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.

@SucksToBeMee

It's a tax that the poorest who earn a good salary have to pay the most of.

Those who earn an average salary don't have to pay much of.

And those who are rich and earn 6 figures have to pay none of.

I am confused (maybe I am thick and that's why I did shit in my education!) But what are you on about??? Those who earn a yearly 6 figure sum, won't pay any student loans/tuition fees back?

And the poorest pay the most???

Eh?

As I said, what are you on about? EVERYone has to pay, if they earn over £25K per year........

@Dyrne - as above, go and use a compound interest calculator.

Interesting - mse seems to think they can - point 20 at the very very end of quite a long link, here:

”In itself that can't change the terms and structures of the way the loans work, but it can change operating practices which may be a pain in the neck for some.”

They can change interest rates and payment structure, but if the basis of the loan is any debt is wiped after 30 years, that would be a term they can’t change, I think.

The problem is that if the interest rate was reduced, in order to keep the RAB charge the same, the repayment rate would have to increase and/or threshold reduce which would disproportionally hit those on lower incomes.

Frankly if you're paying the higher rate of tax a year after graduating you're doing pretty bloody well.

It acts as a graduate tax for most. A grad tax has issues in itself as has been pointed out, although I do think it's more equitable, and there are issues with no fees in terms of uni funding. But there's no system that is perfect and equitable to all. This one isn't too bad as it goes. Probably the fairest to most recipients.

Working overseas (which lots of graduates do for a time) seems particularly problematic with the older loans and you can worst case end up with them calling the whole thing in which with them means a CCJ and that will follow you around. That's what I mean about this being a tricky thing to call. It's all very well saying "just overpay" but if you're from the kind of background that OP and others with maximum loans are from then you are acutely aware that only a finite amount of money will ever pass through your hands and you will have to earn all of it. This makes it very difficult to make long term decisions on matters that are subject to change.

I'm in the same situation as you OP. It doesn't bother me though, I'm just glad to live somewhere where the government enables you to study even if it is via loans - its not like I would ever have had the money upfront to pay myself. And I earn a better income as a result of my qualifications.

YANBU.

I thought interest would not start running until you actually graduated and started earning. I also thought the interest rate would be linked to the normal bank lending rates. It seems really unfair for students to have already accrued years worth of interest before they can even start repaying loans.

I must admit to have been fairly ignorant on these points until recently as my own children start to approach the possibility of going to university.

@MRex

Go and read up on how student loans work and come back and tell me I’m not.

It has absolutely nothing to do with compound interest. It has to do with the way loans are repaid.

The only people the interest rates affect is who ends up paying the debts back once they are wiped. Whether it is the new debt owners or the government.

If they are wiped - I wonder.

Will be interesting to see if the loan terms become an election issue next month (or whenever it turns out to be!) The post 2012 cohort is quite significant now - it wouldn't be surprising if the subject appears in at least some manifestos.

I find it unbelievable that my son pays 10k a year tuition fees only to finish at easter. And he still had to pay expensive accommodation costs until the end of June.

@rainingallday

Those coming from a wealthy background (therefore taking little to no loan out) and end up earning a good salary pay very little back.

Those from the poorest backgrounds who are entitled to max loan and go on to earn a good salary will struggle to cover the interest but will still be paying fairly significant chunks out their salary and will end up paying the most in total.

It's pretty bad to be honest. I just got a loan with nationwide at 3.1%. How can the government justify charging more interest than a business?

Tuition (for a 4 year degree) is free here in Scotland so students usually end up with a smaller amount of student loan debt than those living elsewhere in the UK. However, we pay 1% more tax at basic rate, higher rate and advanced rate. I think this was mostly introduced to surge income tax a little due to the free tuition and free prescriptions.

Would you rather pay 1% more tax and get free tuition? It would make much more sense. Everyone can share the load of helping people to get skilled (low earners in Scotland pay 1% less tax) rather than people walking out of uni with £45k of debt. If your tuition was paid, you'd have came out with £18k of debt. Still not ideal but much better.

