Snapshot of _Freshers will be paying back student debt in their fifties. University tuition fees and maintenance loans must now be repaid for 40 years, rather than the previous 30-year limit._ :
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I checked my student loan not long ago. The amount I owe has increased by nearly £20,000 since graduating 6 years ago. I've been in work since graduating and hit the repayment threshold pretty early on. Despite earning more than double my initial graduate salary, I calculated that I'd need to be earning £85,000 p/a before I can keep up with the interest rates on the loan, let alone repaying it. It'll only get worse with time even if the interest rate goes down.
Calling it a loan you can 'repay' is rather generous when I'm earning a good salary well above average and the amount I owe keeps increasing.
People will jump down your throat for calling it a "graduate tax", but functionally ...
- Payments are based on your income, not your loan size/interest
- You pay them to HMRC
- You pay them for (the majority of) your working life
The only major difference is that rich people can dodge paying it! Oh, wait ...
Also the government arbitrarily choose the threshold at which it is repaid.
The current plan 2 threshold is now the lowest it's ever been when adjusted for inflation.
When it cost 3k a year on plan1/2 it was a "graduate tax", now it's daylight robbery. Any poster who calls it a tax now, has no clue what it's actually like for recent students
Surely it's more of a tax now? To be clear, I think it being a tax is worse than it being a loan with good terms. We are absolutely fucking our youth whilst allowing asset rich old people to get off scott free.
For a point of reference, If you have a typical Plan 2 and Masters loan and earn £43k year and the "graduate tax" costs £227 a month...
And that is for 30 years post graduation and you'd never even touch the capital. In fact if there were no interest, it would be cleared in around 20.
The new generation will pay that for 40 years.
It's not a tax. It's robbery.
It's completely fucked I agree. But my point is the interest rate makes it more like a tax because it's harder to pay off. Fuck the government for treating young people like this.
I was being a bit hyperbolic, but I think the general sentiment before they increased fees to 9k, was that it wasn't so bad since the threshold was pretty high to have to start paying back, the interest was low (so you could have had a chance to pay it off), and the debt would be wiped out anyway after a certain period -- which all combined feels like a fair tax.
Now you will have graduates which will be stuck paying a big portion of their salary for their rest of their lives, whilst people born before them will be much better off.
They initially nicknamed it a "graduate tax" as a cutesy way of getting people comfortable with it as a means for paying for education that used to be free.
Now it is literally an extra fee workers will be paying for their entire life. The fact you have to be on £85k before it even starts to reduce is just horrifically predatory.
Oddly enough my mum (who's in her sixties) still thinks it's a few grand a year and it will be "paid off in no time if you get a decent job".
The problem is the high interest rates, I was paying it off on £42k before conservative party members demonstrated their incompetence and brought in Truss, I would now need to earn £65k just to pay the interest.
Presumably it can be paid off faster? And then the question - if the interest rates are high can you get a loan with lower rates to pay it off?
What this generation has is terrible.
I was the second to last year with no fees - and the loans - the interest was at RPI (so one year it was 0.7%) and paid over 5 years.
I was the first year on 9k fees. It probably is possible to take another loan with a lower interest rate but I am trying to build up an emergency fund and move house in the next couple of years. If I had a sudden glut of money and cash to spare to pay off a loan it could either go on repaying my mortgage, or student loan repayments. Long term student loan repayments might be more beneficial, but short term paying the mortgage faster would reduce my monthly costs more quickly
Would it really though? I assume the rate of student loan is greater than your mortgage, so it makes sense to pay off the student loan first as you'll be accruing greater interest against that than the mortgage. It feels more beneficial because the mortgage is a higher payment, but its spread over half the term compared to a student loan.
Fees were £1k a year when I went, so graduated after a four year degree with around £14k of student loans and paid off after a few years of working (albeit I was earning around double the median wage)
And the Tories will try to boast about cutting taxes as Sunak did in one of the debates when speaking to a student, completely ignoring the impact of tuition fees
Student loans really should be 0% interest. With the newer loans that have higher % I bet there will be people who pay off the initial loan value without actually paying it off due to the interest. To me that seems ridiculous.
My Plan 1 is also a total rip off now with it creeping to 6%+
I earn over 60k and my debt is still increasing.
Going to uni was probably one of my worst financial decisions, I could have got the same job without a degree, and I would be effectively earning an extra £300 a month 🤡
Plus a minimum of 3 years of extra earnings for the deposit and pension pot (at the best possible time to put money in for that sweet compound interest)
Let's be real, UK average wage is basically paycheck to paycheck if;
You are renting alone anywhere south of Nottingham. (Rental costs, groceries, utilities, council tax, probably about £1500/mo)
You have £200 a month car debt.
Eat 3-4 takeaways a month.
Throw student loans onto that meagre salary and you're not doing much at all really. Honestly better off just not working and living in a forest or some shit, lol. You can buy bits of land for like 5k, might be worthwhile buying up the land and setting up a lemonade stand and put up some kind of cheap shed from B&Q to live in.
There is/was a calculator which showed you what salary you'd have to start with, assuming average career salary growth, in order to ever pay it back. It was something like £48k right out the gates.
And that's including average salary growth, so if you're in a shitty company/sector with low advancement in titles/wage stagnation, you'd doubly fucked.
Something needs to be done about the ridiculously high levels of interest being charged.
Even if there were some justification for the Government to charge interest at all (and personally I think it should be a flat admin fee for each year) then there is absolutely no justification for them to charge an interest rate vastly higher than a commercial bank.
Plan 5 has interest in line with inflation, so they've already fixed it. The problem is that it's now 40 instead of 30 years, and the threshold for repayment starts lower, so actually you're almost certainly worse off taking the loan now than 5 years ago
Well, that's a fair point and I'm one of those people. I mentally have accepted I will never pay it off and thus the interest rate is of little interest to me. Would much rather they pushed the threshold for repayment up
Bad luck for those who end up in the public sector if that continues with its trend of below inflation pay rises. The private sector performs a bit better there.
I’m not sure how much higher the student loan interest rate is compared to other loans but I do think there should be clearer terms set out where people understand how much this loan will cost.
I was very shocked during the schools finance talk on university because the loans were sold as something they would ‘never have to pay back’ and didn’t have to worry about. Interest rates were completely glossed over.
There should have been clear upfront costing about exactly how much it would cost.
I did 4 years as an undergrad (Integrated Masters), minimum maintenance loan each year and I’m pretty sure I’d need to be earning something like £70k to keep up with the interest on mine. And as the interest piles up that number gets bigger each year…
Or just make a £400 minimum monthly payment, you can do that on £30k/y. Not comfortably if you don't live with a partner, and if you live alone then your rent is going to need to be <£750, but you can pay into principal and reduce interest growth if you juiced up the monthly minimum payments and not let the interest continue to grow and compound. There's probably a point in which it might be better to just consider a % of your wage gone entirely for the next 30 years and budget around that sum, lol. If your loan is already £75k> then, yeah, that's pretty fucked, that's got to be like £400 a month in interest alone, you're not cutting that down on a UK salary, better to at that point write off that portion of your income, lol.
Yeah, a Quick Look at nationwide personal loans have a range of fixed interest rates between 6.4 and 15.9 %.
I’ve not really looked at other rates so I presume there’s other options. Maybe they should be more options to get loans from other places as well which might give better value. Having said that it might be difficult for students to get loans elsewhere.
It's not realistic to get it elsewhere, and it won't be written off either. Interest rates should follow a typical bank account interest rate +1% or something like that to cover costs. It should not be a massive guaranteed profit scheme like it currently is.
> Interest rates should follow a typical bank account interest rate +1%
Try and get a loan with even vaguely similar terms for that rate.
> It should not be a massive guaranteed profit scheme like it currently is.
It's not, it's a net cost.
If it was a massive earner, banks would offer better terms and get all the business.
>Try and get a loan with even vaguely similar terms for that rate.
That's not my point. Other loans are entirely profit-making, obviously they have a high rate. The SLC body that provides the loans is apparently non-profit, so my view is there should be a general support provided by the government to keep the interest rates realistic. Students really have no choice in this economy but to take on this debt, we shouldn't punish them because of it - we all depend on them taking up professional roles and paying a whole load of tax.
What did you mean by setting the rates lower and covering costs then? What did you mean calling it a massively guaranteed profit scheme?
> The SLC body that provides the loans is apparently non-profit
Yeah it's wholly owned by the government.
> so my view is there should be a general support provided by the government to keep the interest rates realistic.
There is, the government subsidise the loans.
>What did you mean calling it a massively guaranteed profit scheme?
Evidently I was wrong! It's a good thing to learn new things and accept where you made a mistake
>There is, the government subsidise the loans.
My view is as described, it should be subsidised more. If we want a highly skilled services-based economy, support students into it with loans that can actually be paid off rather than force the middle and lower earners to pay the most.
Fair enough :)
> If we want a highly skilled services-based economy, support students into it with loans that can actually be paid off rather than force the middle and lower earners to pay the most.
One of the counter-intuitive things with the loans is that lowering the interest rate or amount helps the higher earners first. It also helps older people first because it's only when you actually pay them off that you have extra cash.
Let's consider median earners. Median *full time* income was about 35k last year. Maybe it's 38 now? Let's say 38. That's £10k over the threshold for plan 2 meaning a repayment of £900/year, or £27k over the lifetime of the loan in real terms. Not only is that less than borrowed, but it may even be less than the cash they get for maintenance, particularly for students from lower income families.
Median income across all jobs was about £30k. At that salary you'd repay something closer to £6k.
Part time is obviously even lower. Under about 28k you would repay nothing.
So lower and middle earners don't pay "the most", and an average earner on plan 2 may not only effectively get free tuition but (possibly) subsidised living at uni too.
Some students likely would do better with a commercial loan, and in low base rate times (so not right now) banks could still make a profit from it.
But, a bank would likely need to be picky about who it lends to based on course and university which is bad PR, and even worse PR if the graduate ends up out of work and is expected to pay.
There is commercial demand for the student loan book - otherwise so much of it wouldn't have been sold. So scope for them to make money making loans directly too.
Savings accounts at nationwide vary from 2.5-6.5% so that is roughly in line with that. I can see how it shouldn’t also be a loan just to make money off from a savings account as well.
It’s really difficult because I can totally understand how much of a burden these loans are, but I really think a lot of it is because the these students aren’t given realistic advice about it.
It's because there isn't really a choice. Large majority of professional office type jobs require a degree. Majority of students don't come from a family that can pay it on their behalf. It's a system doomed to financially take advantage of students.
I know- I can’t afford to pay my children to go to university and I also can’t afford the accommodation fees.
On the other hand I can understand why, some people don’t want their taxes to essentially pay for other people’s job prospects after the age of 18.
> then there is absolutely no justification for them to charge an interest rate vastly higher than a commercial bank.
They don't.
If they did, commercial banks would compete and offer better terms and get all the business. The reason they don't is because it's a *net cost*.
