To think people are unaware on how much the government has SHAFTED students with loans

[SucksToBeMee]

This brings me so much anger to this day, and I took out my student loans from back in 2012 when 9k tuition fees were introduced.

I did a 3 year undergrad and I left with a 50k debt. I can live with my 50k student loan. Fine, the government wants to pass the cost on to students (not that I agree you they should be doing that) but fine.

But the interest rates are so unbelievably outrageous I have no NO CLUE how they've gotten away with completely shafting the whole (especially poorer) student population.

Do people realise the interest rate on student loans is 3% + RPI? It's currently at 6.6%

6.6% interest this year on a 50k loan. That's at least £3300.

I earn a £45k salary and I still won't cover the interest this year. I have been earning a fairly decent salary since graduating and I have never covered the yearly interest.

My outstanding debt goes up and up each year even though I'm paying them thousands in the year. I now owe them £55k after giving them around £6k since I graduated.

They will carry on taking 9% of my salary over 25k and 9% of all my bonuses for the next 30 years.

Anyone who took out max loan (aka from a poorer background) and ended up breaking the barrier through to a better life is fucked over the most.
The wealthier families get away mostly scott free.

I think it's absolutely outrageous, and I'm not sure people realise how fucked over we're actually getting with interest rates. I have a debt that I can never even start to pay off. I will pay them probably double what I initially owed them over the next 30 years.

Honourable mention: they also charge max interest rates on your outstanding loan for the duration of your study.

To I am the wombat your ni contributions are helping pay for the generations pension for above you. So in theory they probably have.

I'm more than happy to pay back the tuition fee loan I borrowed. I'm not happy about probably paying double what I ever borrowed thanks to interest rates and not having a choice about it
But you DO have a choice, if you overpay then you will pay less interest overall. For some people that may not be worth doing because their earnings mean they'll never repay the full loan, but you will. In IT you can expect that your salary will go up with experience. When your salary goes to £50k / £70k / etc you'll be paying off much more of the loan, plus the compound interest. As PP have said, it's more expensive than a mortgage so it can be worth paying off to get the mortgage. If you recognise that and don't like it then adjust your financial priorities. I agree with you that the rate is unnecessarily punitive, but that doesn't stop you from making the best of your own personal financial situation. I understand it can be frustrating to make choices where your shared flat seems below what you wish you could afford if you paid the minimum, but you have to take that inconvenience or accept that the extra interest is your lifestyle choice.

You know when I said, ‘let’s not derail into bloody pensions’? What I meant by that was, let’s not derail the OP’s thread into a moan about pensions.

All of the WASPI arguments were taken down on the thread about that subject. Start a new thread if you want to complain about pensions again. I’ll be sure to drop in, but please allow the OP to confine this thread to the topic she chose when she started it.

You’re right and what annoys me more than anything is when Eu citizens who have no student debt can then take the same role on lower money and companies lower the salaries this way when you don’t want to have to reduce your salary as you have a debt to repay.

The thing is, @laptopscreen, salaries are set according to benchmarks, not according to whether people who might apply have student loans, or any other debt to pay, and in any event the amount repaid is determined by what the person earns. I can’t see anybody turning down a decent role because it would trigger student loan repayments.

So I’m not with you, I’m afraid, and I don’t think that sticking the boot into ‘EU citizens’ (somebody Dutch got a job you wanted perhaps?) is either logical or reasonable.

Jux your experience is unsual - but good for you! Out of interest why can't you study with the OU? You can get a fee loan...(!)

@Iamthewombat happens across the board on Grad jobs. Worked in recruitment. Sorry but it does happen and the benchmarks are dropped as a result. Have no issue with Eu citizens taking the job only the U.K. for companies deliberately using this to their advantage. I think less people should go to uni and feed reduce and have alternative qualifications but that’s not happening any time soon.

So I’m not with you, I’m afraid, and I don’t think that sticking the boot into ‘EU citizens’ (somebody Dutch got a job you wanted perhaps?) is either logical or reasonable.

To be fair, that Dutch person, if a graduate, will only have paid about £2000 of fees for their course (at roughly current levels), and have been eligible for social welfare benefits if living away from home while studying. Its not exactly a harmonised world on fees or education, despite the EU.

