Student loans - thoughts please!

[StrikeCameron]

Like many others, I’m in the situation of DCs approaching their uni education. They will probably need student loans, at least to pay for the fees. I know what Martin Lewis thinks - to look at it as a student tax rather than loan - but the interest rate is so much that it seems like a ball and chain around their necks!
I’d love to hear some thoughts - just to give me some reassurance or ideas or other ways of looking at it as I have no one in RL to really discuss this with.

My DS is on a 5 year course and will leave about £75k in debt plus whatever interest has accumulated during his degree. There is literally no other way this money could have been found or he could have the career he wants so there is no point worrying about it. If he was going with no particular career in mind or just for the ‘uni experience’ I would probably feel differently though. I think now that going to uni creates so much debt it is a good thing to make sure they believe the outcome is worth the investment.

A) Do you have any alternative means of financing OR any other plans to give them eg a house deposit. If so, what sum?

B) Have you considered if they really need a degree - could they do an apprenticeship of some sort instead (and this can be accounting at a KPMG or whatever for example, not necessarily a trade)

So ‘do they need to go to uni to achieve their goals’ and ‘what options can you afford to fund for them’.

Do they really need to go to Uni? Apprenticeships are a great (much cheaper) way to learn. Student loan debt can be horrendous, if I had university- aged children now I'd be discouraging them from going into HE...

Your children will be on Plan 5 and will only pay interest at the same rate as inflation (RPI).
This means that although the loan will increase they'll only be paying it back at what it costs in 'real' terms.

The previous loans had a much higher rate of interest and that's how so many ex-students have so much debt that they're struggling to clear.

Well a few things to think about:

Do they need a degree for what they want to do?
Is it possible to do via degree apprenticeship where you work and learn, meaning you're earning money?

If they do need a degree then essentially it is just an extra tax. The amount isn't considered debt by mortgage lenders in the usual sense, but obviously it affects affordability in terms of their take home pay.

I think they should think long and hard about whether they actually need a degree, and whether their degree of choice is actually going to earn them a significant premium in the workplace.

The previous loans had a much higher rate of interest and that's how so many ex-students have so much debt that they're struggling to clear.

I'm amazed (well, I'm not, sadly) that the government hasn't adjusted this retrospectively to compensate and change it to make it much fairer for those previous students. Presumably it's now accepted that it was a very unfair system before, otherwise they wouldn't have changed it?

It's not a good look at all for any government to merrily choose to continue to cash in and profit from leaving an acknowledged unacceptable burden on young people seeking to continue their education (especially those older members of the government who got their uni education completely free).

Maybe they persist with it to avoid the risk of getting too many votes from those exploited ex-students come the next general election?

My son has a massive loan, it was over £80k when he graduated two years ago, dread to think what it is now. Even though he pays off several hundred a month, it's still going up! Shocking really, but he has a good job and earns a good salary, and without going to uni he wouldn't have had the same opportunities.

My kids are both in their twenties. None of their friends see student loan as an issue - it’s just a line on the payslip (if they earn enough!), money they’ve never been given so they don’t miss it. It’s just a fact of life.

I don't like the narrative of only go to university if it leads to a well paid career. It's so short sighted. What about all our Humanities and Arts students. Is there no value in what they do. Is there no value in just learning?

My dc have both finished their studies and graduated and, fortunately, found appropriate employment.
However, finding graduate roles is getting so competitive, I believe because large employers are forced to pay the apprenticeship levy on their payroll bill and, therefore, are quite rightly taking advantage of the apprenticeship scheme rather than offering graduate roles.
I would also suggest that you consider the apprenticeship route, an opportunity to gain a degree or professional qualification with no debt at all as it is sponsored by the employer.

@HostaCentral that implies that Humanities and Arts students don’t go on to well paid careers, which based on my family is incorrect.

@Tillygan60 do you know anyone who has got an apprenticeship? Like hen’s teeth!

Apprenticeships are highly competitive- they are not a panacea

I’m relieved to hear that the interest has changed.

I don’t really get the student tax narrative (not a ML fan to be fair) it’s right that some students will not be able to pay it back, but the idea only makes sense if none do.

But some should and can. Take a midwife on £30k- fair enough that they pay £40 whatever for 40 years. But compare that to someone go is on sat, £120k 10 years pos graduation. Is it competley reasonable to think that person will not pay off their £45k student loan over 40 years? They’ll be paying enough to impact their quality living and there is no excuse for that not being enough to pay off the loan.

My ds is in year 11 so we are considering this issue.

We are saving like mad for the next 2 years at £1500 a month which we be a pot of £36k for his fees and then we will have £1500 a month for his living expenses.

We're actually not telling him this plan as it will be Interesting to see if he really wants to go and is prepared to get loans.

We may get to the uni point and decide that actually he's better to get a loan.

However my overriding preference is for him to get a degree apprenticeship

I wouldn’t worry about it. Most don’t pay it back in full. I’d take the loans so they can enjoy uni with little money stress and help pay it off if they need it later. That’s a better way to help.

Agreed. Hate this idea that only rich kids get to chose their academic discipline

If you are a high earner you are better to pay if off quicker as otherwise the interest just racks up year after year and you end up paying back more in the long run

But you can learn all sorts of things without getting into that amount of debt.

You could work and learn at the same time if you do it in other ways.

But what if you don’t want learn for fun, you want to be trained? Dance, music, drama degrees- they’re all training you to be in the discipline. It’s networking, it’s designed to set you up for a career in the arts.

take fine art- how are you going to learn how to do that without paying a substantial amount? A degree is relatively cheap for this sort of learning.

@Itsmetheflamingo I was addressing the poster who talked about humanities and the intrinsic value of education - that's why I quoted her post

Basically, I can understand why no one wants to go into debt for the intrinsic value of education.

You're talking about wanting a specific career which is different to the point that I was answering. I don't know how much those other things would cost outside the university, nor do I pretend to know.

DS would love to do an art degree but cannot justify the loan amount versus the burden of debt and potentially not a very highly paid career too.
He's seriously considering studying at a German uni where tuition is free. He has the freedom to work and live in Europe, so will perhaps go out there first for a few months volunteering to get a feel for the country and learn the language, then decide. He wants to travel anyway.

I get it, but the point is rich students get to enjoy the intrinsic value of education. It’s is a philosophical point, but we should also expect equality from an education system which on the face for it, charges the same fees to all.

My two were lucky as FIL invested a lump sum for all the GC when they were about ten. It paid the tuition fees. We lent them the equivalent of the minimum maintenance loan interest free and the interest made on the original lump sum was enough to pay back most of this loan to us at graduation. The remaining debt this didn’t cover they paid back from salary when earning. All in all their degrees cost them about £2k each of their own money and they’re starting their working lives debt free.
We are lucky enough to be able to give them a contribution towards a house deposit when the time comes. Which is a big factor.
I was never sure about ML on this one though tbh, especially having males who are likely to earn more over the lifespan than females.