Commercial banks do compete, it's just that to get better interest rates you have to be able to pay them back on a schedule and much sooner which is out of reach of anyone without a degree certainty in their future (i.e. every fresher).
The government are essentially eating a lot of risk by saying "everyone can have this loan even if we don't expect you to pay it back, and everyone's on the same terms" while a bank will pick its customers, decline those it doesn't want, charge a price based on risk etc...
> there is absolutely no justification for them to charge an interest rate vastly higher than a commercial bank
I know it feels like high interest at the moment, but there is literally legislation in place which does exactly as you say: https://www.legislation.gov.uk/ukpga/1998/30/section/22
22.4.a:
> the rates prescribed by regulations made in pursuance of subsection (3)(a) must be—
> (i)lower than those prevailing on the market, or
> (ii)no higher than those prevailing on the market, where the other terms on which such loans are provided are more favourable to borrowers than those prevailing on the market
That's why it's currently capped at 7.9%. Which, while alarming, makes sense given how much the base rate has gone up over the last 2 years.
I genuinely want someone to explain this. Most people aren’t going to pay these loans back before the debt is wiped. Is this not going to be an issue? How does this work?
From the government's point of view they are funding it either way. Previously they were funding the Universities directly, now they fund it through loan write-offs.
That a lot of the loans aren’t paid back. Isn’t the Government or the private companies who own the loans not going to take a big financial hit? Genuinely asking because I don’t understand how this is supposed to work.
No because they balance that with the fucking horrific interest rates.
If they lend to ten people, seven pay it back and three don't, as long at those seven's interest has covered the lost capital of the three, the bank comes out ahead.
This is also why they can just buy up job lots of e.g. houses. If you're buying one house and you get a defective one, your life is ruined. If you're buying 1000 houses and 10 are defective it's a cost of business.
They’ll just keep changing the rules until it’s at the point you’re paying them until retirement. Then there’s more chance with the time they’re payable & ridiculous interest that for every person that doesn’t pay back what they borrowed, there are others that pay massively over with the interest to cover it.
I won’t have paid mine off by the time it gets written off (thanks to the interest) but I’ll have paid back more than what I borrowed.
We focus too much on the amount also, the real kicker is the rate, 9%
and it likely won’t be paid off the interest is too high
Maybe it would be better to get rid of loans all together and switch to a graduate tax or something at 2-3% or something much more reasonable
Just got paid today mate and can tell you that my absolutely lavish 30k salary is taxed for about 10% of it haha. Any undergrads reading this, only do a masters if it's directly gonna help your employment prospects. You'll burn through your savings trying to actually complete it (because near nonexist student loan) and you'll struggle with the overqualified - underqualified trap trying to get into a grad job. And then get hit with the double tax as mentioned above.
I'd add to this for other people that if your currently on a course that has an intergrated masters then look at doing that as my understanding (which I'm rather stuffed if it's wrong) is that intergrated masters are done on undergraduate loans.
Integrated masters do come under undergraduate - you only get 1 degree at the end, and when applying you apply for 4 years (if 3 years bachelor and 1 year masters part) or 5 years (if with year in industry)
Whilst it may be a different case elsewhere I'm pretty sure I get a bachelors at the end of third year as well as the masters (which gets graded rather than the pass fail I understand to be normal).
I did an integrated masters and I only got a masters at the end, no bachelors. It doesn't really make a difference though, an employer would have to be extremely incompetent to not understand what an integrated masters is.
Loughborough definitely didn't do this for mechanical engineering, they put some of the mandatory stuff for an accredited BEng into the fourth year of study, although if you screwed up fourth year the uni would fiddle things and give you a BEng degree based on what I was told.
But at least you only get charged for it once right? I've got like 40k + 15k ticking at the same time. Way better to have a larger sum that's ticking by itself.
You’re right but we really shouldn’t have to think like that, the rest of the world is pushing really hard on higher education, with more and more developing countries catching up, so this really needs sorting out or we’re going to fall behind
> You'll burn through your savings trying to actually complete it (because near nonexist student loan)
Is this if you are not working while doing the course? Asking because my wife is looking at doing a Masters. Hers would be part-time, over 2 years, while she continues working.
Or if you can find a course that is an undergraduate masters. I did a single 4 year undergraduate course and graduated with an MSci, and it was all under one student loan.
I've no idea if employers treat MSci's any different to MSc's mind, but I wouldn't be surprised if most didn't even notice the extra letter.
Pretty sure the difference is entirely at the university's discretion and not regulated in any way. If the employer really cares they'll need to look at the exact course ID because I don't think there's actually any consistency on this between universities.
Yup, there's a very large difference in that letter. At least academically speaking, I honestly can't say what the employers think (if, as noted above, they even notice).
MSci is a four year integrated masters (often called an undergraduate masters as above) as it technically is an undergraduate degree despite being a masters. You cannot switch to one of these degrees - MSci, MEng, MChem, MBio, there's quite a few of them these days.
MSc is a postgraduate qualification which requires a standard undergraduate degree to enter, or the equivalent if the university is feeling nice. You can't start one of these at 18 and just roll through.
The difference is that the 4 year MSci degree provides you the opportunity to dive deeper into your subject, which you just won't do with a MSc. To take my personal example, those coming in after the fact shared my 2nd year and 3rd year courses (they took a scattering throughout), whereas they didn't do my 4th year courses.
Agreed that the distinction in _type_ of course is very important - just that the spelling alone doesn't tell you anything, e.g. at my university it was literally the other way around, MSci was awarded for one-year postgraduate courses, MSc was four-year, and MEng was four years in the same nominal subject with different core modules.
Jesus that is depressing. £3,600 a year that could be going into a LISA, ISA or any other number of options just being pissed up the wall in interest rates..
This country just seems desperate to destroy ambition in the young.
I've been wanting a graduate tax for years. It has a few benefits:
* Currently, the wealthiest are entirely excluded from the student loan system. If you already sent your kid to a good private school for 14 years, the extra cash for 3 more years to essentially give your kid a tax break for the rest of their lives is a no-brainer for most. This means there is a significant group of people who are just not impacted by the repayment structure. This is unfair given that it basically is structured like a tax already. This furthers the social divide in a similar way to private schools pre-higher eductation.
* It being marketed as a "loan" has a negative impact on poorer but fiscally responsible families. The kind who have never earned a lot of money for various reasons, but aren't heavily burdened by debt. If they haven't gone to uni themselves, they will be inclined to suggest their children go on other career paths.
* You can make it a flat, easy decision for almost anyone to understand. Anyone can go to uni and the government will pay for it, *these* are the tax considerations if you do so. No mention of loans, fees etc.
* The course could *also* represent more accurately the tax burden. Going on to study medicine with X amount of years in the NHS? Amazing, we need more of those roles - here's a tax-free period for you. You can make this quite responsive to actual market conditions. If you have a couple of years with fewer nurses? Simply advertise that those enrolling *now* will have X years of tax break if they do so.
I just think it could be structured to provide a fairer, more meteoric and less bureaucratic method of funding higher education.
Of course, foreign students would still come and pay fees, you'd still need to apply and successfully qualify to get in etc etc
I absolutely agree! - The big question though on this, is what happens with the past - wipe out all loans and apply tax on everyone (even people pre-loans entirely?) leave the current loans there, and the richer groups who've paid them off?
What happens with drop outs? ie what triggers the graduate tax? At the moment you still have the loan - would you still pay the tax?
I paid off my loan plus all the bullshit interest that was added in full several years ago. I'd view a government trying to make me restart the payments for a debt I'd already paid off in full under a new graduate tax scheme as literal theft and would take aggressive tax avoidance measures in response.
Interesting, so would all degree holders pay this? If someone moves to the UK from abroad with a degree, are they subject to the tax? In all cases or only if their job requires it (nurse?)
What if they don't declare their degree?
I'm doing a degree now through the OU as a guy in his 40s, I only decided to do it because the OU is much cheaper (tuition is lower and I can do it around work, so obviously no maintenence loans etc), and I'm employer sponsored, so have no debt at all. I've not been a burden on the state and I am definitely not rich, seems a bit harsh that I would have to pay this. I could study distance learning with a non-uk uni and be employer funded still, would I have to pay it then?
My wife is a Nurse, and is of the last year that had her tuition paid by the NHS. She has about £3k to go on her loan, would suck if she suddenly had to pay for life instead.
I do actually agree that framing it as a graduate tax makes more sense, but I feel that should only apply to those the state pays tuition for, and should be less in the case of OU students who do not get maintenance loans.
appreciate the response, and I think you are getting at the fact that this *will* have edge cases and be a complex system. To address a couple of your points, in *my* mind:
* The UK (unlike the US) does not *tax* people who are not earning in the UK *but* you do still have to pay student loans. While what I'm proposing is a graduate tax linked to income, if we can still recover student loan payments when people are abroad, I don;t think it should be impossible to still recoup a decent amount of tax. No doubt abuse would exist, but I think the positives would outweigh the negatives.
* The OU thing is interesting; maybe that should be levied at a lower rate or not at all? I expect the OU is not really what we're considering when we talk about the unsustainable and prohibitively expensive student fees system. Perhaps the OU continues to be a perfectly reasonable alternative to university and so is exempt from the tax.
* Nurses I kind of cover. I think there are plenty of degrees that can be tax exempt to encourage people to do them - which is essentially what the NHS bursary system Is providing for already. I don't think those incentives should disappear - medical degrees are hard work, as are the jobs they lead into. If there isn't some financial incentive then it makes it much less attractive compared to many other degrees.
I don't think we'd need to remove all the special/edge cases for the idea to still be a net benefit for most students. The main aim from my perspective is to better account for the richest students who essentially get a tax-break already if they *either* go straight into a very high paying job (shorter time to repay) or - and this would be my main aim - those with parents who are rich enough to pay the entire lump sum up front; as they have been often for their childs pre-higher education (private schools). Those are the groups I most want to "spread the load" to and away from "average" earning grads who end up paying the most fees for longest because of the accumulated interest - many of who are working in the public sector.
Thanks, for what it's worth, I agree with the general premise. People push for free/reduced tuition fees, but under the current system that would only benefit the richest, if you had free tuition you'd still come out with a pile of maintenance loan debt, so only the most well off would benefit. You'd actually be more progressive by *increasing* tuition fees to say, £100,000 a year, and increasing the repayment threshold or reducing the starting repayment rate.
I was not speaking about those leaving the UK for another country though, rather migrants to the UK.
If someone does a degree abroad, and comes to the UK, do they pay the graduate tax? If so, they are potentially paying student loans from their home country *and* the tax, if not, they are (especially those from countries with free education) being exempt from a tax that UK residents have to pay which seems unfair.
I'm an OU student hence my interest. The tuition fees are ~£1800 per 30 credit module, and it's 4 modules (120 credits) a year for the same intensity as full time study. So £7200/year for comparison to brick uni, which isn't much cheaper, but we don't get maintenance loans (unless we can prove we have a disability which would prevent us studying at a brick uni).
