Midweek Money: and get that student loan sorted

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TO COMPENSATE for the decrease in student grants, student loans have been increased. Unlike grants, loans are not means-tested. Further good news is that they are interest-free. However, the bad news is that the sum to be repaid increases at the rate of inflation.

Students can apply for a loan only when they start their course of study. Application forms are available from universities or colleges. Assessing an individual's eligibility for a loan is the responsibility of the academic institution where the student is undertaking the course.

The application procedures are rigid and, to save time, students should have certain information available when they begin their course. Applicants born in the UK will require their original birth or adoption certificate. An award letter from the student's LEA will speed up the process. As the loan is paid direct to a bank or building society account, its number and the sort code of the branch has to be stated. Finally, the applicant has to give his or her national insurance number. If this is unknown, the Contributions Agency will be able to assist.

Only one application is allowed each academic year. Therefore, it is advisable to apply for the full amount for, if less than the maximum is requested, it is not possible to apply for the shortfall at a later date. Students may choose to receive their loan as a single sum during the first term, or in three equal instalments, one made each term.

Repayment of loans does not begin until the course has been completed. The monthly instalments depend on income. If this is below a certain threshold - currently pounds 10,000 a year - no repayments have to be made. The threshold will be reviewed each year in the light of average earnings.

When the income exceeds the threshold, 9 per cent of the excess must be paid to reduce the outstanding loan. With the present pounds 10,000 threshold, this means the monthly repayment will be 9 per cent of any gross monthly income - about pounds 833 (pounds 10,000 divided by 12). Therefore, graduates earning pounds 12,000 a year will pay pounds 15 a month, and those with an annual salary of pounds 18,000 will pay pounds 60 a month.

The period of repayment depends on the amount borrowed and annual income. The repayments will be collected by the Inland Revenue.

Maximum loans for the academic year 1998/99 are: London pounds 3,145; Elsewhere, pounds 2,735; Parental Home (any location), pounds 2,325. The loans are 15 to 18 per cent lower in the final year of study