Overpay on the loan. It should be putting people off doing pointless degrees like media studies.

Agreed, it’s not, but would anybody really agree to a lower salary because their course cost less? I don’t think that it logically follows.

I think it is more likely that over-supply of graduates has driven down salaries.

saddler explain why media studies is pointless....

@Iamthewombat the employers don’t give two hoots how much the course costs, it’s when the role is offered to two people. One lives in a country where there are no fees one live in U.K.
one candidate has to pay rent after taking out fees from their monthly salary and the other does not and can therefore accept a lower pay offer as they can still pay the rent as no student loan to pay from a lower salary.
Over time salaries are eroded by companies allowing those without fees to take on lower salaries than their U.K. counterparts.

Another thing that happens in professional jobs is that a graduate may enter on a training scheme to continue onto further education. If they have no student loan to repay they can take the lowest salary over someone else that has studied in the U.K. with fees to repay, this is very attractive to employers. This narrows the job market for U.K. candidates who need more pay to cover their loan and live or at the least forced them to have less money at the end of each month than their Eu counterparts.

If the problem is that the interest rate is too high, and you're confident you will be in the 17% of people who pay off their loans, then just pay it off as fast as possible. Most of the interest avoided, problem solved?

Alternatively and probably better, put 20K (or as much as you can manage) a year into an ISA, maybe invested in a world tracker fund, and when the balance on that overtakes your debt balance, pay that off. The investment should have a return that is (on average over time) similar to the rate on the debt, but you won't be committing to paying off the debt before it's clear that you are in the 17%, and there will be an element of opportunistic timing in the sale of shares, as any surge in prices will bring forward the date when you sell. If you change your mind about paying off the loan, the savings won't be wasted, whereas if you pay off the debt directly, there's a real risk that that is money completely down the drain, if your life pans out differently than expected.

To the poster who wondered if the government really wanted poorer students to go to university - no, that was only a by-product of the desire to create a financial product that would keep on returning income for the government as loan portfolios were sold off

I’d be really interested to know the basis of this statement. @mathanxiety

@laptopscreen of course employers don’t care how much somebody’s course costs. Why should they?

If you are a UK graduate you won’t repay anything until you earn over £25k.

Explain to me why that person would be less likely to accept a job offered at, say, £20k compared to a Dutch graduate because of student loans. The UK graduate won’t have to make repayments on that salary. Hence no ‘I can’t accept that job at that salary because of my loan repayments’ and no advantage to the Dutch graduate: neither will have loan repayments to consider.

Where salaries rise beyond £25k, I find it difficult to believe that market rates are impacted by anything other than the number of suitably qualified people in the market. I don’t think that a £90 per month student loan repayment, if you are arguing that the Dutch person would work for £90 per month less, would have much of an impact in that salary bracket.

Although, interestingly, I had a discussion on a similar subject with DH. DSD has loans of almost £100k (no, we won’t be paying them off for her). DH thought that salaries would have to rise because the graduates had borrowed so much, to somehow level the playing field (he isn’t dim, just hopeful). My response was, in a pig’s ear will that happen, and more likely graduates’ salaries will reduce because there are so many of them now. That’s what we’re seeing.

My personal take is that 3%+rpi is not a middling (not low) interest rate to be paying on an ordinary loan. But this is not an ordinary loan, and perhaps the best way to consider it's fairness is to ask whether you would take the other side of it. If some agency would do all the admin and enforcement for free, and your investment were spread in tiny chunks among multiple students, would you lend at this rate on these terms and conditions?

Obviously not, since we know the government (that currently takes the other side) ends up out-of-pocket.

What if we could only invest in loans of people we knew would be in IT jobs earning 45K at the age of 25? No, I doubt even then that as a lender I would earn more than RPI on my investment. Just a tiny minority of women opting out of repaying by taking time off for children would lower the average return too much for this to be a good investment.

I wouldn't take the other side of the loan deal, even when the borrowers are restricted to people like OP. On that basis, it's not an unreasonably expensive deal.

As usual, it's the "squeezed middle" who end up bearing the brunt.

For those who rake up the debt and then go into relatively low paid, or part time work, or never work, they'll never pay much back.

