Masters Loans – Are They Really That Different to Undergraduate Loans?

We've noticed that many students ask similar questions about the new postgraduate loans.

In particular, lots of you want to know: ‘how similar are they to the undergraduate loans?’

The answer? ‘Very!’

As the undergraduate loans are a point of reference for many of you coming to postgraduate study, we thought it would be useful to point out some of the similarities – and differences.

Please note that this blog focusses on the UK loans for English residents first introduced in 2016.

But don’t worry – elsewhere we’ve put together information on the Welsh, Scottish and Northern Irish loans.

Eligibility for a loan is pretty much the same as it is for an undergraduate loan.

The only difference is you’re now applying as a postgraduate student to study a Masters degree.

As long as you don’t have a Masters degree or equivalent qualification, you can take out a postgraduate loan.

All UK, EU, EEA and Swiss students will normally be eligible for a loan, as long as they have lived in either the UK or EU for the past 3 years.

See our guide for more information on specific residency criteria.

You can also apply up to 59 years of age – so don’t feel the loans aren’t suitable for mature students!

As with the undergraduate loans, it does not matter which subject area you choose to study, or whether you study part-time or full-time.

Both taught and research Masters are eligible for funding.

You can also study at any UK university – just like you did before.

Periods of study abroad during your course are also possible, as long as they do not exceed 50% of your programme length.

(If you want to do your full Masters abroad, then the Erasmus+ scheme may be more suited to you.)

For more information on course eligibility, view our guide.

The maximum postgraduate loan available for the academic year 2017/18 is £10,280.

Postgraduate loans aren’t means-tested, and the amount you may borrow is not capped based on the cost of your course.

This means you can borrow however much you like (up to £10,280) without credit checks or income assessment.

While the main part of an undergraduate loan is paid directly to your university for tuition fees, the postgraduate loan is paid directly to you.

Instalments will arrive into your UK bank account. You can then use the money as you see fit: for fees, living costs or other expenses.

Unlike your undergraduate loan, your postgraduate loan won't provide separate payments for fees and maintenance. In fact, none of it will be paid directly to your university.

Instead, you will receive loan payments directly into your bank account in three instalments per year – similar to the undergraduate maintenance loan system.

And if your Masters is more than a year long, you will receive an equal percentage of the amount you borrowed across each year (i.e. 50% in each year for a two year course).

You can find more information about payments in our guide.

The repayments of both undergraduate and postgraduate loans are designed to be manageable, and offer a better rate than a private loan.

Your postgraduate debt is also written off after 30 years – just like your undergraduate loan.

However, it’s best to anticipate that you will pay back your loan in full.

But this shouldn’t make you worry.

Instead, you should feel positive that it is highly probable that your qualifications will place you in a well-paying job – and that the government anticipates this to be the case, too.

The interest rate for both your undergraduate loan and your postgraduate loan is the same at RPI+3%.

RPI stands for ‘Retail Price Index’ – in simpler terms, this means inflation.

Inflation generally goes up each year, meaning interest rates do too.

However, the government intends to fix the current interest rate on postgraduate loans of 4.6% for five years until 2021.

You will repay your undergraduate loan at the same time as you repay your postgraduate loan.

This means you will make two payments per month to the Student Loans Company when you earn enough to repay.

However, unlike undergraduate loans, the repayment threshold for undergraduate loans isn't being raised.

So, whereas undergraduate loans will now be repaid at a rate of 9% when you earn over £25,000, your postgraduate loan is repaid at a rate of 6% of your earnings over £21,000.

You also don’t begin to repay your postgraduate loan until 2019 at the earliest.

So, if you were to take out a loan for the year 2017/18 and begin earning over £21,000 straight out of university, you’d still have a year of breathing space before your postgraduate loan repayments begin.

Perfect!

Even if you did not take out an undergraduate loan, the information provided in this blog still applies to you.

The rates of interest and repayment are exactly the same – and you also will not begin to repay your loan until 2019.

Your eligibility for a loan is also not based on whether or not you had an undergraduate loan – so don’t feel that those who have had a loan before will fare better, or vice versa.

As long as you have not previously graduated with a Masters, you can apply for a loan the same as any other student.