To not class student loan as ‘real debt’

I think the problem is that more and more people are going to be suffering the student loan repayments for 30/40 years, i.e. virtually their entire working life, whereas in the past, when loans were smaller, it was a lot easier to pay them off so people would be happier thinking they'd only be paying the loan repayments for maybe a quarter or a third of their working life (if they were working full time and earning a fairly decent salary). Nowadays, some forecasts show that you need to be earning an average of £60/£70k p.a. to pay off the loan and at that kind of income, you'll be repaying it for the full term. It's only the much higher earners now that'll pay it off sooner and therefore not pay as much interest, which creates a kind of "circular" calculation because the interest doesn't rise so much in the first place if they're paying it down quicker! The increase in course fees from £3k to £9k p.a. and the increase in housing costs meaning increased maintenance loans required, added to the increase in interest charged is a triple whammy.

I agree, at least in terms of how I felt. Uni 20+ years ago and mine was minimal. It came straight out of my pay alongside tax and NI and pension and I viewed it alongside those. Almost more like a deferred university tax payment or tax something.
Nowadays I don’t know. It’s getting very expensive. But, yes, I suppose the way to view it is still along those lines. It is technically a debt and has interest rates and such. But I have a mortgage and I don’t really see that as a debt either. Obviously it is. But it’s also paying to live somewhere, and, personally, I’d far rather pay to live somewhere I can call my own and will hopefully one day have after mortgage is paid, than to have carried on paying rent and having the uncertainties and the temporariness that come with that.
I imagine that lots of people are put off University because of the cost. That’s dreadfully sad, and really it should be free and so accessible by all. But, politics and ideals aside, it’s an investment as anything else is (mortgages, pensions, NI) and should be seen as that rather than an albatross that will hang around your neck.

At £47k pa, its nearer £150 pm...

On your premise "The Student should pay" they are, twice, a NMW earner pays less than £200pm in Tax and NI.
The £47k earner is paying over £800 per month in Tax and NI but also an additional £145 in Student loan.

£200 vs £945.....

Remember too, £47k also means, unlike someone on NMW (with kids and rent) they'll be getting benefits, on £47k you wont be.

As I’ve mentioned previously, I responded to the OP saying if a career didn’t need a degree, then there may be better routes. I didn’t specify particular careers.

You have made assumptions about where my view point is coming from in my post, which are incorrect.

@FriedFalafels As @Badbadbunny points out, where are these starter jobs? Even if young people know what career they want, can they get a training job? It’s extremely difficult so many opt for university to hone skills and get better advice. Of course too many end up in lower paid roles but they didn’t think they would when they started the degree! In many ways it’s not finance that’s missold, it’s some degrees!

Martin Lewis was not wrong. Loans are paid back in salary. For some it’s a very cheap education. For the average earner, the 40 years means they pay more! It’s not the high earners who pay more. Plus no one gets a full loan unless they qualify for it. It’s not a choice! It’s means tested. How on earth are poorer folk going to afford to go with no bank of mum and dad? Of course they need the loans but too few get high paying jobs and don’t see the need to either. That is not the fault of Martin Lewis.

We don’t all have high quality universities on the doorstep offering even all the academic subjects. We have long had a tradition of going away to university because we don’t all live in major cities. In 1950 we had 22 universities. Look at what we have now and we need a conversation about converting some back to colleges of HE to support business and having a variety of options for 18 year olds.

I think the issue is more that the graduate premium has been eroded. Certain graduates doing certain degree subjects may earn significantly more than people who haven’t been to university. The rest leave with a massive debt and earn little more than non-graduates.

I assume that you’re still young OP, but as you get older you’ll realise that 40k goes nowhere these days.