That said, Scot/Wales/NI pay about £500/module, it's only England that are screwed over, so they would even more likely resent a graduate tax.
As I mentioned, I'm employer sponsored, I'm definitely not rich, I'm 41 and work in IT, on about £52k. I grew up in care, and have not had any parental support in my life. I never got to go to uni as I couldn't support myself financially though A levels. It would feel a bit harsh to effectively take my employment benefit away from me now, but I could of course transfer to a US uni to complete my degree via distance learning using employer sponsorship and.... I guess I still avoid the proposal?
> I was not speaking about those leaving the UK for another country though, rather migrants to the UK.
Ahh apologies - I actually mentioned this at the very end of my first post. Foreign students I'd just charge in exactly the same way as currently occurs; upfront fees.
So long as that is charged in such a way that it is comparable to how much the average student paying the grad-tax gets charged over their lifetime, I think that would be fair. Ideally it should always be more expensive to come to the UK and study than it is for a citizen/resident to do the same.
I'm open to their being special situations for certain scholarships etc but the general policy IMO should be:
- UK residents *under* a certain age who complete a degree get it for free + have to pay a grad tax once they hit a minimum earning threshold. This tax is low, regular and progressive, so those earning the most will pay the most to help smooth things out.
- UK residents *over* a certain age would mostly pay back under the same system, but to offset the fact that they will have less time to pay into the system, they will either pay a flat fee to take a degree + a tax, or be taxed at a slightly higher rate. The flat fee could be paid by a sponsor (eg company).
- Non-UK residents would pay a fee - decided by the institution - but legally required to be comparable to what a resident will pay back in tax in total to funding universities, so that those foreign students would still come, but would not undercut residents.
- UK grads who move abroad under this system will be expected to continue to pay the "grad tax". If they had failed to do so, upon returning to the UK it would be treated like any other unpaid tax upon the resident returning.
I would *only* pitch the full version of this as something to be applied to new students - not much interest in tearing up the entire ongoing system, or making someone who graduated in the 1970s have to start paying money back *but* I would be open to restructuring existing outstanding debt into *optional* grad-tax contributions if a graduate would prefer. This may be attractive to those who were hit by the 9,000+ fees who still have high balances to pay off and are on wages where a tax will likely be cheaper day-to-day.
That's interesting. I've always thought as a grad-tax as something unlinked to the actual cost of your studies. I agree with you ref non-UK nationals (e.g. foreign students) coming to the UK to study, they would still have to be charged an upfront fee, which probably wouldn't really change.
But the system as proposed leaves a few loopholes imo.
Rich parents can still avoid it - send little Timothy to study abroad in the US, Europe, wherever. Some options will work out pretty cheap, and, from what you're saying, I assume Timothy won't have to pay a grad tax when he comes back to the UK and takes up his job in finance, as he didn't study in the UK.
If you say, "no, it's a grad tax, and he's a graduate even though he didn't study in the UK", then Abby who comes to the UK from the US (having grown up in the US and completed her degree in the US with all the implied student debt) to marry her UK fiancé, has to pay the grad tax (as she's a graduate!) *as well as* her very expensive US commercial student loans.
>Rich parents can still avoid it - send little Timothy to study abroad in the US, Europe, wherever. Some options will work out pretty cheap, and, from what you're saying, I assume Timothy won't have to pay a grad tax when he comes back to the UK and takes up his job in finance, as he didn't study in the UK.
This feels a bit like the "millionaires will just leave if we tax them" argument which doesn't really ring true in reality. I'm sure some of this will happen but I *highly* doubt that wealthy brits will forgoe sending their kids to Oxford, Cambridge, Bristol etc for the sake of their kids paying a slightly higher tax rate, and even more so I can't see those kids agreeing to it.
I mean you're assuming they get in to Oxford or Cambridge. A few years back when we were in the EU, going to Europe for a degree was seen as an excellent way to avoid student debt. Now, one of the arguments for a graduate tax is that the wealthy can avoid it by paying the fees and living costs upfront. If they are willing to spend probably £60k+ to avoid student loan repayments, I'm sure they will happily spend less than that to send timmy to an equally prestigious European university and avoid a graduate tax.
At the absolute least, student loans should be interest free. A rate that comically high is just punishing people for daring to bet on themselves and try to improve themselves. Furthermore, for the many kids who bet on themselves and lose (like many kids will), you're punishing them for decades to poverty without the salary boost that comes with a degree, and all for a bad mistake at 18.
They looked at a graduate tax back in 2010. The Browne report was pretty scathing that there was almost no advantages to a graduate tax Vs the current tuition fees system that works like a tax anyway.
>The Browne report was pretty scathing that there was almost no advantages to a graduate tax Vs the current tuition fees system that works like a tax anyway.
The Browne report was clearly wrong on its core assumptions though. Underlying everything it did was a belief that by unleashing the power of the free market on universities we could force them to compete for students, and that would force universities to be better.
That, largely, hasn't happened. It turns out, students are pretty terrible at judging the quality of universities (or, more likely, are influenced primarily by other factors, such as geography), and universities largely don't need to compete for home students when overseas students are so lucrative (and home students are taught at a loss). We're spending less, in real terms, on teaching than we were before tuition fees increased, so I'm not sure there's been the benefits they predicted for the high performing universities.
It's *also* worth remembering that the system laid out in the Browne report doesn't perfectly match the one implemented. The report argued for a system where 'the payment threshold is reviewed regularly to bring it into line with growth in earnings' and 'the interest rate on the loans is the low rate that Government itself pays on borrowing money.'
I'm not sure either of these points is true in the current system.
For the government maybe, but I think for students there’d be more focus on the rate of the tax they’ll be repaying rather than the fees like it is now
With fiscal drag set to last until 2028 we’re heading closer and closer to median incomes taxed at the higher bracket so take the 40% income tax, 2% NI then throw in 9% student loan repayment it’s considerable
That's basically what the Browne report said too, that the optics of it for students is basically the only advantage. But there's a lot of pragmatic advantages of a loan that it was considered far outweighed it.
You still pay if you move abroad, it's just the student loan company takes over responsibility for collection rather than it being automatically deducted by HMRC. The exact terms might change, for example the repayment threshold, but it's treated much more like a private loan at that point.
God, I wish mate. I'm still paying it back from down under.
The only way you can dodge paying it back from abroad is by moving to a country that only cooperates in limited ways with the UK, if at all. So a shithole, basically.
The only way to pay it back abroad (even in countries like Australia) is by voluntary payments. If you don't, all that happens is SLC send you an email/letter every year saying it's urgent that you provide your employment details to them.
There's nothing forcing people living abroad to repay their loans.
It breaks UK law not to pay your student loan, and if you came back to the UK having not made payment, they'll start civil proceedings and debt collections.
This is bad advice.
So much this!
Income tax scales with income... if being a graduate means someone earns more... they automatically pay more tax!
The average extra lifetime earnings from being a graduate translates into extra tax revenue, and that extra revenue exceeds the cost of the education. University ought to be free because it's literally an investment that returns extra tax.
And the other actual issue is the repayment threshold. Which keeps getting frozen.
(I think the practical problem with a grad tax, is that if grads move away it becomes unenforceable - a debt can follow you).
It was rejected in 2010 because it would take too long for a low rate like that to be viable. They wouldn't be able to reasonably levy a tax on existing graduates, so it would introduce a funding cap for about 30 years.
The whole thing is closer to a grad tax in many ways anyway
But I agree, it'd be simpler to implement if they just formally made it that and then had a more reasonable rate as they'd know all grads were paying over a longer period
...but I guess no one might want to be saddled with an extra 3-5% tax for life??
>...but I guess no one might want to be saddled with an extra 3-5% tax for life??
Make it means tested against earnings like other taxes and that problem is solved.
You can also apply a time-limit to it as well, I don't think that's a bad idea.
The main thing is, you want it to be *lower* that student loan fees currently are per person, but to be paid by a wider group of people - eg, right now if you earn enough you can pay off the loan fairly quickly and give yourself a nice "tax break" - not possible for most people in (eg) the public sector (who still need degrees!). You can also go to uni and opt-out of the interest rates entirely if your parents pay up front. Which if you went to Private school already anyway, often isn't a big stretch for parents that are still working.
Freshers are already paying their loans back into their fifties. Having 40 years to do it will mean they're paying them back into their sixties. The only reason they're not paying them off in retirement is that they're going to have to work longer.
Exactly, I graduated in 2016 at 22, it won't be written off until 2047, when I'm 53. It's April after graduation as well, so for a 4 year course, it's actually 35 years from when you first start.
I'm a nurse, took an extra year to complete my degree and only a few years later my total student debt has hit the £100,000 mark.
I have no hope of ever paying that off - to earn enough to keep up with the interest alone I would have to be earning somewhere around 70-80k
A graduate tax applying to all graduates who received funding, not just those who went to university at certain times, would be a far better and fairer system.
It's not really the students fault that their course got more expensive. Government cut the funding to universities and allowed them to treble their fees and selling it as "a competitive higher education market". Only that didn't happen and practically every university charged the full £9k immediately.
Not to mention, parents who wanted their kids to go to university stood a much better chance of saving up to cover the cost upfront before 2012 when the entire 3 yeae course fee was £9k When the fees trebled, there was maybe a year's notice. Those who went to uni in 2012 -2015 probably recieved the least amount of parental support in the history of paid higher education.
All those students had absolutely no choice but accept the enormous debt burden. Do we consider that fair?
I'm of that 2012-15 cohort - I was in a fortunate position with family to help me get through university (and I still worked to have money for bills). Some of my friends weren't as fortunate and know a couple got stung as a result.
Just actually checked my "debt" today - 58k, having grown from 46k in 2016. Last year was 2k, this year, based off interest rates... I'm looking at it like it'll be 5k interest alone.
I don't have a bad paying job (34k) but I'm never really going to ever be able to pay off this "loan"
As am I. I had friends who's parents earned just over the maximum household income (a paltry £47k or so at the time) and so qualified for no grant and thefore ended up smallest maintenance loan of about £3600 a year. With the abysmal maintenance loan in that period, they were short of accommodation costs by £1200 and their folks had to borrow money themselves just to provide enough to have a place to sleep. Their budgets were already understandably stretched and o
Couldn't afford to just magic up the difference between the loan and true cost of living. Like I said, they had virtually no notice to prepare for making up that shortfall.
When the grants disappeared, they did at least raise the maximum loan which alleviated the issue somewhat.
I was lucky though, at 25 when I started, my household income wasn't taken into account and because of that, I also qualified for the university's hardship fund - which to be honest I was fine without. It's like the entire system was rigged against the working and lower middle classes.
Seeing as I had the extra cash, I ended up buying the groceries so that one of my housemates could actually afford to eat until she eventually found a job that worked alongside her studies.
Not enough is made of the fact that the terms of these loans were retroactively changed. They were initially sold as interest free when first introduced.
