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AIBU?

Share your dilemmas and get honest opinions from other Mumsnetters.

Original poster

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

160 replies

Tryingtryingandtrying · 25/09/2021 10:57

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?

OP posts:
cupofdecaf · 25/09/2021 13:45

Yes it is.

BasicDad · 25/09/2021 13:46

Even in the worst case scenario of repayment, I don't know how anyone can feel hard done by earning £50k+ from the age of around 22.Confused

poshme · 25/09/2021 13:47

@IceCreamAndCandyfloss

There’s no obligation to go to uni nor take out a loan.

What I do disagree with is the option to not pay the loan back by either not working or keeping below the salary threashold , repayments should start from six months after the course finishes regardless of what the person is doing career wise.

Well this wouldn't work at all. Every single time anyone went on maternity leave they'd get into debt over their student loan payments.

Or if someone became ill And couldn't work, they'd get into debt over their loan payments.

BasicDad · 25/09/2021 13:48

@titchy explain how it is regressive?

Are you talking about the poor £50k/year 22 year old?

DeepaBeesKit · 25/09/2021 13:49

Ish.

Of course anyone can pay it up front. But the way it is done now is fairest, because it keeps the repayment levels manageable and you only pay back so much as your earnings support.

The only way you can eliminate wealthy students benefitting from their parents paying the fees would be to make it "free" and past the cost into general taxation. This would utterly unfair on the millions of hardworking non graduates who shouldnt have to pay for students who choose to spend 3 years studying in a very expensive way.

Pottedpalm · 25/09/2021 13:55

@FirewomanSam

Paying it all up front would be a very silly thing to do since most people won’t pay off the full amount before it gets written off. Martin Lewis has some good explanations about it on the MSE website.

So yes, wealthy people could pay all the fees up front and thereby avoid having to pay anything else in future but it would make very little financial sense to do that.

You pay interest on the loan. Both my DC have paid off their loans, they have paid more than they would have done if it was paid upfront.
titchy · 25/09/2021 13:57

@BasicDad

Even in the worst case scenario of repayment, I don't know how anyone can feel hard done by earning £50k+ from the age of around 22.Confused
Well they'd likely be one of the high earners that the loan system is beneficial for...Hmm
Pottedpalm · 25/09/2021 13:57

@ShinyMe

As *@Seeline* says, if you had to pay back the loan regardless, lots of people from poorer households and people on courses which lead to poorly paid jobs would just not go, and that causes huge problems. I graduated over 20 years ago and am still not paying back my loan (although I think I am just over the threshold on the newer loan payment terms, but I had an OLD OLD loan with better terms) and I don't see that I will ever repay mine. My wage is below the national average, even though I see it as comfortable for me (I earn more than most of my friends) so why should I be repaying the same as say, a law graduate earning four times my salary?
Because you got the degree; what you chose to do with it is irrelevant.
BasicDad · 25/09/2021 13:58

How are wealthy students benefitting from up front payments? If I was gifted 28k from mom and pop for my tuition fees, I'd still take the loan and invest the money they'd given me!

BasicDad · 25/09/2021 13:59

@titchy I genuinely don't think you have an answer for how you think the student loan system is regressive.

TheHouseILiveIn · 25/09/2021 14:01

@WoozySnoozy

Even the wealthy people should consider taking out the loan. Its one of the best rates you'll ever get.
Not if you end up in a decent career. If you end up a high earner the interest rate on the loan is extortionate. It's something like 5.6% off the top of my head and starts accruing straight away. So by the time you graduate your loan is higher than the amount you took out and increases every year. If you think base rate is 0.1% then 5.6% is daylight robbery. This is my beef with the student loan system. It's as bad as the American system if you end up being a high earner.
Jaxhog · 25/09/2021 14:02

On the basis suggested here, we should also do away with mortgage interest rates too! After all, it isn't fair that richer people have shorter, smaller or no mortgages, so pay less interest!

titchy · 25/09/2021 14:03

Ok @BasicDad .... maybe some examples will help with what is meant by regressive.

(Remember we're only talking about high vs medium earners here.)

A high earner might pay off all their loan in ten years. They will have accrued ten years of interest, so maybe paid a grand total of £75k in repayments.