All well and good if you are in a place with lots of employers who are taking on school leavers! What if there are no local firms taking on trainees in your chosen career/profession? Again, it's fine for big city dwellers to think our youngsters have lots of options, just because there are opportunities in the bigger cities. What about the majority of the population who don't live in big cities? They can't afford to relocate to big cities as the trainee wages wouldn't cover housing costs etc. There are no student loans/living loans available to those who aren't attending Uni so they can't afford "Uni style" accommodation.

My son is an actuarial graduate. There are literally no firms within commuting distance of our home town that employ actuaries nor train them. How would he get a training job if he didn't relocate closer to the cities where there are financial services firms?

Lots of careers/professions are the same. Try trying to become a nuclear physicist if there's no nuclear power station or nuclear plant within commuting distance of the family home!

At least with Uni, there is proper support in place to help students move to the Uni, student loans to pay towards the living costs, etc.

@FriedFalafels

If it is needed, travelling away to university shouldn’t always be the default like it used to be.

Unlike big city dwellers, lots of people don't live within easy/cheap commuting distances of a university. Especially in the regions and small cities/towns that have crap public transport.

Not all universities offer the same. It's no use even living relatively close to a Uni if they don't offer the course you want.

Not to mention that fact that Uni's don't offer places to everyone who applies. If your nearest/commutable distance doesn't offer you a place, you've no option but to go to a further away one and that means living there.

Personally, I would like to see the Treasury crunch some numbers whereby we treated loan repayments as tax deductible, so lessening the impact on those who do progress.

Plus re look at the interest calculations.

I think the current system is now a disincentive to the working class students it was supposed to assist. Uni is once again for those students with wealthier parents.

@jackdunnock

Signing up 17 year olds to a higher education that costs them a small fortune that they'll likely be paying for until their retirement is abhorrent in my opinion. I'm amazed no one's raised it as a miss selling scandal yet, because it's arguably the worst, and it's state sponsored.

It is indeed another mis-selling scandal. I sat through a few Uni open day finance talks with my DS and was almost screaming at the presenters/slides being shown, all akin to the hapless Martin Lewis's encouragement of taking out maximum loans. NO warnings at all. Slides clearly showing that the threshold would rise each year in line with average earnings (a blatant lie). Slides showing forecast numbers of students who wouldn't pay off the loan - deliberately not making it clear that lots of them would have paid off the capital PLUS tens of thousands in interest and still not fully cleared the debt (blatant misrepresentation). The same slides and notes being used by different Unis so it must have been prepared centrally for all Unis to use.

If it had been any other financial product, there'd have needed to be evidence of the warnings, evidence of "due diligence", evidence of "know the customer", evidence that the right advice was being given. But because the government exempted it from the financial services regulations, there was nothing like that.

It's an absolute travesty how the students have been conned and I'm glad there's finally a lot of criticism and demands for change. Not that I think Rachel will do anything as she's completely hopeless and out of touch!

Your relatively modest income means you don’t see the full impact. Come back in 10 years when your salary has increased and you’re paying £400, £500, £600 a a month in deductions with no hope of paying it off because so much interest has accrued when you’ve been paying small amounts.

Someone might start out on a modest income, then work their way up the ladder to become well paid… but while they’re getting started, there’s massive interest accruing. By the time they become “high paid” and see hundreds a month deducted from their pay - which will definitely affect mortgage affordability - the accrued interest means it will be very difficult to ever pay off their loan. Of course it’s debt.

Again, I haven’t argued about careers which need degrees or those who have took out the loans should pay them back - of course they should.

I just pointed out that if someone is looking at a career path that doesn’t require a degree, then the alternative can be a good option. You have pointed out yourself that so many aren’t paying back as their careers are low paying. Quite a significant number can do these without a degree.

The £3k I was referring too was when I left school as it was more subsidised. This being the default route back then didn’t mean such a huge debt. However with the increase in fees and interest, university shouldn’t always be the default for current school leavers. If it is needed, travelling away to university shouldn’t always be the default like it used to be.

If you chose the right degree with a clear path and job opportunities at the end the yes it is worth it.