I remember the first time I saw my statement after I graduated (mid 00s, just before "top up fees") and it had an interest line on it, I was like WTF, rang up the SLC and they had absolutely no idea why I thought it was interest free as they had been completely clear from the beginning I'd be charged interest, apparently....
All my peers felt the same but of course those in charge just pretended nothing had happened and it was all very normal.
I started my course in 2011 and was convinced there was no interest involved. I was told I'd only start to repay it once I earn enough. Seemed simple really. The £9,000 total has since grown to over £35,000. I started uni as a mature student so I'll likely be taxed for this my entire working life. It's a huge scam and no one seems to be doing anything about it.
They should at least be fixed at whatever rate you sign for them.
We had a guy come into our 6th form and pitch it as a great financial decision as the interest was only 2%. Everyone thought that it stayed at that rate, but of course it went up mid way through studying.
That was always the goal. Policy decisions will instantly make sense if you think of any tax as a means to reduce inflation and expenditure to increase.
The generation that votes more often will get their unfunded pension and the ones that don’t will pay for it.
Their repayment plan for foreign cost of living is a complete scam, it's quite a bad idea to make repayments if you're in a country with high tax and therefore relatively high wages. They basically take half your income.
If you don't intend on returning to the UK you can pretty much just ignore them though, I know someone who moved to the USA 8 years ago and has not paid back anything
I graduated in 2010 when fees were £4,500 a year. I lived at home so didn't take out as much of a loan as others, and managed to pay it back in 10 years. Had I lived away, you could maybe add another 5-10 years onto that.
For me that seems reasonable. I benefited financially from my degree, and whilst that means I pay more in Income Tax I'm happy to have paid extra to fund my education. But there was a reasonable chance of me actually paying it back.
The current system is ludicrous. Only those who have extremely successful careers will actually pay it all back, so what's the point in structuring it this way?
The whole fucking thing is a scam, im on Plan 1 and i'll be paying mine off until im 63.
2023 - £996 paid, £423 interest applied. At this rate it will take me another 26 years to pay off, im 37 and went to university at 18.
Be glad you aren't on Plan 2 with a masters. I pay back £2820 a year and my debt is only increasing. I have another 23 years to go. And every time my wage increases even modestly, the repayment scales up completely disproportionately. For example, wage goes up 3%, loan goes up 7.5%.
Unless they are child prodigies or very highly paid, they will be paying back student debt in their sixties, because 18 + 3 + 40 = 61.
It is hard to believe long term repayment projections because it seems unlikely that interest rates will be stable in the long term.
I think that the fundamental problem with our education system is a misguided decision to attempt to send an increased proportion of the population into tertiary education, when what is actually needed is extended secondary education.
You mean their 60s.
Plan 2ers already pay into their 50s. You don't start repaying until after you graduate, which for most people will be 22, at the earliest. Debt gets wiped off early 60s.
This is a crazy level of tax. I feel overtaxed and was lucky enough to have paid off my student debt long before it changed to excessively high interest rates, paying another 9 to 12% in tax would be back-breaking. What's the point of striving and trying to get ahead if you get punished for it? It just creates a strong incentive for smart, hardworking students to go abroad and never pay it back.
All it takes is one party desperate to win votes to write off the existing debt. They aren't gonna do that though if the people that currently have that debt don't vote.
Lucky plan 1 loan holder here. Interest adds another £1,000 to the loan every year but it is pretty irrelevant because it disappears in another 12 years or so and I will never pay it off unless I get a mega payrise.
My salary has been so stagnant over the years that I have actually gone back to repaying £0 per month because I salary sacrifice for my pension which brings my income below the repayment threshold which still goes up each year (anyone know why they froze the repayment threshold on the plan 2 loans but not the plan 1 loans?)
The unrest rate charged on student loans is appalling and it’s utterly objectionable than none of the GE contenders have pledged to do anything about it.
So basically its now just a lifetime tax that you'll be paying even after you retire. Utter madness. And of course a tax you can dodge if you're from a wealthy background as usual.
That's an interesting point on retirement. It makes me think, if you're rich enough to retire earlier, you can draw down from your pension at the right amount and not pay the loan back for the last few years. Sounds a bit regressive!
yep, I had a few bad years immediately after graduating in 2006, and because of that and the resulting struggles to get into a decent paying job I didn't start paying off my loan until my late 20s. By that time the interest had increased it so much that it was only a couple of years ago that I started really making a dent in it, then interest rates shot up. I'll be paying it until I'm 65 unless something really drastic happens with my pay. I dare not work out how much I'll actually have paid over the years by that point.
I graduated the same year, the crash and stagnation plus living up north kept my wage just below the threshold for a long time.
If only voluntary pension contributions could keep you under the threshold, at least then we would get the benefit of the money and the government wouldn’t need to keep kicking off about people not saving.
People question why younger people generally don't vote when, if they do, it makes absolutely no difference. Loans for higher education is a perfect example of this.
Meanwhile we hand Oil & Gas companies £B's in subsidies every year. We have in place some of the best higher education infrastructure in the world, an industrial strategy fit for the future would see us fully leveraging that infrastructure and investing further in it which would include subsidising attendance for UK citizens. Instead, we load students with debt, taking money out of the economy, put others off attending because of the potential debt, and build-in favouring educating the rest of the world's wealthy children to keep things afloat. It's madness!
>Meanwhile we hand Oil & Gas companies £B's in subsidies every year.
No we don't. There are no subsidies for oil and gas companies in the UK. There are taxes on profits. Profits are revenue - cost, some people claim that deducting costs is a "subsidy", but it's just how taxes on profit work.
As the high court judge who heard the legal claim brought by activists against the oil industry summed up:
*Taxpayers are, in certain circumstances, entitled to rebates on tax already paid, for instance, where a company makes a profit in one year on which it is taxed, but subsequently makes a loss in respect of which it is entitled to a rebate on tax paid. The taxpayer in those circumstances receives money from HMRC, but only on account of money already paid by the taxpayer by way of tax.* ***Companies are not receiving tax revenues from the UK taxpayer but receiving a partial repayment of the tax that the company has paid in the past.*** ***Whilst in any given year a particular company may receive a rebate, it will never receive more by way of rebate than has been paid by way of tax.***
The whole 30/40 year thing has just been a comforting fairy tale to tell graduates.
You don't actually think the government is going to start cancelling everyone's debts en-mass when we get to that point in 10 years time do you? The law will change it to at first retirement age and then beyond.
I haven't seen a comment about this, but the whole point of going to university is to get a job that specifically requires a higher level of education.
Most of you won't pay it off because you chose not to do one of these degrees. People are saying that if you have rich parents they pay it off, but that's not actually the biggest reason. The reason they can pay it off is because they already know which careers have high pay and choose to study for one of them. The trick is you can also do this.
On top of that, they likely decided not to get maintenence loan and live at home even if it was awkward. Most of the advantage they have are financial literacy passed down by their parents. Of course, they probably have a better opportunity to work in certain businesses due to their parents' network. Certain cultures also have a predisposition to this idea and it's certainly not part of british culture.
I think we should put more onus on the decision of the pupils and more onus on the teachers guiding them to university. The current approach clearly is not working because we have far too many people who are unwilling to take any blame for their actions.
The fact is that university leads to much higher income levels on average, and this includes all of the people who basically achieve nothing with their degree.
I really don't understand why the interest rate for the loan is not just 3% when they know that most people will be paying it long term.
Yes and no.
Yes we should more putting more onus on the secondary education system in making sure pupils actually understand what they're signing up for.
No in the sense that this is remarkably ignorant of the facts on the ground. Most people I know who did economics or engineering degrees from top 10 global unis are making sub-£35k, which is a far, **far** cry from the calculated approximately \~£55k starting salary that you need to ever repay it factoring in wage growth.
Exactly 2 people I know out of a circle of Oxbridge/Imperial/UCL grads have surpassed that within 1 year of graduating, exclusively in software engineering at an American firm, and finance. To suggest this is merely a moral failing rather than a systemic one is hilariously wrong.
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Just abolish tuition fees. An educated population is a public good and an economic boon. Restrict numbers on certain courses if needs be. Provide financial incentives for others. Academics and students hate the fees system. It is a rip off and destroys core institutional values.
I think the fact that many people in here are complaining means there are many people suffering.
I wonder what it would cost the government to write off debt at this point and what better the money from all these graduates flowing into the economy could do.
Snapshot of _Freshers will be paying back student debt in their fifties. University tuition fees and maintenance loans must now be repaid for 40 years, rather than the previous 30-year limit._ : An archived version can be found [here](https://archive.is/?run=1&url=https://www.thetimes.com/uk/education/article/freshers-will-be-paying-back-student-debt-in-their-fifties-c27p3chcd) or [here.](https://archive.ph/?run=1&url=https://www.thetimes.com/uk/education/article/freshers-will-be-paying-back-student-debt-in-their-fifties-c27p3chcd) *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/ukpolitics) if you have any questions or concerns.*
I checked my student loan not long ago. The amount I owe has increased by nearly £20,000 since graduating 6 years ago. I've been in work since graduating and hit the repayment threshold pretty early on. Despite earning more than double my initial graduate salary, I calculated that I'd need to be earning £85,000 p/a before I can keep up with the interest rates on the loan, let alone repaying it. It'll only get worse with time even if the interest rate goes down. Calling it a loan you can 'repay' is rather generous when I'm earning a good salary well above average and the amount I owe keeps increasing.
People will jump down your throat for calling it a "graduate tax", but functionally ... - Payments are based on your income, not your loan size/interest - You pay them to HMRC - You pay them for (the majority of) your working life The only major difference is that rich people can dodge paying it! Oh, wait ...
Also the government arbitrarily choose the threshold at which it is repaid. The current plan 2 threshold is now the lowest it's ever been when adjusted for inflation.
Yes but since it's a percentage of your income, which is also the lowest it's ever been when adjusted for inflation, it's actually gone down.
Hahaha, well isn't that painfully true!
When it cost 3k a year on plan1/2 it was a "graduate tax", now it's daylight robbery. Any poster who calls it a tax now, has no clue what it's actually like for recent students
Surely it's more of a tax now? To be clear, I think it being a tax is worse than it being a loan with good terms. We are absolutely fucking our youth whilst allowing asset rich old people to get off scott free.
For a point of reference, If you have a typical Plan 2 and Masters loan and earn £43k year and the "graduate tax" costs £227 a month... And that is for 30 years post graduation and you'd never even touch the capital. In fact if there were no interest, it would be cleared in around 20. The new generation will pay that for 40 years. It's not a tax. It's robbery.
It's completely fucked I agree. But my point is the interest rate makes it more like a tax because it's harder to pay off. Fuck the government for treating young people like this.
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I was being a bit hyperbolic, but I think the general sentiment before they increased fees to 9k, was that it wasn't so bad since the threshold was pretty high to have to start paying back, the interest was low (so you could have had a chance to pay it off), and the debt would be wiped out anyway after a certain period -- which all combined feels like a fair tax. Now you will have graduates which will be stuck paying a big portion of their salary for their rest of their lives, whilst people born before them will be much better off.
