Student finance: Martin Lewis shares 5 expert loan, money and savings tips for university students in England

• Martin Lewis has issued fresh guidance for students and parents ahead of the new academic year
• His focus is on helping first-time undergraduates understand how the current loan system really works
• The MoneySavingExpert founder says many myths still surround tuition fees and student finance
• He warns that the financial impact is often misunderstood and differs from traditional debt
• Lewis has outlined five essential things new students should know before starting university

With a new academic year approaching, consumer champion Martin Lewis has warned students and parents to take a hard look at how higher education is funded, and not to be misled by myths around tuition fees and “student debt.”

University can be transformative, both in life experience and in boosting long-term earning potential. But with the rising cost of higher education, students and families must go in with their eyes open.

The MoneySavingExpert founder has outlined five key things every first-time undergraduate in England should understand before starting their studies.

His message is that the student finance system is complex, often counterintuitive, and easy to misunderstand.

His advice focuses on those under the new “Plan 5” loan system, which applies to new starters, though many of the principles are relevant to others too.

1. The headline figure isn’t what you actually pay back

Students often hear about borrowing sums of £60,000 or more to cover tuition fees and living costs. But Lewis stresses this number is misleading.

That’s because the system doesn’t work like a traditional loan. You don’t pay fees upfront – the Student Loans Company covers them. Repayments only begin from the April after leaving university, and only if you’re earning more than £25,000 a year.

Above that threshold, graduates pay 9% of earnings. Those earning less pay nothing. Repayments stop altogether after 40 years, regardless of how much has been repaid.

Crucially, student loans don’t appear on credit files, and repayments are usually deducted automatically through payroll, like tax.

For many, this means they’ll be contributing for most of their working life, while others may never repay at all.

Are you keeping up with the latest headlines? NationalWorld’s breaking news - in your inbox.

2. Parents are expected to plug the funding gap

While tuition costs get the headlines, living expenses are often the bigger challenge. Students can apply for a maintenance loan to cover day-to-day costs, but the amount depends heavily on household income.

For those under 25, parental earnings are used to calculate entitlement. That means many students won’t receive the “full” loan. For September 2025 starters, the maximum yearly loan is:

• £8,877 if living at home
• £10,544 if living away from home
• £13,762 if living away from home in London

But these figures are reduced once family income passes £25,000, and can be cut by half for households earning around £65,000 or more. The shortfall is effectively treated as a “parental contribution”, though there is no legal obligation for parents to pay it.

Lewis warns this is an area where many students get caught out, and says “the living loan often isn’t big enough to cover real costs.” Parents and students should discuss this openly before term starts to avoid financial shocks.

The problem has been made worse by inflation. The threshold at which support is reduced has been frozen since 2008, despite a 64% rise in living costs since then.

3. It’s more like a tax than a debt

Perhaps the most important shift in perspective Lewis highlights is that the size of your loan doesn’t change your monthly repayments.

Whether you borrow £20,000 or £60,000, the monthly amount is exactly the same if you’re earning the same salary. For someone on £35,000, repayments will be £900 a year, regardless of the total borrowed.

This is why he describes the system as more like an additional tax than a traditional loan. For graduates, it effectively functions as a 9% surcharge on earnings above £25,000 for up to 40 years.

Those with lower or average earnings may never clear their loan before it’s wiped, while high earners may repay the full balance (and more) over time.

4. Don’t panic about interest rates

Another common source of anxiety is interest. For 2025/26, interest is set at 3.2%, based on the Retail Prices Index.

But Lewis explains that in practice, this doesn’t mean graduates are paying more in “real” terms. Because interest rises in line with inflation, the cost of what you repay is broadly equivalent to the cost of what you borrowed in today’s prices.

What’s more, many graduates won’t actually repay the interest at all. Unless you’re on track to clear your loan within the 40-year term, interest added to your balance won’t affect what you pay back.

While seeing statements rise can feel alarming, Lewis urges students not to fixate on interest figures, as repayments are still tied solely to income.

5. The rules can change – but rarely for those already enrolled

Finally, Lewis reminds students that the system is not set in stone. Loan terms are set by government and can change over time, though major negative changes for those already enrolled are unlikely.

A recent example was the government’s plan to lower repayment thresholds, which was eventually reversed following public pressure.

Looking ahead, one big shift is due in January 2027 with the launch of the Lifelong Learning Entitlement. This will extend student-style finance to individual modules, available up to age 60.

While those starting university in 2025 will remain under Plan 5, the change may affect future opportunities for additional study.

If you have an education story to share, we’d love to hear from you. You can now send your stories to us online via YourWorld at yourworld.net/submit. It's free to use and, once checked, your story will appear on our website and, space allowing, in our newspapers.