I retained (fully paid for) and although I think my original degree was barely worth the paper it’s written on it gave me the opportunity to work abroad which landed me a good job at the end and was a stepping stone for everything else.

I also think 18 is young to be working for the rest of your life unless you know what you want to do and exactly how to get there without a degree

@Alexandra2001 £90 a month is not bad for a job with decent prospects and a career structure though. Someone earning minimum wage for years might see that as a decent price to gain a lot of money.

@FriedFalafels So what about the history grad who wants to convert to law then? Or a psychology grad who wants to be a journalist? It’s obviously impossible to just have degrees for dedicated careers with no flexibility.

As for degrees being £3,000 - obviously they cannot cost that. The true cost, the universities say, is £12,000 plus. So the current level underprices them and the overseas fee is often treble the uk student price. If we insist on keeping the vast number of universities and 37% of school leavers going, someone has to pay. There’s nothing wrong with the premise that the person who gains pays.

The big issue is rule changes and too few paying back the loans because many degrees are not leading to good enough earnings. However young people are still willing to take the punt due to lack of alternatives. The tax payer ends up
paying for most degrees as the loans are not paid off. The 40 year plan penalizes lower earning grads as they pay for longer. Quite simply, most grads don’t earn enough. So we do desperately need jobs where young people train from age 18 but they are so hard to get. University is the default position. It does give thinking time but it comes at a cost.

You re being unreasonable.

£40k p.a and deductions of £90 per month is still substantial, that £40k worker is paying a lot of tax and NI, so in effect, people are paying twice to be able to work in our health service, manufacturing or life sciences etrc

At present, we will see a drop in people going to Uni and doing what exactly? Can't work in the NHS without a degree and existing staff haven't the time to mentor apprentices.

Also, how come all of Europe can afford to fund Uni education with high rates of participation, without lumbering young people with debt like this?

Fees and the interest rate calculations are unfair and Labour refusing to do anything about it, will lead to younger people voting elsewhere.

I said only to go to university if you’re chosen career can’t be done without a degree.

Fees use to be £3k per year & student loans didn’t attract the interest they do now. People gained degrees without even knowing what they wanted to do and I know quite a lot of people who don’t use them.

There are a number of well paying career routes you can take without a degree. Some you can do professional qualifications in and some of these offer a tag on degree for substantially less.

@FriedFalafelsWhat routes are those then? Apprenticeships for degrees are way more competitive than uni places. Where else can you get a degree? Non degree route. Some careers ok with this, many not.

I know. I am a qualified mortgage adviser. It's not an issue if you're paying back £20 a month or something as a FTB but if you want to borrow say £50k as a pair of higher earners to build an extension they will look at whether you have enough disposable after a loan payment each.

Fucking hell. Totally missed plan 5 shenanigans

The threshold for plan 5 is 25k....so in the early days "you'll only start paying back when you earn above x " ....has turned into, "if you work ft , youll start paying it back straight away"

Ok. So if we take 8.5k a year (and I was specific about not including all the variables of which there are many) then are you really saying that you would forfeit 255k additional income over 30 years for the sake of not paying a student loan?
I've lived on minimum wage for a considerable number of years before doing my degree. I'll personally take monthly loan repayment to be able to earn my salary which, granted, isn't awfully high but is still more than double minimum wage. After tax, pension contributions and student loan, it's still 20k more take home pay per year than minimum wage would be.

They do take it into account for mortgage deals though. It’s included as one of your monthly outgoings.

What? No it isn't. Assuming bog standard 5% pension contribution, it's a difference of about £8.5k a year after student loan deductions, which whilst it is more than the loan payments you'd make of £45k or so, is still a bit of a sting to earn not a great deal more than the average wage.

The thing that angers me the most about it all is that the system has been deliberately designed to force young people into this debt - for example you have to do a degree now to be a nurse or a paramedic, whereas you didn’t need to before. There's no other route in.