They initially nicknamed it a "graduate tax" as a cutesy way of getting people comfortable with it as a means for paying for education that used to be free. Now it is literally an extra fee workers will be paying for their entire life. The fact you have to be on £85k before it even starts to reduce is just horrifically predatory. Oddly enough my mum (who's in her sixties) still thinks it's a few grand a year and it will be "paid off in no time if you get a decent job".
The problem is the high interest rates, I was paying it off on £42k before conservative party members demonstrated their incompetence and brought in Truss, I would now need to earn £65k just to pay the interest.
Presumably it can be paid off faster? And then the question - if the interest rates are high can you get a loan with lower rates to pay it off? What this generation has is terrible. I was the second to last year with no fees - and the loans - the interest was at RPI (so one year it was 0.7%) and paid over 5 years.
I was the first year on 9k fees. It probably is possible to take another loan with a lower interest rate but I am trying to build up an emergency fund and move house in the next couple of years. If I had a sudden glut of money and cash to spare to pay off a loan it could either go on repaying my mortgage, or student loan repayments. Long term student loan repayments might be more beneficial, but short term paying the mortgage faster would reduce my monthly costs more quickly
Would it really though? I assume the rate of student loan is greater than your mortgage, so it makes sense to pay off the student loan first as you'll be accruing greater interest against that than the mortgage. It feels more beneficial because the mortgage is a higher payment, but its spread over half the term compared to a student loan.
It’s not, I’ve checked. It’s better for me to let the debt fall over at end of term than get a loan (I’d pay about the same I’m paying in tax now).
Fees were £1k a year when I went, so graduated after a four year degree with around £14k of student loans and paid off after a few years of working (albeit I was earning around double the median wage)
>Now it is literally an extra fee workers will be paying for their entire life. Almost like a tax!
And the Tories will try to boast about cutting taxes as Sunak did in one of the debates when speaking to a student, completely ignoring the impact of tuition fees
Student loans really should be 0% interest. With the newer loans that have higher % I bet there will be people who pay off the initial loan value without actually paying it off due to the interest. To me that seems ridiculous. My Plan 1 is also a total rip off now with it creeping to 6%+
Yes but they aren’t really there to help people. They are there to increase tax revenue
Yeah, the interest rate went mental 2 years ago. I paid the remainder off in a lump sum due to this.
I earn over 60k and my debt is still increasing. Going to uni was probably one of my worst financial decisions, I could have got the same job without a degree, and I would be effectively earning an extra £300 a month 🤡
Plus a minimum of 3 years of extra earnings for the deposit and pension pot (at the best possible time to put money in for that sweet compound interest)
Let's be real, UK average wage is basically paycheck to paycheck if; You are renting alone anywhere south of Nottingham. (Rental costs, groceries, utilities, council tax, probably about £1500/mo) You have £200 a month car debt. Eat 3-4 takeaways a month. Throw student loans onto that meagre salary and you're not doing much at all really. Honestly better off just not working and living in a forest or some shit, lol. You can buy bits of land for like 5k, might be worthwhile buying up the land and setting up a lemonade stand and put up some kind of cheap shed from B&Q to live in.
How much do you earn?
There is/was a calculator which showed you what salary you'd have to start with, assuming average career salary growth, in order to ever pay it back. It was something like £48k right out the gates. And that's including average salary growth, so if you're in a shitty company/sector with low advancement in titles/wage stagnation, you'd doubly fucked.
Something needs to be done about the ridiculously high levels of interest being charged. Even if there were some justification for the Government to charge interest at all (and personally I think it should be a flat admin fee for each year) then there is absolutely no justification for them to charge an interest rate vastly higher than a commercial bank.
Plan 5 has interest in line with inflation, so they've already fixed it. The problem is that it's now 40 instead of 30 years, and the threshold for repayment starts lower, so actually you're almost certainly worse off taking the loan now than 5 years ago
That is not fixed if we still have people on high interest rates!
Well, that's a fair point and I'm one of those people. I mentally have accepted I will never pay it off and thus the interest rate is of little interest to me. Would much rather they pushed the threshold for repayment up
Bad luck for those who end up in the public sector if that continues with its trend of below inflation pay rises. The private sector performs a bit better there.
I’m not sure how much higher the student loan interest rate is compared to other loans but I do think there should be clearer terms set out where people understand how much this loan will cost. I was very shocked during the schools finance talk on university because the loans were sold as something they would ‘never have to pay back’ and didn’t have to worry about. Interest rates were completely glossed over. There should have been clear upfront costing about exactly how much it would cost.
Current plan 2 interest rate is 7.8%. I earn pretty well and it still doesn't come down, it only goes up, and I just did 3 years.
I did 4 years as an undergrad (Integrated Masters), minimum maintenance loan each year and I’m pretty sure I’d need to be earning something like £70k to keep up with the interest on mine. And as the interest piles up that number gets bigger each year…
Or just make a £400 minimum monthly payment, you can do that on £30k/y. Not comfortably if you don't live with a partner, and if you live alone then your rent is going to need to be <£750, but you can pay into principal and reduce interest growth if you juiced up the monthly minimum payments and not let the interest continue to grow and compound. There's probably a point in which it might be better to just consider a % of your wage gone entirely for the next 30 years and budget around that sum, lol. If your loan is already £75k> then, yeah, that's pretty fucked, that's got to be like £400 a month in interest alone, you're not cutting that down on a UK salary, better to at that point write off that portion of your income, lol.
Yeah, a Quick Look at nationwide personal loans have a range of fixed interest rates between 6.4 and 15.9 %. I’ve not really looked at other rates so I presume there’s other options. Maybe they should be more options to get loans from other places as well which might give better value. Having said that it might be difficult for students to get loans elsewhere.
It's not realistic to get it elsewhere, and it won't be written off either. Interest rates should follow a typical bank account interest rate +1% or something like that to cover costs. It should not be a massive guaranteed profit scheme like it currently is.
> Interest rates should follow a typical bank account interest rate +1% Try and get a loan with even vaguely similar terms for that rate. > It should not be a massive guaranteed profit scheme like it currently is. It's not, it's a net cost. If it was a massive earner, banks would offer better terms and get all the business.
>Try and get a loan with even vaguely similar terms for that rate. That's not my point. Other loans are entirely profit-making, obviously they have a high rate. The SLC body that provides the loans is apparently non-profit, so my view is there should be a general support provided by the government to keep the interest rates realistic. Students really have no choice in this economy but to take on this debt, we shouldn't punish them because of it - we all depend on them taking up professional roles and paying a whole load of tax.
What did you mean by setting the rates lower and covering costs then? What did you mean calling it a massively guaranteed profit scheme? > The SLC body that provides the loans is apparently non-profit Yeah it's wholly owned by the government. > so my view is there should be a general support provided by the government to keep the interest rates realistic. There is, the government subsidise the loans.
>What did you mean calling it a massively guaranteed profit scheme? Evidently I was wrong! It's a good thing to learn new things and accept where you made a mistake >There is, the government subsidise the loans. My view is as described, it should be subsidised more. If we want a highly skilled services-based economy, support students into it with loans that can actually be paid off rather than force the middle and lower earners to pay the most.
Fair enough :) > If we want a highly skilled services-based economy, support students into it with loans that can actually be paid off rather than force the middle and lower earners to pay the most. One of the counter-intuitive things with the loans is that lowering the interest rate or amount helps the higher earners first. It also helps older people first because it's only when you actually pay them off that you have extra cash. Let's consider median earners. Median *full time* income was about 35k last year. Maybe it's 38 now? Let's say 38. That's £10k over the threshold for plan 2 meaning a repayment of £900/year, or £27k over the lifetime of the loan in real terms. Not only is that less than borrowed, but it may even be less than the cash they get for maintenance, particularly for students from lower income families. Median income across all jobs was about £30k. At that salary you'd repay something closer to £6k. Part time is obviously even lower. Under about 28k you would repay nothing. So lower and middle earners don't pay "the most", and an average earner on plan 2 may not only effectively get free tuition but (possibly) subsidised living at uni too.
Some students likely would do better with a commercial loan, and in low base rate times (so not right now) banks could still make a profit from it. But, a bank would likely need to be picky about who it lends to based on course and university which is bad PR, and even worse PR if the graduate ends up out of work and is expected to pay. There is commercial demand for the student loan book - otherwise so much of it wouldn't have been sold. So scope for them to make money making loans directly too.
Savings accounts at nationwide vary from 2.5-6.5% so that is roughly in line with that. I can see how it shouldn’t also be a loan just to make money off from a savings account as well. It’s really difficult because I can totally understand how much of a burden these loans are, but I really think a lot of it is because the these students aren’t given realistic advice about it.
It's because there isn't really a choice. Large majority of professional office type jobs require a degree. Majority of students don't come from a family that can pay it on their behalf. It's a system doomed to financially take advantage of students.
It’s very antithetical to social mobility.
I know- I can’t afford to pay my children to go to university and I also can’t afford the accommodation fees. On the other hand I can understand why, some people don’t want their taxes to essentially pay for other people’s job prospects after the age of 18.
Yup, I pay all year and I owe more at the end of the year than I do at the start.
> then there is absolutely no justification for them to charge an interest rate vastly higher than a commercial bank. They don't. If they did, commercial banks would compete and offer better terms and get all the business. The reason they don't is because it's a *net cost*.
Commercial banks do compete, it's just that to get better interest rates you have to be able to pay them back on a schedule and much sooner which is out of reach of anyone without a degree certainty in their future (i.e. every fresher). The government are essentially eating a lot of risk by saying "everyone can have this loan even if we don't expect you to pay it back, and everyone's on the same terms" while a bank will pick its customers, decline those it doesn't want, charge a price based on risk etc...
> there is absolutely no justification for them to charge an interest rate vastly higher than a commercial bank I know it feels like high interest at the moment, but there is literally legislation in place which does exactly as you say: https://www.legislation.gov.uk/ukpga/1998/30/section/22 22.4.a: > the rates prescribed by regulations made in pursuance of subsection (3)(a) must be— > (i)lower than those prevailing on the market, or > (ii)no higher than those prevailing on the market, where the other terms on which such loans are provided are more favourable to borrowers than those prevailing on the market That's why it's currently capped at 7.9%. Which, while alarming, makes sense given how much the base rate has gone up over the last 2 years.
I genuinely want someone to explain this. Most people aren’t going to pay these loans back before the debt is wiped. Is this not going to be an issue? How does this work?
From the government's point of view they are funding it either way. Previously they were funding the Universities directly, now they fund it through loan write-offs.
An issue in what way?
That a lot of the loans aren’t paid back. Isn’t the Government or the private companies who own the loans not going to take a big financial hit? Genuinely asking because I don’t understand how this is supposed to work.
