Aibu to think the student loan is a graduate tax that you can avoid if your parents are wealthy enough?

[Tryingtryingandtrying]

Was it designed deliberately this way by people with wealthy parents? Can you pay the fees up front each year if you have enough money?

But again, whats your point? Theres lots of things that rich people in effect pay less for as they pay less interest.

We took out a 15 year mortgage cos we can afford higher payments than someone else who would need a 25 year mortgage. At the end they will have paid more interest.

Given the large % that will never pay anything back plus further large % who never pay back the full amount, I can't support assertion that this funding system unfairly benefits 'offspring of rich parents who can pay it all off up front'

I also humbly submit that £25k/annum is a lot more than most private schools charge.

It’s not a tax in any way, it’s paying for the cost of tuition received or normal living expenses. Whether it’s paid for by parents upfront of via a loan makes no real difference, it has to be paid for somehow.

The real injustice right now is that students are paying (either through loans or their parents) for inadequate teaching as it’s been online for so long, and for accommodation that they have been unable to use.

Very few people pay fees upfront because it rarely makes financial sense to do so. We could probably afford to pay university fees for our DS in future but that is the last thing I would choose to spend money on for him - much better to pay for a house deposit or extra post-grad training than pay uni fees which he may never have to pay back in full anyway and where cheap finance is available. You need to be a very high earner for a long period to pay off the whole of your student loan now. Most people won't clear it. So actually students who go on to make a high income are subsidising those who don't. It is essentially a graduate tax.

Student loans in the UK, plan 2, are problematic for the reason that there's a sweet spot in earnings where you get really bashed by them.
If you earn under the threshold or not too far from it, then it is quite reasonable and a good deal. If you earn a very high salary (which you are more likely to do statistically if you grew up with wealthy parents, went to private school etc) then you can realistically pay your debt off quite quickly and not accrue too much interest. The problem hits the good earners who aren't on mega bucks and also people who want to move internationally. They are paying a hefty chunk every month just for the interest and this will continue for 25 years before the loan is written off.

I finish paying my loan off this year, 20 years after my first day of uni. Tax was no where near 50%, its been very managable and I think its a good system tbh.

Your maths is out.

I earn about £40k per year but I started off on much less. But for arguments sake lets say my graduate salary was £40k and I had student debt. Under the current system I’d pay my normal tax of 20% on my earnings above £12,500 then I’d pay an extra 9% tax on my earnings above £27,000

So £12,500 is tax free
£14,500 is 20% tax
£13,000 is 29% tax

Hardly 50% tax as you stated.

And over 30 years that would mean repayments of £35,000 just under half of the original debt based on full loan.

I still earn way above what I would without a degree, even taking off the deductions for student loan repayments, so I don't mind. It doesn't seem to be unique or a shocker that people who have money can afford more.

YABU.

It's a pretty fair system.

I graduated in 2008.

Ive still got about a year of payments to go.

But the way I see it.
I earn a decent amount that I would never have had the chance to earn if I hadnt gone to university in the first place.
Hopefully I can help my kids with the Uni costs so they dont have the same problems i did.
It is a large amount going out every month, and next year when it ends it will be a good boost to my income.

Yes it is designed this way and much better than being an ‘actual loan’

But quite a bit worse than being an actual graduate tax.

Student loans do make the top bracket of tax high.

The part of your income from c£27k is taxed at 20% income tax, 12% NICs and 9% student loan (so 41%).

And the part form c.50k is taxed at 40% income tax, 2% NICs and 9% student loan, so 51%.

(And NICs are to rise soon).

Clearly the blended rate is lower.

@comefromaway Over £40ish k it is 40% tax or 49% for those with a loan. And 40kish supporting a family is not megabucks. So that 9% will be felt every month.

The bit I disagree with I think the same amount of maintenance loan should be available to all because I’ve seen loads of young people over the years including my own husband whose parents refused to support them for whatever reason.

The way it’s structured is unfair. Yes the monthly are designed to be affordable but that’s just to get everyone to buy into the concept of a graduate tax. Many many of our dc will end up with an effective rate of tax which is >50%. I wouldn’t be v happy with that.

Plus the government can flex the terms of repayment. With the way things are going I’d expect them to play around with the thresholds and the term of repayment.

Essentially it’s a gamble, low earner and your fine, high earner and your fine, middle earner pay for 30 years and repay significantly more than you actually borrowed because of the usurious interest rates.

@BasicDad

YABU.

It's a pretty fair system.

It's regressive - the very definition of unfair! Reducing interest rates would make it less regressive, but of course means less income to the Govn. Although the RAB charge would be lower so reducing interest is palatable politically.

[quote Tryingtryingandtrying]@sst1234 A tax that the wealthy don't pay? How's that fair?[/quote]

But they are paying it.

Just as a lump sum upfront for fees and payments straight to their child for maintenance rather than borrowing it from SLC and paying it back over time after graduation.

A graduate tax would be staggered, probably easier to administrate. And those who are extremely high earners would pay a percentage for x number of years. So would pay more than those who never cashed in in a high paying graduate loan. Eg nurses v investment banking.

[quote Tryingtryingandtrying]@comefromaway Over £40ish k it is 40% tax or 49% for those with a loan. And 40kish supporting a family is not megabucks. So that 9% will be felt every month.[/quote]
£40k supporting a family is megabucks to me. Dh and I put two kids through private school on a combined income of £65k

Everyone at the firm I work who is on over £40k puts extra in their pension to keep their income down.

[quote Tryingtryingandtrying]@comefromaway Over £40ish k it is 40% tax or 49% for those with a loan. And 40kish supporting a family is not megabucks. So that 9% will be felt every month.[/quote]
It's 9% over the threshold though, not 9% on the whole lot. Whilst I'm not supportive, I am old enough to remember basic rate tax being 33% and personal allowance being proportionally far lower than now.

The interest rate though is scandalous.

I'm on plan 1, so luckily it's very low at present, but the other student dont really have a chance to pay back their loans unless they are on a sky high salary.

You do realise that if you earn more then you pay more tax, don’t you?

@Tryingtryingandtrying

Young people are paying the equivalent if nearly 50% tax because of the student loan. The interest accumulating means few ever pay it all off. (but would have covered the actual money) Ultimately it should either be a graduate tax or interest free loan. If I had been paying £25000 a year in school fees £9000 is a lot cheaper and my child won't be on effectively a higher tax code for 30 years.

£9250 each year is for fees only. Students can apply for a maintenance loan of about the same, but that is means tested on parents income. Most students don't qualify for the full loan, all are entitled to the minimum if about £4,500. Parents are expected to make this up to the full amount each year. However, accommodation costs, especially first year halls are more than the minimum loan (often considerably more), leaving all other living costs as extra. If no loan is to be taken out, that's getting on for £19K at least. Of course many students take part time jobs, but this isn't possible with all courses, and some unis don't even allow it.

It's fair that everyone pays they're own way for higher education whether that be through a loan or parents that have saved and pay for their children's future upfront.
Its like saying it's not fair that rich parents buy their children a house whilst poorer parents children will have to take a loan(mortgage) out