Student loans to hit 12%

[GreenLunchBox]

www.bbc.com/news/education-61088025

It always boggles my mind how nobody really cares about the student loans situation, writing it off as a 'graduate tax'.

At 12% interest a £50k loan becomes £100k after 6 years then £200k after another 6.

"But you don't have to pay it all off.. "
What if you have aspirations to getting a high- paid job?

Honestly, they are trying their hardest to widen the gap between rich and poor. If we still had access to studying in the EU I would encourage my kids to look into it.

@watcherintherye

No offence but my kids aren't going to uni to earn £28k

No offence, but if you think graduates, even those with Masters degrees, are going to walk into jobs paying £40K +, I’m afraid you’re deluded.

Indeed.

It actually was quite an offensive thing to say, OP. But I assume you knew that.

@scaevola

A friend who has admitted done well and just exceeded £50k salary with bonus etc. Her deductions are now: Tax 40% Pension 13% Child benefit high income (what a joke!) tax 20%

Those figures don't uite work

Tax: it's nil rate to personal allowance of £12,570, then standard rate to £50,270, and 40% only the on income over that. So as you say she's only just over £50k then not much will be at that rate.

CB repayments are on sliding scale scale - charge is 1% of the total received CB per every £100 over £50k earned. So even at £2k over that (which is what I guess you mean by 20%) it's 20% of £1133.60 (first child) and £741.40 (subsequent), which of course is not part of the earned income, which is not reduced by these payments - they will,still be receiving 80% of CB on top of their salary

And you have missed NI and local tax (Council Tax) from your calculations

I’m glad you’ve done the explanation here!

On the matter of Child benefit high income (what a joke!) tax 20% - in future they could stop claiming it. Then it would avoid the tax… and whack a little more into pension and come back under the 40% tax threshold.

I'm not really bothered if you think it was offensive because it's true. If the end salary was going to be £28k I would be advising them not to go to university. An apprenticeship would be more sensible.

I've been paying mine back for 11 years now, currently paying around £300 a month, and I still owe 38000 😂 How depressing.

@GreenLunchBox

I'm not really bothered if you think it was offensive because it's true. If the end salary was going to be £28k I would be advising them not to go to university. An apprenticeship would be more sensible.

You do understand how graduate salaries work?

Start of low, get middle salaries, then earn more......

So at the start, there will be no repayments, then for a while, there will be some and then high earners will pay more

Someone on £100,000 now pays back £6,600 a year.

But it will take time to get to that high income.

What’s offensive about that?

I don’t personally agree, but I’m stumped as to how it’s offensive?

So at the start, there will be no repayments

That depends where you start! My science grad (BSc, not masters) DS started on 30k 16mths ago, about to move to new job at 40k. His close friend works for a large pharma co, started on 35k. Not all grads start in very low salaries! Both DS and his friend are already paying back loans. They will almost certainly get to the 55/60k bracket one day.

@DrWhoNowww

If you still haven't repaid your loan 30 years afterwards, it's written off by the Government.

This isn’t true for all plans.

If your plan 1 (1998 to 2005 starters) then you pay 9% of everything you earn over 20k (ish, it’s gone up to 20,300 I think this year) for ever - until it’s paid off or you retire.

Of course you have a lower interest rate, but if you worked in lower paid jobs/had a 10 year career break to raise children and have then sat at around 30k then it’s quite feasible you still lots to pay - because even though you only pay it back when you earn, the interest gets added each year regardless.

It's split into two parts:

Plan 1:

2005 to 2006, or earlier - When you’re 65

2006 to 2007, or later - 25 years after the April you were first due to repay

Again, if a person can't pay it off its written off by the Government. Loans aren't written off, so these are a tax.

Vast majority will have it written off 30 years from graduation. That's true.

Martin Lewis believes it should be renamed to "Graduate Contributions".

Levelling up is precisely the opposite, it's actually a "keep them down policy". Our Etonian oligarchs don't want ordinary people to rise above their station.

@BertiesShoes

So at the start, there will be no repayments

That depends where you start! My science grad (BSc, not masters) DS started on 30k 16mths ago, about to move to new job at 40k. His close friend works for a large pharma co, started on 35k. Not all grads start in very low salaries! Both DS and his friend are already paying back loans. They will almost certainly get to the 55/60k bracket one day.

So in that case, going to Uni has enabled them to get a high paying graduate job.

@Greyornavy

What’s offensive about that?

I don’t personally agree, but I’m stumped as to how it’s offensive?

Linking salary to intrinsic worth, I guess. But I can’t be arsed to argue about it on the internet! And it was the phrasing “my kids aren’t doing something only to earn £X” - they’re adults making choices about their own lives. Same goes for the poster who doesn’t think arts or history is “worthwhile”.

Student loans suck but I am very in favour of education and cannot afford to pay university fees in full for my children so if they want to pursue a passion or money or … anything, I guess, that higher education makes possible I’ll be helping them apply. I’ll make them aware of financial implications but honestly, I think being scared off university by the idea of a loan is more divide to class divide than anything else.