I think it should just be 1% interest per annum which starts when you get a job. It surprises me as well that there's no student loan schemes with employers either such as the employer helps to pay off your student loan and in return, there's NIC deductions for employers or something like that.

It's always better to encourage people rather than discourage them. I just can't see many working class or even some middle class people being ok with having a debt as high as £45k accruing 6.6% interest. It will put young people off going to uni then we'll end up with a surge in vocational and apprentice jobs and much less people in professional roles or only trust deed types in professional roles!

@MRex What has compound interest have to do with it?

I pay 9% of my salary back per month, it’s taken out of my pay before it goes into my bank account, just like tax and NI and pension contributions.

It’s not 9% of the loan value.

It doesn’t matter if I owe 50K or it goes up to 500K, I will still keep plodding along paying the exact same amount per month until either they write the loan off or I die.

if the basis of the loan is any debt is wiped after 30 years, that would be a term they can’t change, I think.

We cross posted! I am less confident of that, but havent read the current contract I admit.

Those coming from a wealthy background (therefore taking little to no loan out) and end up earning a good salary pay very little back.

Actually very few students, even wealthy ones, have their fees and maintenance paid upfront by their parents. So that argument doesn't really work.

It's based on income not if you are in work, as per the agreements income from benefits except those explicitly stated can be included (they aren't by student finance/loans but are by companies buying the loans).

You can get more than the amount from only being on benefits in some circumstances, in my friends case she does work part time and so was deferred (as not earning enough) but when her loan was sold the part where it says benefits can be included (it's not explicit just student finance didn't include them) were included as were benefits such as direct payments because they weren't around when the agreements were drawn up.

So yes you can be out of work and deemed to have enough income to pay back your loan, if you have a certain set of circumstances.

Payment isn't dependable on salary from a paid job.

A lot of people suddenly found they needed to pay back because they were working and getting child tax credits, housing benefit or found overtime counted as income which pushed them over the income threshold. It's not about being in work, it's about the income you have coming in.

Direct payments are to pay for care and expenses associated with that from a bank account in their name and is classed as income as it's not explicitly excluded. The direct payments scheme isn't a national scheme it's a local one e.g. Run differently in England to Wales for example so will never be excluded. It's complicated (it shouldn't be!! But it is). You can't use direct payments to pay a loan but you can use other benefits to pay it e.g. ESA etc.

you are acutely aware that only a finite amount of money will ever pass through your hands and you will have to earn all of it
That's why most people with a 30 year loan of £50k at 6.6% interest might prefer to pay say £70k (repaid in full after 10 years) rather than £110k (amount paid after 30 years only if salary doesn't go up and no change to loan agreement and no increase in BoE base rates from their current historic lows; depending on salary increases and changes in rules could be on the hook for up to £550k+++).

Probably not explaining myself very well sorry. Need to go to bed!

@SucksToBeMee

What you are saying makes zero sense, and is 100% wrong.

There's no incentive for poorer people to try, and few real opportunities to do so

Er, motivation? Determination? Natural ability?

It will put young people off going to uni

The interesting thing is - it doesn't seem to! So in that sense it has been a success - think I read that 50% of school leavers now go to university (up from about 8% in the 1960s).

@titchy

Actually very few students, even wealthy ones, have their fees and maintenance paid upfront by their parents. So that argument doesn't really work.

Wondering where you got that from? I knew many many people at my uni from wealthy backgrounds that either had 0 loan or only had tuition fee loans and not maintenance loans as their parents paid for their living costs. My uni had 20% students from a privately educated background (and many more from well off backgrounds)

@rainingallday

It makes perfect sense but ok.

So many people are missing OP's point.

OP if my reading is correct, you're saying that over the 30 year repayment period, you'd be able to pay back the £50k were they not slapping extra interest on it. With the high rate of interest, instead of having paid it off, you'll be making repayments over the full 30 years.

Lots of people are saying "but your monthly payments are the same regardless of the interest", which is technically correct, but not what the OP is getting at.

Is it possible to take a loan from bank @ 3% going rate these days and pay off student loan with it than paying interest @ 6.6%?