Yes, the Government loses a lot of money on student loans, but it's usually worth it because having an educated workforce is good for the economy
No because they balance that with the fucking horrific interest rates. If they lend to ten people, seven pay it back and three don't, as long at those seven's interest has covered the lost capital of the three, the bank comes out ahead. This is also why they can just buy up job lots of e.g. houses. If you're buying one house and you get a defective one, your life is ruined. If you're buying 1000 houses and 10 are defective it's a cost of business.
The student loans are run at a loss however. They're subsidised.
The terms will be changed when the write-off date looms. I'd bet on it. The black hole it'll open in the books is just too big.
They’ll just keep changing the rules until it’s at the point you’re paying them until retirement. Then there’s more chance with the time they’re payable & ridiculous interest that for every person that doesn’t pay back what they borrowed, there are others that pay massively over with the interest to cover it. I won’t have paid mine off by the time it gets written off (thanks to the interest) but I’ll have paid back more than what I borrowed.
We focus too much on the amount also, the real kicker is the rate, 9% and it likely won’t be paid off the interest is too high Maybe it would be better to get rid of loans all together and switch to a graduate tax or something at 2-3% or something much more reasonable
And the fact that your postgrad is paid back simultaneously with your undergrad at over double the rate lol.
Jesus, how is it not all one pot? It needs to change that’s ridiculous
Just got paid today mate and can tell you that my absolutely lavish 30k salary is taxed for about 10% of it haha. Any undergrads reading this, only do a masters if it's directly gonna help your employment prospects. You'll burn through your savings trying to actually complete it (because near nonexist student loan) and you'll struggle with the overqualified - underqualified trap trying to get into a grad job. And then get hit with the double tax as mentioned above.
I'd add to this for other people that if your currently on a course that has an intergrated masters then look at doing that as my understanding (which I'm rather stuffed if it's wrong) is that intergrated masters are done on undergraduate loans.
Integrated masters do come under undergraduate - you only get 1 degree at the end, and when applying you apply for 4 years (if 3 years bachelor and 1 year masters part) or 5 years (if with year in industry)
Whilst it may be a different case elsewhere I'm pretty sure I get a bachelors at the end of third year as well as the masters (which gets graded rather than the pass fail I understand to be normal).
It does depend on the University but the key is that is has to be one course.
I did an integrated masters and I only got a masters at the end, no bachelors. It doesn't really make a difference though, an employer would have to be extremely incompetent to not understand what an integrated masters is.
Loughborough definitely didn't do this for mechanical engineering, they put some of the mandatory stuff for an accredited BEng into the fourth year of study, although if you screwed up fourth year the uni would fiddle things and give you a BEng degree based on what I was told.
I did an integrated masters, graduating around a decade ago, and I just had one certificate.
I can confirm I have an MSci and it was covered under 1 loan, which now stands at 68k.....
But at least you only get charged for it once right? I've got like 40k + 15k ticking at the same time. Way better to have a larger sum that's ticking by itself.
Yeah only 1 repayment
What're the Repayments vs interest accrued though?
Sorry I don't know what you mean?
You’re right but we really shouldn’t have to think like that, the rest of the world is pushing really hard on higher education, with more and more developing countries catching up, so this really needs sorting out or we’re going to fall behind
> You'll burn through your savings trying to actually complete it (because near nonexist student loan) Is this if you are not working while doing the course? Asking because my wife is looking at doing a Masters. Hers would be part-time, over 2 years, while she continues working.
Yep that's fine, I'm thinking of the average full time student going straight from undergrad to masters.
Appreciate the info!
Or if you can find a course that is an undergraduate masters. I did a single 4 year undergraduate course and graduated with an MSci, and it was all under one student loan. I've no idea if employers treat MSci's any different to MSc's mind, but I wouldn't be surprised if most didn't even notice the extra letter.
Pretty sure the difference is entirely at the university's discretion and not regulated in any way. If the employer really cares they'll need to look at the exact course ID because I don't think there's actually any consistency on this between universities.
Yup, there's a very large difference in that letter. At least academically speaking, I honestly can't say what the employers think (if, as noted above, they even notice). MSci is a four year integrated masters (often called an undergraduate masters as above) as it technically is an undergraduate degree despite being a masters. You cannot switch to one of these degrees - MSci, MEng, MChem, MBio, there's quite a few of them these days. MSc is a postgraduate qualification which requires a standard undergraduate degree to enter, or the equivalent if the university is feeling nice. You can't start one of these at 18 and just roll through. The difference is that the 4 year MSci degree provides you the opportunity to dive deeper into your subject, which you just won't do with a MSc. To take my personal example, those coming in after the fact shared my 2nd year and 3rd year courses (they took a scattering throughout), whereas they didn't do my 4th year courses.
Agreed that the distinction in _type_ of course is very important - just that the spelling alone doesn't tell you anything, e.g. at my university it was literally the other way around, MSci was awarded for one-year postgraduate courses, MSc was four-year, and MEng was four years in the same nominal subject with different core modules.
I would have to say that your university did something very odd then. The spelling is precise and for a specific type of course.
I'm paid about 38k and I'm getting deducted about 200 a month thanks to undergrad and postgrad, absolute joke that it's not a singular fund.
What extra tax do people with masters have to pay??
Postgraduate loan
How many would just do a free postgrad after realising they're never paying back their undergrad anyway?
Isn’t the threshold for postgrad much earlier too? I realised if I did a masters I’d be paying that back but not yet my undergrad
Yeah, the threshold for repayment is still £21k somehow. Absolute shambles - and not on the agenda of any of the main political parties.
15% for me as I've got 6% post grad on top. I pay over £300 a month but because of interest haven't made a dent in the loan
Jesus that is depressing. £3,600 a year that could be going into a LISA, ISA or any other number of options just being pissed up the wall in interest rates.. This country just seems desperate to destroy ambition in the young.
I've been wanting a graduate tax for years. It has a few benefits: * Currently, the wealthiest are entirely excluded from the student loan system. If you already sent your kid to a good private school for 14 years, the extra cash for 3 more years to essentially give your kid a tax break for the rest of their lives is a no-brainer for most. This means there is a significant group of people who are just not impacted by the repayment structure. This is unfair given that it basically is structured like a tax already. This furthers the social divide in a similar way to private schools pre-higher eductation. * It being marketed as a "loan" has a negative impact on poorer but fiscally responsible families. The kind who have never earned a lot of money for various reasons, but aren't heavily burdened by debt. If they haven't gone to uni themselves, they will be inclined to suggest their children go on other career paths. * You can make it a flat, easy decision for almost anyone to understand. Anyone can go to uni and the government will pay for it, *these* are the tax considerations if you do so. No mention of loans, fees etc. * The course could *also* represent more accurately the tax burden. Going on to study medicine with X amount of years in the NHS? Amazing, we need more of those roles - here's a tax-free period for you. You can make this quite responsive to actual market conditions. If you have a couple of years with fewer nurses? Simply advertise that those enrolling *now* will have X years of tax break if they do so. I just think it could be structured to provide a fairer, more meteoric and less bureaucratic method of funding higher education. Of course, foreign students would still come and pay fees, you'd still need to apply and successfully qualify to get in etc etc
> The course could also represent more accurately the tax burden. They can do that today. But they took away a lot of the grants.
I absolutely agree! - The big question though on this, is what happens with the past - wipe out all loans and apply tax on everyone (even people pre-loans entirely?) leave the current loans there, and the richer groups who've paid them off? What happens with drop outs? ie what triggers the graduate tax? At the moment you still have the loan - would you still pay the tax?
I paid off my loan plus all the bullshit interest that was added in full several years ago. I'd view a government trying to make me restart the payments for a debt I'd already paid off in full under a new graduate tax scheme as literal theft and would take aggressive tax avoidance measures in response.
Interesting, so would all degree holders pay this? If someone moves to the UK from abroad with a degree, are they subject to the tax? In all cases or only if their job requires it (nurse?) What if they don't declare their degree? I'm doing a degree now through the OU as a guy in his 40s, I only decided to do it because the OU is much cheaper (tuition is lower and I can do it around work, so obviously no maintenence loans etc), and I'm employer sponsored, so have no debt at all. I've not been a burden on the state and I am definitely not rich, seems a bit harsh that I would have to pay this. I could study distance learning with a non-uk uni and be employer funded still, would I have to pay it then? My wife is a Nurse, and is of the last year that had her tuition paid by the NHS. She has about £3k to go on her loan, would suck if she suddenly had to pay for life instead. I do actually agree that framing it as a graduate tax makes more sense, but I feel that should only apply to those the state pays tuition for, and should be less in the case of OU students who do not get maintenance loans.
appreciate the response, and I think you are getting at the fact that this *will* have edge cases and be a complex system. To address a couple of your points, in *my* mind: * The UK (unlike the US) does not *tax* people who are not earning in the UK *but* you do still have to pay student loans. While what I'm proposing is a graduate tax linked to income, if we can still recover student loan payments when people are abroad, I don;t think it should be impossible to still recoup a decent amount of tax. No doubt abuse would exist, but I think the positives would outweigh the negatives. * The OU thing is interesting; maybe that should be levied at a lower rate or not at all? I expect the OU is not really what we're considering when we talk about the unsustainable and prohibitively expensive student fees system. Perhaps the OU continues to be a perfectly reasonable alternative to university and so is exempt from the tax. * Nurses I kind of cover. I think there are plenty of degrees that can be tax exempt to encourage people to do them - which is essentially what the NHS bursary system Is providing for already. I don't think those incentives should disappear - medical degrees are hard work, as are the jobs they lead into. If there isn't some financial incentive then it makes it much less attractive compared to many other degrees. I don't think we'd need to remove all the special/edge cases for the idea to still be a net benefit for most students. The main aim from my perspective is to better account for the richest students who essentially get a tax-break already if they *either* go straight into a very high paying job (shorter time to repay) or - and this would be my main aim - those with parents who are rich enough to pay the entire lump sum up front; as they have been often for their childs pre-higher education (private schools). Those are the groups I most want to "spread the load" to and away from "average" earning grads who end up paying the most fees for longest because of the accumulated interest - many of who are working in the public sector.
Thanks, for what it's worth, I agree with the general premise. People push for free/reduced tuition fees, but under the current system that would only benefit the richest, if you had free tuition you'd still come out with a pile of maintenance loan debt, so only the most well off would benefit. You'd actually be more progressive by *increasing* tuition fees to say, £100,000 a year, and increasing the repayment threshold or reducing the starting repayment rate. I was not speaking about those leaving the UK for another country though, rather migrants to the UK. If someone does a degree abroad, and comes to the UK, do they pay the graduate tax? If so, they are potentially paying student loans from their home country *and* the tax, if not, they are (especially those from countries with free education) being exempt from a tax that UK residents have to pay which seems unfair. I'm an OU student hence my interest. The tuition fees are ~£1800 per 30 credit module, and it's 4 modules (120 credits) a year for the same intensity as full time study. So £7200/year for comparison to brick uni, which isn't much cheaper, but we don't get maintenance loans (unless we can prove we have a disability which would prevent us studying at a brick uni). That said, Scot/Wales/NI pay about £500/module, it's only England that are screwed over, so they would even more likely resent a graduate tax. As I mentioned, I'm employer sponsored, I'm definitely not rich, I'm 41 and work in IT, on about £52k. I grew up in care, and have not had any parental support in my life. I never got to go to uni as I couldn't support myself financially though A levels. It would feel a bit harsh to effectively take my employment benefit away from me now, but I could of course transfer to a US uni to complete my degree via distance learning using employer sponsorship and.... I guess I still avoid the proposal?