Middle income earners can expect to spend the maximum thirty years in repayments, irrespective of whether they pay it off or not. So they will end up paying a heck of a lot more than the high earner. That's what we mean by regressive.

Blossomtoes · 25/09/2021 14:03

@Tryingtryingandtrying

I think it should be a graduate tax that everyone pays regardless of wealth. That would be fairer than the current system.
You mean the way it used to be when only 5% of the population were graduates?
titchy · 25/09/2021 14:05

@Jaxhog

On the basis suggested here, we should also do away with mortgage interest rates too! After all, it isn't fair that richer people have shorter, smaller or no mortgages, so pay less interest!
There isn't an argument that mortgages should be fair though. They're a private arrangement between two private bodies - the bank and the individual. Education loans I would argue are a public good and come from the public purse so should be as fair as possible.

I'd happily go back to Gov funding HE in full though as a principle. That's the only truly fair system.

daisypond · 25/09/2021 14:07

Not if you end up in a decent career. If you end up a high earner the interest rate on the loan is extortionate.

But that doesn’t much matter - because a high earner can pay it off quickly. A friend’s child paid off their entire loan within three years after graduating.

JoborPlay · 25/09/2021 14:09

I can't get het up about it to be honest. DH and I both have significant student debt, but I can't say it impacts massively on our lives.

DGRossetti · 25/09/2021 14:10

The trick is - or used to be - to get your degree and then emigrate (like my DB did).

TheHouseILiveIn · 25/09/2021 14:13

@daisypond

The repayment threshold in England is just under 28k. Many graduates will never earn that. I’m in my 50s with a first class degree from a top university and I only just earn that now.
That's got to be very unusual, surely. I know people who started on £28k without a degree
BasicDad · 25/09/2021 14:17

@titchy but middle income earners that earn £50k/year straight out of uni?

And it's a loan, not a tax, so you can't even call it regressive...it's just finance!

Even if you can make the fictional leap to pretend it was a tax, it'd still be hard to argue it being regressive when it's still advantageous to earners up to around £45k/year (from 22!). Additionally, those that clear the loan quicker by virtue of a higher income will be paying an order of magnitude more tax as a whole through a progressive taxation system!

It's pretty proposterous to consider otherwise.

SusieBob · 25/09/2021 14:23

The biggest problem with calling it a loan is that it still actively discourages people from going to university as they worry about getting into debt.

The truth is < 25% of graduates will ever pay the loan off, and a lot of those people pay it off early in the mistaken belief that it saves them money when, in fact, it's often better to not pay the loan off and just let it be written off. The system is expensive to administer and with the different types of loan out there overly complicated to understand.

Just do away with the whole thing, introduce a graduate tax and be done with it.

daisypond · 25/09/2021 14:29

That's got to be very unusual, surely. I know people who started on £28k without a degree

I don’t think so. Most people in the company I work for have top degrees from top universities, including Oxford and Cambridge, and the starting salary is about 22k in London, and less elsewhere in the country. My DH went to Oxford and is in his 50s and he earns about 25k. Most jobs simply don’t pay particularly well. My DD graduated with a first this year from a RG university and earns much less than that too.

thegcatsmother · 25/09/2021 14:29

We paid upfront for ds's BA and MA. He has no student loans at all. It was pointless taking a student loan and incurring interest when we would have paid it anyway. No, he may not have ever paid it back, but we preferred he start adult life with no debt.

BasicDad · 25/09/2021 14:34

@SusieBob but that would almost certainly create a two class system.

Little Tarquin's Mummy and Daddy are going to pay in full to avoid an unlimited tax on future earnings. Therefore the only people paying graduate tax are those that couldn't afford to pay up front.

purplecarrot23 · 25/09/2021 14:35

@InvincibleInvisibility

Yes. Not really a surprise that children from wealthy families have advantages and opportunities that other children don't.

We are comfortably off and can't complain. DS' best friend's dad earns 10 million a year. Their experiences, especially during school holidays, are vastly different.

@InvincibleInvisibility what job does he do to earn £10million per year? Genuinely interested as that's a helluva salary!