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.

I think there is a major societal problem with huge numbers of people starting their working lives with a socking great debt which they don't expect to pay off, because it just normalises debt while breaking the link between taking out a loan and repaying it.
We've been fortunate enough to he able to fund our sons through university (to be fair, together with them also contributing by earning money as they go, and also taking gap years to save for it).
Both of my sons are classical musicians so unlikely to have ever paid off the debts if they'd taken the loans. I would have hated to start my life with a huge debt hanging over me, and didn't want our children to have to live with that.
It's worth noting that I've had to forget any thoughts of early retirement in order to do this - hope the kids appreciate it 🤣.
Refering to studying abroad, DS2 is currently studying postgrad in Estonia - the cost of his course and living costs is half what it would be in the UK. If only the UK had avoided the utter stupidity of Brexit it would have been even cheaper.

@Itsmetheflamingo that's a whole separate conversation though for a whole other thread

I must admit, I don't hugely understand what happened to student loans but from listening to Martin Lewis, it sounds as if the terms had changed and how can that be okay!

if it puts people off getting any kind of student loan in the future, I don't blame them.

@StrikeCameron what's your line of thinking? Are you thinking you'd rather they didn't go? Depending on their likely career path, I absolutely don't blame you. That is obviously their choice in the end though.

Think of it as a graduate tax that they will pay throughout their whole career, unless they get a very well paid job. About 50% of students pay off their loans and the rest have it wiped after (now) 40 years.

someone on £120k a year will be paying back £11k a year. That’s not a tax, that’s a pension.

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?

As an Arts grad, no, there is no going to university for the pleasure of learning for my dc. We are not rich enough. We would also have 2 there at the same time. University is for the rich as far as we can see. We also think degrees have been devalued as every fucker has one!! We are completely changing our narrative to our dc which is a bit disappointing but also interesting to see different routes. Also need to take AI and careers into consideration.

Im definitely not recommending this but a friend of mine stayed at home for uni, took as much loan as she could and invested it in shares! She made a lot of money (luckily) and used it for an investment in a business she started after uni. Obviously the student loan interest is relatively cheap and it worked out well for her.

She did not in fact enjoy her degree and has never worked in her degree area (civil engineering)!

Bit of a risky approach but does prove there are creative solutions out there

If he’s not earning enough he won’t pay anything. It’s not a burden in the way other types of loans are.

It's only recently that I realised that student loans charged interest! I feel similar to others that if you are going to uni it must be for a job/outcome e.g a job you cannot do without a degree, this was my stance with my son as we are in the position to help him but not pay for everything. Thankfully he's doing an apprenticeship so hopefully this works out for him.

I had friends who did similar back in 2001/2002. In fact, with decent house proves and very low deposit requirements a couple bought property to rent out 😂 depends how risk adverse you are I guess!

This is how my son and his friends see it. They only care about their net pay not how much the outstanding loan is. Ds is 22 and on £45k already. The degree immersed him in understanding the field he was going into. He could have done this without the degree but it would have taken him much longer and the degree proves his knowledge level.

He feels the same way about a mortgage too, he knows that he will borrow a certain amount and probably pay back double over at least 25 years. That is also a debt with responsibility of maintaining a home.

Even if we had had £42k to fund his loans taken out whilst at uni we wouldn't have paid it instead we would have given this as a house deposit because it takes years to save that amount up even living at home rent free.

I'm on plan 2 and postgrad, neither of those quals really influenced my career and it hurts way more than you think when you are rearing kids, buying your house and striving like fuck to fund it all and you get several hundred sucked off your 'increased' paycheque, esp with tax thresholds not moving, interest rates sucking another few hundred a month and cost of living going up. Now, I'm wondering how I'm going to help DD pay for getting a car, a degree and a house 😔 its going to get worse with every generation

I think the 'terms' of the Plan 2 have changed because, like taxes, the Chancellor has frozen the thresholds at which people start paying back the loan. So more pay it at lower incomes. Really the thresholds should increase with inflation.

This podcast explains the rationale behind loans etc, it was interesting!

castbox.fm/vb/901551448

This is what worries me about this breezy “it’s just a tax!” Attitude. What about when you’re paying back enough to really hurt- knowing you have underpaid or even delayed your pension, that you are going without something or many things significant every month- and will do for your whole working career, yet for plan 2, you don’t make a dent in the debt.

You can pay off a mortgage but not a £40k student loan. How is that palpable?!

I understand that but on plan 5, you're paying the loan back when you earn just over full-time minimum wage. I know it's 9% on the portion over the threshold but we don't want him to only attain that sort of wage all of his life. He wants to have a family and buy a house without this debt being a huge burden for 40 years. It's such a massive scam, and so unfair to many young people who feel that uni is the only option.

I'm so sorry 😞 this type of scenario is what keeps me awake at night. The thought of DS being in a career that pays an average salary without the potential for high earnings but being burdened by a debt that will never get paid off either holding him back. It's a poisoned chalice that we're handing to our children. Not all of them are going to be super-high earners or even high earners.

Studying any degree subject is fine as long as you understand the debt you are getting into, and the future career prospects.

The problem is that for too long, so many people have done degrees in subjects that they think are interesting or fun, without properly researching the career prospects. They are then shocked and horrified when they have a huge debt and no job at the end of it. Unfortunately the days of walking into a good job with any degree subject, from any university, are over, and people need to be aware of this before taking in massive debt that will impact them for most of their working lives.

Wow, so many replies - thank you. I’m going to read each and every one carefully.
To reply to the specific question that a pp asked me - yes, a degree is essential to the careers my DC are thinking about. Plus I truly want them to have the university experience - like I did (back in the late ‘90s!). I‘m just trying to work out the best way to pay for it all!

Op I'm being flooded with articles from the times /telegraph and guardian on unfair student loans.
The successive governments have moved the interest rates and now loans are a crippling shackle around their necks .

I am too! Clearly my algorithm has been affected by my interest. It's awful though, real loan shark behaviour.

I am likely to never pay my loan off but I grew up in a town with no real prospects besides hospitality. I was the first in my family to go to uni and I don't think I would have left the small town otherwise.

My family had no connections to get me into the rare jobs that there were going (it's a who you know kinda place) so uni seemed like the best idea, away from home.

There's no way we could have afforded for me to go without loans. University offers more than just a career and so I think it's more than just a case of finances.

@Amblealongside they have been sold a lie
Hopefully the gov will sort it out

Although the interest rate on plan 5 is lower, they have also lowered the threshold at which you start paying back ...so as soon as youre in ft work, you basically start paying it back ....as opposed to "only when you earn above x"

Increasingly, students are living at home and commuting to their local uni to reduce the loans they take. This often means they can keep local jobs and not need to take the maintenance loan. Or take a gap year and earn full time in order to part fund it.

That’s what they told us 20 years ago. It’s bullshit.

Degree apprenticeships were like hens teeth when I looked into it 3 years ago and are harder to get on to than many Russell Group degree courses.