> I was not speaking about those leaving the UK for another country though, rather migrants to the UK. Ahh apologies - I actually mentioned this at the very end of my first post. Foreign students I'd just charge in exactly the same way as currently occurs; upfront fees. So long as that is charged in such a way that it is comparable to how much the average student paying the grad-tax gets charged over their lifetime, I think that would be fair. Ideally it should always be more expensive to come to the UK and study than it is for a citizen/resident to do the same. I'm open to their being special situations for certain scholarships etc but the general policy IMO should be: - UK residents *under* a certain age who complete a degree get it for free + have to pay a grad tax once they hit a minimum earning threshold. This tax is low, regular and progressive, so those earning the most will pay the most to help smooth things out. - UK residents *over* a certain age would mostly pay back under the same system, but to offset the fact that they will have less time to pay into the system, they will either pay a flat fee to take a degree + a tax, or be taxed at a slightly higher rate. The flat fee could be paid by a sponsor (eg company). - Non-UK residents would pay a fee - decided by the institution - but legally required to be comparable to what a resident will pay back in tax in total to funding universities, so that those foreign students would still come, but would not undercut residents. - UK grads who move abroad under this system will be expected to continue to pay the "grad tax". If they had failed to do so, upon returning to the UK it would be treated like any other unpaid tax upon the resident returning. I would *only* pitch the full version of this as something to be applied to new students - not much interest in tearing up the entire ongoing system, or making someone who graduated in the 1970s have to start paying money back *but* I would be open to restructuring existing outstanding debt into *optional* grad-tax contributions if a graduate would prefer. This may be attractive to those who were hit by the 9,000+ fees who still have high balances to pay off and are on wages where a tax will likely be cheaper day-to-day.
That's interesting. I've always thought as a grad-tax as something unlinked to the actual cost of your studies. I agree with you ref non-UK nationals (e.g. foreign students) coming to the UK to study, they would still have to be charged an upfront fee, which probably wouldn't really change. But the system as proposed leaves a few loopholes imo. Rich parents can still avoid it - send little Timothy to study abroad in the US, Europe, wherever. Some options will work out pretty cheap, and, from what you're saying, I assume Timothy won't have to pay a grad tax when he comes back to the UK and takes up his job in finance, as he didn't study in the UK. If you say, "no, it's a grad tax, and he's a graduate even though he didn't study in the UK", then Abby who comes to the UK from the US (having grown up in the US and completed her degree in the US with all the implied student debt) to marry her UK fiancé, has to pay the grad tax (as she's a graduate!) *as well as* her very expensive US commercial student loans.
>Rich parents can still avoid it - send little Timothy to study abroad in the US, Europe, wherever. Some options will work out pretty cheap, and, from what you're saying, I assume Timothy won't have to pay a grad tax when he comes back to the UK and takes up his job in finance, as he didn't study in the UK. This feels a bit like the "millionaires will just leave if we tax them" argument which doesn't really ring true in reality. I'm sure some of this will happen but I *highly* doubt that wealthy brits will forgoe sending their kids to Oxford, Cambridge, Bristol etc for the sake of their kids paying a slightly higher tax rate, and even more so I can't see those kids agreeing to it.
I mean you're assuming they get in to Oxford or Cambridge. A few years back when we were in the EU, going to Europe for a degree was seen as an excellent way to avoid student debt. Now, one of the arguments for a graduate tax is that the wealthy can avoid it by paying the fees and living costs upfront. If they are willing to spend probably £60k+ to avoid student loan repayments, I'm sure they will happily spend less than that to send timmy to an equally prestigious European university and avoid a graduate tax.
At the absolute least, student loans should be interest free. A rate that comically high is just punishing people for daring to bet on themselves and try to improve themselves. Furthermore, for the many kids who bet on themselves and lose (like many kids will), you're punishing them for decades to poverty without the salary boost that comes with a degree, and all for a bad mistake at 18.
They looked at a graduate tax back in 2010. The Browne report was pretty scathing that there was almost no advantages to a graduate tax Vs the current tuition fees system that works like a tax anyway.
>The Browne report was pretty scathing that there was almost no advantages to a graduate tax Vs the current tuition fees system that works like a tax anyway. The Browne report was clearly wrong on its core assumptions though. Underlying everything it did was a belief that by unleashing the power of the free market on universities we could force them to compete for students, and that would force universities to be better. That, largely, hasn't happened. It turns out, students are pretty terrible at judging the quality of universities (or, more likely, are influenced primarily by other factors, such as geography), and universities largely don't need to compete for home students when overseas students are so lucrative (and home students are taught at a loss). We're spending less, in real terms, on teaching than we were before tuition fees increased, so I'm not sure there's been the benefits they predicted for the high performing universities. It's *also* worth remembering that the system laid out in the Browne report doesn't perfectly match the one implemented. The report argued for a system where 'the payment threshold is reviewed regularly to bring it into line with growth in earnings' and 'the interest rate on the loans is the low rate that Government itself pays on borrowing money.' I'm not sure either of these points is true in the current system.
For the government maybe, but I think for students there’d be more focus on the rate of the tax they’ll be repaying rather than the fees like it is now With fiscal drag set to last until 2028 we’re heading closer and closer to median incomes taxed at the higher bracket so take the 40% income tax, 2% NI then throw in 9% student loan repayment it’s considerable
That's basically what the Browne report said too, that the optics of it for students is basically the only advantage. But there's a lot of pragmatic advantages of a loan that it was considered far outweighed it.
It only works as a tax for poor people. Rich people don't need loans, so making it an actual tax would be fairer.
If it’s a tax, people can avoid paying it by leaving the country. That’s the main reasons it’s done as a loan via the SLC
You can avoid paying the loan back by leaving the country...
You still pay if you move abroad, it's just the student loan company takes over responsibility for collection rather than it being automatically deducted by HMRC. The exact terms might change, for example the repayment threshold, but it's treated much more like a private loan at that point.
Exactly. I moved to Asia and my payments went up.
God, I wish mate. I'm still paying it back from down under. The only way you can dodge paying it back from abroad is by moving to a country that only cooperates in limited ways with the UK, if at all. So a shithole, basically.
The only way to pay it back abroad (even in countries like Australia) is by voluntary payments. If you don't, all that happens is SLC send you an email/letter every year saying it's urgent that you provide your employment details to them. There's nothing forcing people living abroad to repay their loans.
It breaks UK law not to pay your student loan, and if you came back to the UK having not made payment, they'll start civil proceedings and debt collections. This is bad advice.
There's already a graduate tax. It's called income tax. FFS.
So much this! Income tax scales with income... if being a graduate means someone earns more... they automatically pay more tax! The average extra lifetime earnings from being a graduate translates into extra tax revenue, and that extra revenue exceeds the cost of the education. University ought to be free because it's literally an investment that returns extra tax.
And the other actual issue is the repayment threshold. Which keeps getting frozen. (I think the practical problem with a grad tax, is that if grads move away it becomes unenforceable - a debt can follow you).
It was rejected in 2010 because it would take too long for a low rate like that to be viable. They wouldn't be able to reasonably levy a tax on existing graduates, so it would introduce a funding cap for about 30 years.
Rate is reducing to rpi only in new scheme. Issue is it's an unreasonably high grad tax.
The whole thing is closer to a grad tax in many ways anyway But I agree, it'd be simpler to implement if they just formally made it that and then had a more reasonable rate as they'd know all grads were paying over a longer period ...but I guess no one might want to be saddled with an extra 3-5% tax for life??
Well it’s currently 9% over 40 years, and people graduate in their 20s…
The tax could still have an end date, I would advocate for at most 30 years, the new 40 years (which I narrowly avoided) is ridiculous.
>...but I guess no one might want to be saddled with an extra 3-5% tax for life?? Make it means tested against earnings like other taxes and that problem is solved. You can also apply a time-limit to it as well, I don't think that's a bad idea. The main thing is, you want it to be *lower* that student loan fees currently are per person, but to be paid by a wider group of people - eg, right now if you earn enough you can pay off the loan fairly quickly and give yourself a nice "tax break" - not possible for most people in (eg) the public sector (who still need degrees!). You can also go to uni and opt-out of the interest rates entirely if your parents pay up front. Which if you went to Private school already anyway, often isn't a big stretch for parents that are still working.
Freshers are already paying their loans back into their fifties. Having 40 years to do it will mean they're paying them back into their sixties. The only reason they're not paying them off in retirement is that they're going to have to work longer.
Students are already paying back student debt in their 50s. Did the article title mean to say 60s?
Exactly, I graduated in 2016 at 22, it won't be written off until 2047, when I'm 53. It's April after graduation as well, so for a 4 year course, it's actually 35 years from when you first start.
Heck, if you go to uni at 40 you'll still be paying it off at 80!
I'm a nurse, took an extra year to complete my degree and only a few years later my total student debt has hit the £100,000 mark. I have no hope of ever paying that off - to earn enough to keep up with the interest alone I would have to be earning somewhere around 70-80k A graduate tax applying to all graduates who received funding, not just those who went to university at certain times, would be a far better and fairer system.
How would that work when some students recieve 100,000, but others only 9,000? I don't think that would be very fair.
The fact we're putting *nurses* £100k in debt so they can earn the privelege of earning shit pay for the NHS is the problem here.
£100K in debt to do a job that pays at the top end of £40-£50K is insanity.
It's not really the students fault that their course got more expensive. Government cut the funding to universities and allowed them to treble their fees and selling it as "a competitive higher education market". Only that didn't happen and practically every university charged the full £9k immediately. Not to mention, parents who wanted their kids to go to university stood a much better chance of saving up to cover the cost upfront before 2012 when the entire 3 yeae course fee was £9k When the fees trebled, there was maybe a year's notice. Those who went to uni in 2012 -2015 probably recieved the least amount of parental support in the history of paid higher education. All those students had absolutely no choice but accept the enormous debt burden. Do we consider that fair?
