In thinking the student loan repayments thresholds are extremely unfair?

[sunfloweryy]

I started uni in 2011 so I’m on repayment plan 1. Colleague in 2012 so plan 2.

I’ve just found out that she only repays 9% of her income over £25K - mine is over £18K! So I effectively pay £700 a year more.

AIBU in thinking that’s hugely unfair? I know her loans are bigger but we aren’t in a very well paid industry anyway so it’s unlikeky either of us will ever earn enough to pay them off.

Yours will be written off after 25 years, hers won't be written off for 30 years...

It's no more unfair than her uni fees being arbitrarily higher than yours. I'm on repayment plan 1 but I'm just glad my debt is in the teens and not the twenty or thirty thousand range!

Appreciate that but we both earn £30k and it’s 9% for us both so if we never pay it back it hardly matters if the debt is £30k or a million! Does it?

Plan 1 v plan 2 are not unfair. Plan 2 pay way more interest. Their debt grows and grows and grows until you earn about 35k. So no your threshold for your loan 1/3 of the size of your colleague is not unfair. Most people on plan 2 will pay back a lot more than they borrowed. I'm on plan 2. I borrowed £38k. Because of the interest, I graduated with ~£40k. It's now at £42k and I have paid over 4k. Only with my latest pay rise will I start making a dent in it. With wage growth estimates I will pay it off at the 26-28 year mark having paid around 75k... your colleague has the worse deal.

Her debt will be triple yours.

You could well end up paying off a lot less than she does.

Be grateful you live in a country where university education is so widely accessible.

I'm on Plan 1 and mine won't be written off until I'm 65.

Every time I get a statement I’ve barely paid off anything but interest

They have a lot more debt though, granted probably won't ever pay it off anyway, but there had to be some incentive to take out a loan given that fees tripled. I just view it that I will pay a % of my wages for another 20 years, I factor it in when looking for a job and working out take home pay.

We are fortunate to have a loan system at all.

What would you like to happen with it?

I'm on Plan 1 and mine won't be written off until I'm 65.

Me too, graduated in 2005. Debt is only 7k though. Going to apply for a master's soon to bump it up

How's this...

I had one year of loan on plan 1, many years ago. I actually did two years but didn't take out a loan for the second, and there were no tuition fees then.

I'm now studying again on plan 2, because I'd studied for two years before, I had to pay my own tuition fees for first year as I wasn't eligible for the loan, despite never having had a tuition loan before and only one year of maintenance- they still count it as two years because I COULD have claimed it... so much for thinking it was better not to if we could avoid it.

On top of this, as a current student, my own income is not taken into consideration when calculating my eligibility for new loans, and that would also be the case if my old loan was plan 2. However, because of my old one being plan one, they don't discard my current student income- and so while RECEIVING a plan 2 loan, I'm still expected to make payments on the plan 1... so my current student finance is literally paying my original student finance.

The system is ridiculous. It's so convoluted that even the people running it can't understand it half the time.

we aren’t in a very well paid industry anyway so it’s unlikely either of us will ever earn enough to pay them off.

Probably should have thought about which degree to do at uni before taking out loans which you can't pay back, and gone into an industry where you would be earning enough.

@MarchDaffs and @leghairdontcare I think I'm on the same plan as yours, it was the 'old' plan 1 I think, changed to the plan 1 the op is talking about in for those starting uni in about 2006 or 2007.

My plan you had to start repaying once you were earning just 15k and it never got written off apart from in 1 of 2 scenarios.

a) you reach age 65 and haven't finished repaying
b) if 25 years after graduating you have not started repaying i.e. have never managed to earn 15k+

OP it might not seem fair to you, because your friend has a slightly better deal but you got a better deal than us. It is what it is, and it is what you signed up to when you took the loan. No point in complaining about it.

It's a good thing not everyone takes that attitude, since there are jobs that usually require degrees to get but don't pay well, but that we as a society benefit from.

Every time I get a statement I’ve barely paid off anything but interest

After 25 years your loan will be written off regardless of the amount outstanding. Even if you haven't paid back a single penny or the capital, the loan will be written off. After that you won't pay anything. Her loan will also be written off but after 30 years, rather than 25.

Yeah soupforbrains mine is the one for people starting between late 90s and mid 00s.

I'm sure I read somewhere that the majority of student loans of all types aren't repaid and are predicted to never be. Can imagine that's especially true of the newest not just because of the amounts but also because the repayment threshold isn't that far below the median full time salary.

Mine has actually been sold off. Not for much, I read at the time. I was below the threshold for a few years due to having young DC. If they'd contacted me, I'd have explained that my earnings would soon increase but instead the state flogged it off for less than I'd have given them. Doesn't seem like it was a very smart move.

Was your degree worth it then?

You knew the system when you decided to go to university and took out your loans. You must have realised that rules change all the time and different people pay back different amounts.

You could apply your 'extremely unfair' complaint to lots of things. There will be countless people paying 2, 3, 5 or even 10 x the amount of mortgage repayments as their next door neighbour for exactly the same house, simply because they bought at different times.

People have to pay different amounts for insurance too, through no fault of their own. It may seem unfair, but life isn't fair.

You seem to reselt the fact that you will have to repay your student loan, am I wrong?
If you plan on repaying it, the sooner (and with less interests) the better!

Plan 1 here and my loan is currently sat around £28k 10 years since I graduated. Not everyone who didn’t pay £9k fees has a small loan!

Appreciate that but we both earn £30k and it’s 9% for us both so if we never pay it back it hardly matters if the debt is £30k or a million! Except that after 25 years you will not have to pay anything, whereas she'll go on paying 9% for another 5 years.

Secondly, hers will have grown by RPI+3% while she was still at uni.

Thirdly, once she earns over £25k, her interest will be RPI plus an amount that gets larger the more she earns.

Of the three regimes that have been in place since student loans started, yours is the best of the three.

DS has both. Plan 1 for his degree and Plan 2 for a PGCE. Unfortunately the 9% of salary goes into paying them both off at the same time rather than paying off the Plan 2, which has a far higher interest rate, first. Personally I think the PGCE should have been fee free as there is a teacher shortage (likewise for nurses) or, failing that, interest free.

@MarchDaffs @leghairdontcare I graduated in 2007 so same as you :(

Plan 2 people need to stop thinking of it as a loan to be repaid, but more a contribution like PAYE.

only very few will ever actually pay their "loans" off, so it's not really helpful to think of it that way.