Learn Russian: Здесь в основном живут студенты.

In Russian, word order is flexible but purposeful. The most important or new information (the focus of the sentence) is typically placed at the end. Since the point of the sentence is who lives here (students, rather than families or professors), студенты takes the final position. If it were Студенты живут здесь, the focus would shift to the location.

How does the phrase в основном literally translate, and how is it formed?

It translates literally as 'in the main' or 'in the fundamental'. It is formed using the preposition в plus the prepositional case of the neuter adjective основное (main or fundamental) acting as a noun. It is the standard way to say 'mainly', 'mostly', or 'for the most part'.

Could I change the word order to Здесь живут в основном студенты?

Yes, that is perfectly natural and means exactly the same thing. Adverbial modifiers like в основном have some flexibility. Putting it right before the subject (студенты) tightly links the concept of 'mostly' to the 'students' themselves, whereas the original sentence's word order modifies the whole situation. The practical meaning is identical.

Could I use тут instead of здесь in this sentence?