For those who get really highly paid jobs, like merchant bankers, they'll have it paid back in maybe 10 years, so won't suffer that much interest.

But the poor sods in the middle, maybe earning £30k-£60k p.a., they'll be paying it off for the full 30 years, firstly by paying off the original £50k, they'll then spend the next few years paying off the exorbitant interest.

There must be a better way. 6.6% interest is simply ridiculous at a time of historic low interest rates.

Iamthewombat Explain to me why that person would be less likely to accept a job offered at, say, £20k compared to a Dutch graduate because of student loans. The UK graduate won’t have to make repayments on that salary. Hence no ‘I can’t accept that job at that salary because of my loan repayments’ and no advantage to the Dutch graduate: neither will have loan repayments to consider.

Sorry I keep butting in, but I went to a Dutch university and know about the fees there. So they are about 17% of the fees that a British student will pay. Annually. But Dutch graduates are not a good comparison because the Dutch economy is doing really well and salaries are higher over there. A better comparator would be an Eastern European or Spanish graduate, where salaries are lower than in the UK and they benefit from lower fees/loans to pay off.

All these people suggesting that graduates should repay their loans sooner to avoid the interest building up..

Where does the money come from for the "squeezed middle" who are also facing high housing costs, workplace pension deductions, tax, NIC, expensive public transport season tickets, childcare costs, etc etc. There's only so much that someone can "save". All these "worker" costs are getting out of hand.

When a certain level of job is reduced by £90 pm do you not think it has an impact on salaries below and above that?
If a junior is paid x and a mid level prof paid y what do you think happens to the salaries above and below that when someone is willing to accept an offer £90 lower every time in the y bracket. This over time reduces salaries in these fields across all surrounding levels. And it’s not a simple case of accepting exactly the student loan amount less. Not having to pay off £90 pm means you can pay for more rent options, transport options as they have more actual income. The advantages continue.

There are so many graduates. This is also an issue, often Eu countries don’t have the same policies for recruitment in the U.K., many countries have policies which allow locals to take a job before someone from the U.K. again this is an uneven playing ground for graduates, Eu citizens can take a job in the U.K. with the same chance as a local but not the case the other way around. Who has the most chance of getting a job in Europe? Not U.K. of course this is the government that doesn’t sort this out, again I don’t have any problem whatsoever with an Eu person taking a job in the U.K. because that’s what policy allows. But I do think that job market is skewed against locals more often than people realise.

@QualCheckBot yes you’re right I didn’t want to narrow down to a specific nationality of graduate but this is happening and a Dutch National isn’t really who I’m talking about.

Crikey! Were the lectures in English or Dutch?

I don’t dispute that fees are lower in Europe. What I don’t see is how it’s going to make any difference for starting salaries below £25k - at which point neither the U.K. graduate nor the European graduate are required to make loan repayments - or even at higher salaries, where the amount repaid by the U.K. graduate isn’t enough to adjust salary needs by an amount sufficient that they can’t are the job unless it pays £90 per month more than the advertised amount, which a Czech graduate (say) might accept.

If the Czech graduate chooses to work for a lower salary, isn’t it more likely to be because she isn’t getting the opportunities at home and this accepts a role at the salary offered to get her start? The employer can advertise the role at, say, £20k because plenty of graduates will take it to gain experience. U.K. graduates included. Perhaps the Czech graduate is just better?

There must be a better way. 6.6% interest is simply ridiculous at a time of historic low interest rates.

If that were true, then it would be possible to borrow from an unconnected third party for less.

I've been having a quick think whether I would let DD take out loans when the time comes. If she was going to repay them out of employment income, I wouldn't, even if I had full confidence that she would have earning ability like OP. "Full confidence" still leaves enough room for it to be a deciding factor to have the option of not repaying the loan in an exceptionally low-earning future.

As it happens, DD will likely have enough income from inherited investments to pay off any loan. Since her investment income is far more certain than employment income, for her it would make sense not to have loans. (Not forgetting also that any money spent on fees would probably avoid 40% inheritance tax.) I suppose my point is that a student needs parents with a lot more than 60K to pass on, in fact several times that, before not taking out the loan makes sense.

I meant to say I would let her take out loans if they were going to be repaid out of employment income, but not if they were going to repaid out of (much more certain) inherited money.