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.

That what traditionally happens a lot here in Ireland. We don’t have the student loan setup here so it’s different but I know of several families where the DC have been told they need to stay at home for third level .

My son studied a 4 year engineering degree - the sort of degree that is " supposed" to be so much in demand that jobs should be relatively easy to get.
5 years after obtaining a Masters degree from a Russell group university he has a large student debt and has already had 2 redundancies due to firms closing, contracting or moving overseas. That's the current graduate employment climate even in so called shortage areas!
Although he didn't have to pay his student debt when he was unemployed, the large repayments now takes a big chunk out of his monthly wage without reducing the overall sum due to the interest. Yes, he views this as a graduate tax, but being on plan 2 he has much higher payments than many other students on later plans. As his actual take home pay is reduced,he is in a vicious circle of paying high rent which makes it difficult to save for a house deposit, which keeps him in the rental market etc,etc.
He pays into a pension but would like to pay in more to safeguard his future but he can't afford to do so.
Many of his fellow engineering graduates have moved overseas to achieve the financial stability to buy a house, raise a family and save for a reasonable retirement
He accepts that he needs a degree to access the jobs he does, and feels he should pay something back for his loan But the current repayment system is demotivating and depressing.
He is quite a resilient person but I do worry that this situation is not good for his mental wellbeing and as a parent I feel Plan 2 in particular was missold to both students and parents .

Yes, the interest rates on plan 2 are appalling and current graduates are entering the economy at a particularly bad time. Imagine how much worse it is for students who have studied something like media studies at a bottom 50% university. Research shows that it is generally students from poorer backgrounds who end up studying these courses with few career prospects, at the less desirable universities, and who then struggle on low wages with large debts.

I imagine that the government decided on high interest rates so that graduates who end up in well paying jobs pay for those who don’t, and/or who never pay the fees back.

The problem is that we have far too many people going to university. It’s partly the fault of employers who now use a degree as a prerequisite for every mediocre job. Perhaps employers should pay the graduate tax. They would soon reassess whether the job they offering actually requires a degree, and invest more in training people with a guaranteed job at the end.

They haven’t only been sold a lie by the government, they’ve been sold a lie by shit universities, offering useless courses in a glossy prospectus which alludes to a glittering future.

It’s not bullshit. I was on plan 1 and paid interest linked to RPI. You back what you borrowed, adjusted for inflation. It wasn’t the massive amount of interest that plan 2 students get clobbered with. I think this interest rate is fair.

I’m plan 1 and I’m clobbered with interest. Less clobbered perhaps but my above average salary barely covered that interest during the recent hikes - it’s only now they are going down I’m starting to repay again but I’ve been paying a few k a year for over a decade and it hasn’t gone down. A normal loan of that amount would have been paid back in that time (more than once) therefore it isn’t fair at all.

It is fair because you are paying back exactly what you borrowed, adjusted for inflation. You are not paying back more than you borrowed like some plan 2 students. The reason the interest is accumulating is because you are only paying tiny amounts. This would be the case with any other loan - if you only made minimal repayments, then the interest would accumulate. If you were on a higher salary then you would clear it quickly. I paid mine off within about 6 years of starting full-time work, despite taking time out for postgrad.

For plan 2 students it’s different because they are paying back what they borrowed, plus an extra 3% once they hit a certain salary level. I believe that the original idea was that students who do well out of higher education should pay a bit more to make up for those who don’t do well and end up in low paid jobs. It was supposed to be progressive. However in reality, it’s just another example of the middle classes getting clobbered.

I still disagree. Yes you can argue that its similar to a credit card where smaller payments mean more interest but the construct of the repayment is designed to be the minimum payment so it feels unfair to penalise and charge such interest. Anyone using salary/PAYE will fall foul of this and it only benefits SLC. I could take a bank loan and pay it off but it is sold as not worth doing this. The monthly payments would be about the same actually.

I am not paying tiny amounts and I have already paid the amount I initially lent back and more. At this rate, I will never be able to pay it back. Again, I earn a fair amount more than average and not a bad salary - not using Mumsnet standards of course.

Actually I’m lying. Just checked my statements. I will pay it off (the only time interest and payments were like for like is when I was made redundant and took a poorly paid job exactly as interest rates hiked) but it won’t be too much quicker than when I reach 65 and it gets wiped from a quick look.

But you aren’t paying back more than you borrowed. You are paying back exactly the same amount that you borrowed. The only reason the interest payments are there is to account for inflation, so the amount that you pay back is exactly the same value as the amount that you borrowed. So for example, if you borrowed £100 in 1900, this would be the equivalent value of about 11k in 2026. It’s not the same as a credit card where you would pay real interest on top of inflation.

I’m not sure what is that you’re not getting, or why you think that you should pay back less in value than you borrowed.

You’re clearly missing something. I owed £13k when I left. I have paid back more than that and I still owe £11k. That isn’t inflation.

I have also never said I shouldn’t pay back what I borrowed or less than the value off. You’ve pulled that out of nowhere.

Well if you’re plan 1 then it must of been well over a decade since you borrowed the money. It’s not really a surprise that it’s acquired interest given how high inflation has been, is it?

If you were plan 1, as I was, then you would have paid low tuition fees (if any) and had your degree heavily subsidised by tax payer. It’s pretty bad taste that you are now moaning about how ‘unfair’ it is, and trying to make out that you are being ‘penalised’, when this thread is about young people paying 9k a year in tuition fees, on top of their living expenses. Your loan was tiny, it’s not other people’s fault that you’ve taken so long to pay it off, and therefore acquired interest.

“Shit” universities do plenty good by their grads and plenty of “good” universities churn out low earning grads.

the shit universities lying to students is a myth.

I also don’t understand how the poster above has struggled so much with a plan 1 that it’ll take until retirement to pay it off.

Well if you can’t pay their fees they’ll have to do it. But yeah, I’ve paid about £9k back in 8 years and the interest has grown my debt from £52k to £67k despite my repayments.