or not). Interest will then accrue at an annual rate of 9.9%.
You'll have between one and five years to pay off your loan, with payments organised according to your chosen repayment plan and borrowing amount. The loan must be repaid in full.
Early repayment is an option at the Co-operative (subject to a small charge) but not at Barclays.
Postgraduate student loans
Repayments for the new postgraduate student loans are similar to those for existing undergraduate borrowing. You'll be eligible to make repayments from the April after you complete your course, but will only do so if you're earning over £21,000 per year. Repayments will then be automatically deducted from your salary at a rate of 6%.
Interest will accrue on your loan from the date of your first payment, but the rate will be much more competitive than a commercial loan. In 2016 interest for a postgraduate loan will be set at 3.9%.
If you don't repay your postgraduate loan within 30 years of graduating the amount will be written off.
Winner: postgraduate loans
Again, it's the postgraduate loans that are a clear winner here.
Career Development Loans are more attractive than many other personal loans, with interest paid for you whilst you're studying. But the interest you'll eventually pay is much higher - and the time you'll have to do it is much shorter.
Postgraduate loans do add to your student debt, but you'll only make repayments when you can afford to.
Our comparison gives the Professional and Career Development Loans an early lead, but, really, it's the postgraduate loans that come out on top for most criteria.
This isn't really surprising: the new funding came about as a result of the government recognising a need for improved postgraduate support that Career Development Loans alone couldn't offer.
But this doesn't necessarily mean that the loans completely replace PCDLs. In fact, for British students living outside England, the Career Development Loans are the best form of postgraduate loan available - for now.
PCDLs are also flexible in ways that postgraduate loans aren't. Instead of being required to study a full Masters degree you can access a wider range of shorter PGCert and PGDip courses offering professional training at postgraduate level.
Ultimately, the best form of postgraduate funding for you will depend on your aims and circumstances.
The following table summarises our comparison of the two loan schemes:
Postgraduate Loans vs Career Development Loans
|
PCDL |
PGL |
| Courses |
Any career-enhancing qualification, up to 2 years long. |
Any Masters degree, up to 4 years long (part-time). |
| Students |
UK, EU & EEA students studying in the UK and intending to work in the UK, EU or EEA. Must have satisfactory credit history and not possess savings greater than £16,000. |
UK students resident in England wishing to study in the UK. Or EU / EEA students resident in the EU / EEA wishing to study in the UK. Not means tested. |
| Amount |
£300 to £10,000. |
Up to £10,000. |
| Payment |
Up to 80% of fees directly to institutions. Living costs paid to students (if working less than 30 hours per week). |
Paid directly to students in instalments, to be used for fees, living costs or other expenses. |
| Repayments |
Commence one month after course ends. Repayment schedules up to 5 years long available. Early repayment available, but may incur a fee. |
Commence in April after course ends for students earning over £21,000 per year. Deducted from salary at 6%. Written off after 30 years. |
| Interest |
Paid by government during course. 9.9% thereafter. |
Accrues from date of first payment. Set at RPI+3%. Currently 3.9% in 2016. |
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