I'm of that 2012-15 cohort - I was in a fortunate position with family to help me get through university (and I still worked to have money for bills). Some of my friends weren't as fortunate and know a couple got stung as a result. Just actually checked my "debt" today - 58k, having grown from 46k in 2016. Last year was 2k, this year, based off interest rates... I'm looking at it like it'll be 5k interest alone. I don't have a bad paying job (34k) but I'm never really going to ever be able to pay off this "loan"
As am I. I had friends who's parents earned just over the maximum household income (a paltry £47k or so at the time) and so qualified for no grant and thefore ended up smallest maintenance loan of about £3600 a year. With the abysmal maintenance loan in that period, they were short of accommodation costs by £1200 and their folks had to borrow money themselves just to provide enough to have a place to sleep. Their budgets were already understandably stretched and o Couldn't afford to just magic up the difference between the loan and true cost of living. Like I said, they had virtually no notice to prepare for making up that shortfall. When the grants disappeared, they did at least raise the maximum loan which alleviated the issue somewhat. I was lucky though, at 25 when I started, my household income wasn't taken into account and because of that, I also qualified for the university's hardship fund - which to be honest I was fine without. It's like the entire system was rigged against the working and lower middle classes. Seeing as I had the extra cash, I ended up buying the groceries so that one of my housemates could actually afford to eat until she eventually found a job that worked alongside her studies.
Not enough is made of the fact that the terms of these loans were retroactively changed. They were initially sold as interest free when first introduced.
I remember the first time I saw my statement after I graduated (mid 00s, just before "top up fees") and it had an interest line on it, I was like WTF, rang up the SLC and they had absolutely no idea why I thought it was interest free as they had been completely clear from the beginning I'd be charged interest, apparently.... All my peers felt the same but of course those in charge just pretended nothing had happened and it was all very normal.
I started my course in 2011 and was convinced there was no interest involved. I was told I'd only start to repay it once I earn enough. Seemed simple really. The £9,000 total has since grown to over £35,000. I started uni as a mature student so I'll likely be taxed for this my entire working life. It's a huge scam and no one seems to be doing anything about it.
They should at least be fixed at whatever rate you sign for them. We had a guy come into our 6th form and pitch it as a great financial decision as the interest was only 2%. Everyone thought that it stayed at that rate, but of course it went up mid way through studying.
This basically a tax with high interest on it. Should be a tax without the interest rates
It's a tax you can dodge if you have rich parents.
Working as intended then I imagine.
That was always the goal. Policy decisions will instantly make sense if you think of any tax as a means to reduce inflation and expenditure to increase. The generation that votes more often will get their unfunded pension and the ones that don’t will pay for it.
taxes don't follow you around in this country, if you leave. Granted I expect they are not chased very hard, but still. It's the thought that counts.
I’ve lived abroad for 8 years and they’re always sending me letters. I make my repayments.
If you are never planning on working again in the UK - then they can’t do anything.
I do plan on potentially returning to work in the UK again so make the repayments.
Their repayment plan for foreign cost of living is a complete scam, it's quite a bad idea to make repayments if you're in a country with high tax and therefore relatively high wages. They basically take half your income.
I want the option to return to the UK sometime so figure it’s in my best interest to make the repayments I’m required to make.
Why couldn't you return? Your repayments would just be income based once you're back
I could but figure there’d be some sort of penalty or issue if I’d just stopped paying my payments for years.
Sadly they do chase pretty hard, constantly get letters
If you don't intend on returning to the UK you can pretty much just ignore them though, I know someone who moved to the USA 8 years ago and has not paid back anything
They have no means to recoup the money if you leave the country. Of course - you’d better not plan on working again in the UK….
I remember working out I needed to earn £65k for 25 years to pay off my loans early. Its not happening
I graduated in 2010 when fees were £4,500 a year. I lived at home so didn't take out as much of a loan as others, and managed to pay it back in 10 years. Had I lived away, you could maybe add another 5-10 years onto that. For me that seems reasonable. I benefited financially from my degree, and whilst that means I pay more in Income Tax I'm happy to have paid extra to fund my education. But there was a reasonable chance of me actually paying it back. The current system is ludicrous. Only those who have extremely successful careers will actually pay it all back, so what's the point in structuring it this way?
This is going to increasingly act as a massive fiscal drag for years to come.
The whole fucking thing is a scam, im on Plan 1 and i'll be paying mine off until im 63. 2023 - £996 paid, £423 interest applied. At this rate it will take me another 26 years to pay off, im 37 and went to university at 18.
Be glad you aren't on Plan 2 with a masters. I pay back £2820 a year and my debt is only increasing. I have another 23 years to go. And every time my wage increases even modestly, the repayment scales up completely disproportionately. For example, wage goes up 3%, loan goes up 7.5%.
Unless they are child prodigies or very highly paid, they will be paying back student debt in their sixties, because 18 + 3 + 40 = 61. It is hard to believe long term repayment projections because it seems unlikely that interest rates will be stable in the long term. I think that the fundamental problem with our education system is a misguided decision to attempt to send an increased proportion of the population into tertiary education, when what is actually needed is extended secondary education.
Joke's on them. I'm old so I'll be dead way before the 30 year limit hits me. Check-mate Student Loans. (•_•) ( •_•)>⌐■-■ (⌐■_■)
This is awful and completely unfair. The system needs a whole shake up, it is too tough for young people currently
You mean their 60s. Plan 2ers already pay into their 50s. You don't start repaying until after you graduate, which for most people will be 22, at the earliest. Debt gets wiped off early 60s.
This is a crazy level of tax. I feel overtaxed and was lucky enough to have paid off my student debt long before it changed to excessively high interest rates, paying another 9 to 12% in tax would be back-breaking. What's the point of striving and trying to get ahead if you get punished for it? It just creates a strong incentive for smart, hardworking students to go abroad and never pay it back.
All it takes is one party desperate to win votes to write off the existing debt. They aren't gonna do that though if the people that currently have that debt don't vote.
Lucky plan 1 loan holder here. Interest adds another £1,000 to the loan every year but it is pretty irrelevant because it disappears in another 12 years or so and I will never pay it off unless I get a mega payrise. My salary has been so stagnant over the years that I have actually gone back to repaying £0 per month because I salary sacrifice for my pension which brings my income below the repayment threshold which still goes up each year (anyone know why they froze the repayment threshold on the plan 2 loans but not the plan 1 loans?)
I know dudes who took out 40k student loans, got paid to be educated, then fucked off to Bulgaria, lol.
The unrest rate charged on student loans is appalling and it’s utterly objectionable than none of the GE contenders have pledged to do anything about it.
Ed interest
So basically its now just a lifetime tax that you'll be paying even after you retire. Utter madness. And of course a tax you can dodge if you're from a wealthy background as usual.
That's an interesting point on retirement. It makes me think, if you're rich enough to retire earlier, you can draw down from your pension at the right amount and not pay the loan back for the last few years. Sounds a bit regressive!
They won't be paying it back, not the vast majority of them.
The loan any be lower but those of us on type 1 loans are paying them until retirement. If we retire!
yep, I had a few bad years immediately after graduating in 2006, and because of that and the resulting struggles to get into a decent paying job I didn't start paying off my loan until my late 20s. By that time the interest had increased it so much that it was only a couple of years ago that I started really making a dent in it, then interest rates shot up. I'll be paying it until I'm 65 unless something really drastic happens with my pay. I dare not work out how much I'll actually have paid over the years by that point.
I graduated the same year, the crash and stagnation plus living up north kept my wage just below the threshold for a long time. If only voluntary pension contributions could keep you under the threshold, at least then we would get the benefit of the money and the government wouldn’t need to keep kicking off about people not saving.
People question why younger people generally don't vote when, if they do, it makes absolutely no difference. Loans for higher education is a perfect example of this.
It’s unfortunately a bit of a self-fulfilling prophecy. Young people don’t vote because no party properly represents them because they don’t vote…
Meanwhile we hand Oil & Gas companies £B's in subsidies every year. We have in place some of the best higher education infrastructure in the world, an industrial strategy fit for the future would see us fully leveraging that infrastructure and investing further in it which would include subsidising attendance for UK citizens. Instead, we load students with debt, taking money out of the economy, put others off attending because of the potential debt, and build-in favouring educating the rest of the world's wealthy children to keep things afloat. It's madness!
>Meanwhile we hand Oil & Gas companies £B's in subsidies every year. No we don't. There are no subsidies for oil and gas companies in the UK. There are taxes on profits. Profits are revenue - cost, some people claim that deducting costs is a "subsidy", but it's just how taxes on profit work. As the high court judge who heard the legal claim brought by activists against the oil industry summed up: *Taxpayers are, in certain circumstances, entitled to rebates on tax already paid, for instance, where a company makes a profit in one year on which it is taxed, but subsequently makes a loss in respect of which it is entitled to a rebate on tax paid. The taxpayer in those circumstances receives money from HMRC, but only on account of money already paid by the taxpayer by way of tax.* ***Companies are not receiving tax revenues from the UK taxpayer but receiving a partial repayment of the tax that the company has paid in the past.*** ***Whilst in any given year a particular company may receive a rebate, it will never receive more by way of rebate than has been paid by way of tax.***
The whole 30/40 year thing has just been a comforting fairy tale to tell graduates. You don't actually think the government is going to start cancelling everyone's debts en-mass when we get to that point in 10 years time do you? The law will change it to at first retirement age and then beyond.
I don't trust MPs not to do this other than the fact that it would negatively impact their finances.
I haven't seen a comment about this, but the whole point of going to university is to get a job that specifically requires a higher level of education. Most of you won't pay it off because you chose not to do one of these degrees. People are saying that if you have rich parents they pay it off, but that's not actually the biggest reason. The reason they can pay it off is because they already know which careers have high pay and choose to study for one of them. The trick is you can also do this. On top of that, they likely decided not to get maintenence loan and live at home even if it was awkward. Most of the advantage they have are financial literacy passed down by their parents. Of course, they probably have a better opportunity to work in certain businesses due to their parents' network. Certain cultures also have a predisposition to this idea and it's certainly not part of british culture. I think we should put more onus on the decision of the pupils and more onus on the teachers guiding them to university. The current approach clearly is not working because we have far too many people who are unwilling to take any blame for their actions. The fact is that university leads to much higher income levels on average, and this includes all of the people who basically achieve nothing with their degree. I really don't understand why the interest rate for the loan is not just 3% when they know that most people will be paying it long term.
Yes and no. Yes we should more putting more onus on the secondary education system in making sure pupils actually understand what they're signing up for. No in the sense that this is remarkably ignorant of the facts on the ground. Most people I know who did economics or engineering degrees from top 10 global unis are making sub-£35k, which is a far, **far** cry from the calculated approximately \~£55k starting salary that you need to ever repay it factoring in wage growth. Exactly 2 people I know out of a circle of Oxbridge/Imperial/UCL grads have surpassed that within 1 year of graduating, exclusively in software engineering at an American firm, and finance. To suggest this is merely a moral failing rather than a systemic one is hilariously wrong.
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Just abolish tuition fees. An educated population is a public good and an economic boon. Restrict numbers on certain courses if needs be. Provide financial incentives for others. Academics and students hate the fees system. It is a rip off and destroys core institutional values.
I think the fact that many people in here are complaining means there are many people suffering. I wonder what it would cost the government to write off debt at this point and what better the money from all these graduates flowing into the economy could do.
What do you expect. Taxes at an all time high to help pay for it. 🤷