The Hidden Debt Behind Your Student Loan
The maintenance loan lands three times a year, in one lump sum, and it’s gone faster than the term is long. What fills the gap between that payment and the next one rarely makes it into any official conversation about student finance — but for a genuinely large number of UK students, the answer is an overdraft, a credit card, or a BNPL app, quietly running alongside the loan the whole time.
Quick answer: Save the Student’s 2026 Banking Survey found the average Maintenance Loan now falls £502 a month short of real living costs. To cover that, 29% of students used Buy Now Pay Later at least some of the time this year — up from 27% last year — and among students with an overdraft, 23% have hit their arranged limit at some point. None of this shows up in headline student loan figures, because none of it is a student loan. It’s commercial credit, carrying commercial interest rates, sitting quietly next to a loan structure that doesn’t charge anything like the same terms.
What the data actually shows
The £502 monthly shortfall isn’t a worst-case estimate — it’s Save the Student’s average across the students they surveyed for 2026, and it’s why the same survey found 56% of students saying their Maintenance Loan isn’t enough. Separately, research covered by Wonkhe frames the scale plainly: students are using overdrafts, credit cards, and BNPL to cover the distance between what the state lends and what it actually costs to exist as a student, with overdraft interest sitting around 22% and credit card rates running above 21% once a student account’s terms end.
The BNPL figure specifically has moved in the wrong direction two years running. After dropping to 27% in 2025, usage rose again to 29% this year, with 9% of students using it regularly rather than occasionally. One in five of those users reported being late on a payment at some point — a detail that matters because BNPL late fees and any resulting collections activity behave like any other missed payment on any other form of credit, regardless of how the product is marketed.
Why this debt is structurally different from the student loan
A UK student loan is genuinely unusual as debt goes. It doesn’t appear on your credit file. Repayments are income-contingent, calculated as a percentage of earnings above a threshold, not a fixed monthly amount you’re obligated to find regardless of circumstances. Any remaining balance is written off after a set number of years — 30 for Plan 2, 40 for Plan 5 — with no penalty for the amount not repaid.
An overdraft, a credit card, or a BNPL balance follows none of those rules. Interest accrues in the ordinary way. Missed payments can appear on your credit file — even for BNPL providers that don’t report routine activity, a missed payment referred to collections reports regardless. There’s no income-contingent grace period and no eventual write-off. The two debts sit next to each other on a student’s finances, but they behave according to completely different logic — and that distinction rarely gets explained anywhere the money is actually being spent.
The insight most coverage of the funding gap misses
Most reporting on the maintenance loan shortfall focuses on the shortfall itself — the £502 figure, the political question of whether loans should rise faster. What gets less attention is what specifically fills the gap, and how unevenly that filling method distributes risk. A 0% student overdraft used within its limit costs nothing while you’re studying. The same shortfall covered through BNPL or an unarranged overdraft can cost meaningfully more, even though from a spending perspective the transaction looks identical — money that wasn’t in the account being spent anyway.
That distinction — arranged, interest-free borrowing versus commercial credit with real rates attached — is the actual decision point, and it’s rarely framed as a decision at all. Students describe it as “just getting by,” which is accurate emotionally but obscures that some ways of getting by cost significantly more than others for covering an identical gap.
A worked example
Say a student is £150 short one month before the next loan instalment. Covered through an arranged, interest-free student overdraft within its limit: the cost is £0, provided it’s repaid in the ordinary course of the account. Covered through a BNPL plan split over six weeks with a missed payment along the way: a late fee, potentially a block on the account, and — if it escalates — a referral to collections that can affect a credit file, on top of the original £150. Covered through an unarranged overdraft or a credit card carrying interest around 21-22%: real, ongoing interest cost from the moment the money is spent, continuing for as long as the balance runs.
The £150 gap is the same in every version. The consequence isn’t. That gap between “how it feels in the moment” and “what it actually costs depending on the method” is precisely what tends to go unexamined until a balance has built up across several months rather than one.
Why the picture is shifting again this year
Two changes landed in mid-2026 that alter this picture further, in ways that haven’t fully settled yet. BNPL became a fully FCA-regulated product from 15 July 2026, which means providers now have to run proper affordability checks before approving new plans and offer a formal complaints route through the Financial Ombudsman Service if something goes wrong. That’s a genuine improvement in consumer protection, but it doesn’t change the underlying maths — a BNPL plan used to cover a funding gap still carries the same fee and collections risk if a payment is missed, regulation or not.
At the same time, Money Wellness has reported record numbers of people seeking debt advice specifically for BNPL debt, with the proportion of debt-advice seekers carrying a BNPL balance rising from 15% in 2023 to 25% this year. Students aren’t broken out separately in that particular dataset, but the direction — more people stacking multiple small BNPL commitments rather than one larger one — matches exactly the pattern of using BNPL repeatedly to bridge a recurring gap, which is what a termly maintenance loan structure practically invites.
One thing worth checking: if you’re currently covering a funding gap with more than one form of credit — an overdraft plus BNPL, say — add up what each is actually costing you specifically, rather than treating the total gap as one undifferentiated number. The methods aren’t interchangeable even when the amount is identical.
FAQ
Is it normal for students to have debt beyond their student loan?
Statistically, yes — it’s common. Save the Student’s 2026 survey found meaningful proportions of students using overdrafts, BNPL, and credit cards during their studies. Common doesn’t mean cost-free, though: each of those forms of credit carries real interest or fee structures the student loan itself doesn’t.
Does a student overdraft affect my credit score?
Using an overdraft within its arranged, interest-free limit generally doesn’t damage your credit file on its own. Going into an unarranged overdraft, missing payments once you’ve graduated and the interest-free period ends, or letting the balance grow unmanaged can affect your credit file and your ability to get affordable credit later.
Does BNPL affect my credit score as a student?
It depends on the provider — some UK BNPL providers report routine activity to credit reference agencies, others generally don’t, though this landscape shifted with new FCA regulation from July 2026. What’s consistent across providers is that missed payments referred to collections can affect your credit file regardless of the original provider’s reporting policy.
Why doesn’t the maintenance loan just cover the gap?
The Maintenance Loan is means-tested and calculated using a formula that hasn’t kept pace with rising rent and living costs in many areas, particularly cities with higher accommodation costs. That structural gap is a widely reported and ongoing feature of the current system, not something specific to any individual student’s spending.
For the full picture on student finance, visit our Students hub.
Written by Hamid Ali, MSc Accounting & Finance, ACCA in progress, Founder of DebtShift.