So in that case, going to Uni has enabled them to get a high paying graduate job.

Yes, totally agree, my point was to dispute a previous comment, that there are no repayments to start with! That depends on the starting salary, and DS salary is by no means the highest in his cohort! It is irrelevant to him anyway, as we can and will pay off his loan this year!

@GreenLunchBox thanks a lot OP. I am a teacher and I don’t earn £28k.

Teachers are required to have a degree. We need high quality teachers, you know - for the good of our children’s future, and thus, the future of our country/the world. No biggie.

Do you seriously suggest that the answer is that everyone with a degree goes into high earning industries?

What a sad situation - McDegree anyone? Education shouldn’t be a profit based, money making enterprise, what a recipe for disaster

A friend who has admitted done well and just exceeded £50k salary with bonus etc. Her deductions are now:
Tax 40%
Pension 13%
Child benefit high income (what a joke!) tax 20%

If this friend is paying 13% into their pension they will be earning in excess of £57000 before they even start paying HRT and paying back CB. If they are also receiving childcare tax relief that figure will be even higher. And of course their NI is lower on their earnings over £50K.

And then, as PPs have already said, they are only taxed 40% on the amount they earn over £50K taxable income. Either they earn quite a bit more than £50K or they, or you, are bad at maths.

@NameGoesHere

It’s appalling and discriminatory, make the rest of uk pay tuition fees then maybe this wouldn’t happen.

Another England centric poster who seems to have little to no knowledge of the rest of the UK.

From the BBC:

"So in which countries can a prospective student from the UK study for free? Scottish students already get free university tuition in Scotland, as do students from other EU countries, but those from England, Wales and Northern Ireland have to pay to study there."

And Scotland's isn't as great as it first sounds because the Scottish Government aka SNP has a CAP on 'free' university places. According to UCAS, 15,150 students in Scotland missed out on a place.

Often, these students will have to go to university in England, Wales and Northern Ireland. These three send more students from disadvantaged backgrounds to university than Scotland does as well.

What is discriminatory is English, Welsh and Northern Irish students cannot study in Scotland for 'free', but a French, German and Spanish student can.

No prizes for guessing why on that one too.

So, university is not 'free' in England, Wales and Northern Ireland.

You will though @DogsAndGin

DH's remaining loan balance is £20,925.

He pays £223 per month so £2676 per annum and will probably be paying £4k per annum starting in a few months. He is 31 so he will definitely pay it back in his lifetime, perhaps in the next 5-7 years. We aren't rich at all.

@desiringonlychild2022 if your DH is 31 his student loan is more likely to be loan plan 1, rather an loan plan 2 which is impacted by this rise.

Anyway if he is on loan plan 2 then 12% interest on the £20,925 would add on an extra £2,511 a year. So if he’s paying off £2,676 a year you can see he’s barely paying off the interest. This is why the student loan system is so silly. It isn’t designed for normal people with good jobs to pay it off.

£20,925 is also quite a small balance, most people will have 27k atleast in tuition for a 3 year degree plus atleast another 15k for living costs. So the lowest loan realistically someone could have under plan 2 is around 42k.

Oh and interest rates have been at 6% anyway for the last few years so again the loans are generally growing faster than people are able to pay them off.

What is discriminatory is English, Welsh and Northern Irish students cannot study in Scotland for 'free', but a French, German and Spanish student can.

Not any more - your 2018 BBC link is very out of date.

EU / EEA students starting new courses last year (after end of July 2021) will now pay the international fee rates.

It’s not a tax either as rich people can avoid it completely by paying upfront. For many it is just an extension of school fees ( in fact cheaper)

I would like to see some competition in the market , so banks offering student loans at competitive interest rates for those ( or their parents) that will likely pay it all back. So people can choose.
Although I guess that doesn’t exist as a thing because it would make the government loan book for just loans that are never paid back basically junk on the loan resale market.

@PinkPlantCase he is on plan 1 and that includes a masters plus an extra year that he was able to repeat due to ill health. But as his masters is in Germany, there were no fees so it was only living costs.

I think he will pay it off cos when we last checked 3-4 years ago, it was 30k and now when i checked this morning it was 20k. Plus he is probably going to start paying more soon once his new job is confirmed. People always treat student loan debt as 'theoretical' but people do end up paying it off and i think even for people on plan 2, with rising inflation (which may eventually trickle down to wages for some) and now rising interest rates, many people would be paying considerable sums of money towards their loans

I work in HE. 40% of home students get funding for fees, sliding scale pending household income. To say it’s almost worth just putting by one parent’s income on the form is tempting to say the least.

Issue is most people taking out the loan will not earn enough to pay off. So yes making those who can pay more is not fair....... but this is UK through and through. The more you earn the more you are penalised through tax. Always affects the middle man

@NoSquirrels if you are so keen on education perhaps you should have been putting money away from the time they were born so you can facilitate their further education?

I agree with @GreenLunchBox - what's the point if going to Uni and using the tax payers money if you are going to be earning less than £28k? University education is not a right but a privilege and it's main aim is to get a degree rather than being a rite of passage that many go to university for