Advanced Learner Loans

The United Kingdom has set in motion a range of national skills policies over the years with a strong supply-side focus, reflecting the belief that raising skill levels will lead to higher competitiveness and productivity. These strategies establish the general direction that the United Kingdom takes in skills development, setting targets and introducing new policies and agencies to assist in achieving these targets.

A Shift from Grants to Income-contingent Loans

One of the initiatives of the government to expand higher education is to move from grants to income-contingent loans. Higher education institutions currently charge a flat tuition fee, regardless of the subject, and student income-contingent loans are available to cover tuition and living costs. The Student Loans Company is a government-owned agency that was established in 1989 and is responsible for managing all loans and grants to students in universities and colleges in the United Kingdom. In recent years, the United Kingdom has shifted away from grants and moved towards income-contingent loans for students, primarily due to their lower public cost.

Relative to grants, loans may also make students more responsive to market signals in their degree selection as most students must eventually repay the money, unlike with grants. In 2015, the government announced it would end grants for students from low-income households, but would raise total financial support via income-contingent loans. With income-contingent loans, students in university can apply for loans to cover both their tuition fees and living expenses, and only start replaying the loan once their courses end and their annual income exceeds £21,000.

Advanced Leaner Loans

To encourage adults to up-skill and retain over the course of their lives, Advanced Learner Loans were introduced. With a similar income-contingent repayment scheme as student loans for higher education, Advanced Learner Loans are meant to encourage adults age 19+, to pursue further education courses at Level 3 or above in awarding institutions which are recognised by the Office of the Qualifications and Examinations Regulator (OFQUAL). Loans are intended to be focused on technical qualifications the support entry into employment and progression to higher-level skills. Once they get into the world of business, they can form their own company or get employed. To start a company one needs to register their office before taking up any activity.

Unlike regular commercial loans, Advanced Leaner Loans do not depend on income, neither do they pay any income tax and there are no credit checks. Since being introduced in 2014, take up has increase from 57,000 learners to 80,000 learners in 2017. An evaluation of the loan programme by the Learning and Work Institute argued that take up of loans has been low due to poor awareness among individuals and employers about the programme. The evaluation uncovered that loan users are mainly learners who had already decided to return to study, and were informed about the Advanced Learner Loan when they contacted an education provider for course information or to enrol. Most of them were not aware of the loan programme before contacting their education provider, and so, were not induced to pursue further education as a result of the loan.

What is the Loan Amount and Courses Funded

As explained earlier, Advanced Leaner loans do not depend on income and there are no credit checks. The loan amount that you’re eligible for depends largely on two factors; the course you have opted for and the fees charged by the college for that course. The minimum loan amount that you can apply for is £300.

Note: Once you qualify for the loan, the said amount is paid directly to the admitting college.

Advanced Learner Loans cover the following courses:

• A levels (including AS Levels)
• Access to HE courses
• Level 3 Certificates
• Level 4 Certificates
• Level 3 Diplomas (including Technical Levels and Early Years Educators)
• Level 4 Diplomas

For courses that started on or after 1 August 2016, the Advanced Leaner Loans will cover the following courses:

• Level 5
• Level 6

Note: Advanced Learner Loans do not fund HND courses, or Advanced/Higher Apprenticeships.

Eligibility for the Advanced Learner Loan

As explained earlier, Advanced Leaner loans do not depend on income and there are not credit checks. The eligibility criteria for is:

• Learner must be 19 years old or above while making the application.
• Learner must be a UK resident or have a ‘settled’ status.
• Learner must be currently living in the UK; and have been so for the past 3 years
• Leaner must pursue their education from awarding institutions which are recognised by the Office of the Qualifications and Examinations Regulator

Note: Learners can take up to four loans at a time. They have an option to either take out one loan after the other or at the same time.

Loan Repayment

The Advanced Learner Loans are subject to repayment. The interest accrued on the loan will begin on the day the first payment. Repayment schedule will commence once the learner has started earning over £404 a week, £1750 a month or £21,000 a year. If income falls below any of these thresholds, repayments will automatically discontinue and will only restart once income exceeds any of these thresholds. Some students also choose to become sole trader and start earning themselves.

Repayments are set at 9% of your income over the minimum £21,000 a year. Even if your income doesn’t go over the £21,000 a year limit, but is over £404 a week or £1,750 a month at any point in the year.

Jack gets a monthly income of £2,500 before tax. He needs to repay 9% of the different between what he earns and the threshold amount:

£2,500 - £1,750 = £750

9% of £750 = £67.5

*For that particular month, Jack’s student loan repayment will be £67.5.

Note: Loan repayments will automatically change according to the rise of fall of income changes.

Interest Rate on the Loan

Interest will be calculated based on RPI (Retail Price Index). Interest is accrued from the day your college is paid for until the loan is paid back completely. The table shows your interest payment calculation:

Final Thoughts

Before your commit to the loan it is very important to access your financial situation. This includes, thinking hard about how you will repay your loan in full. As mentioned earlier, Advanced Leaner loans do not depend on income and there are not credit checks. So it is entirely up to you to decide the affordability factor. A lot of people don’t realise that interest start clocking up the day the loan is paid to the college. What they end up with is a loan amount which is far greater than the initial loan. So take careful stock of your financial situation before you commit to the loan or speak to your prospective college for more information.

About the author

Sumit Agarwal
Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.