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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:
BasicDad · 25/09/2021 14:39

@thegcatsmother

If you'd have given him the money to stick in a LISA or SIPP, he'd have been in a better financial position in the long run and reduced risk of paying for something he didn't need to.

thegcatsmother · 25/09/2021 14:42

Due to reasons which are none of your business, it wasn't possible to do that. He hasn't paid for anything; we did.

SusieBob · 25/09/2021 14:43

[quote BasicDad]@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.[/quote]
Little Tarquin's mummy and daddy can already do that.

At least with a simple graduate tax nobody is scared off by the prospect of a bogus "debt" hanging over them.

thegcatsmother · 25/09/2021 14:45

Furthermore, by paying in full, the university got the money up front; a discount was available if you paid the fees upfront, and the taxpayer wasn't paying for the loans.

BasicDad · 25/09/2021 14:50

@thegcatsmother

Due to reasons which are none of your business, it wasn't possible to do that. He hasn't paid for anything; we did.
True. Should have qualified that in many situations it's better...not specifically yours.
titchy · 25/09/2021 15:19

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

It's called a loan. But that's a misnomer. It looks like a tax, it functions as a tax, to all intents and purposes it IS a tax. A regressive one, unlike a true grad tax which wouldn't be regressive.

I'm not arguing for or against either the current loan which is a tax, or a true graduate tax system by the way, just pointing out how one is fairer than the other.

titchy · 25/09/2021 15:21

I also think there's far bigger policies round the corner than pose a greater risk to HE in this country than just the loans system. But another thread I suspect!

BasicDad · 25/09/2021 16:27

@titchy if graduate tax is introduced. Is it only for students that received their tuition fees for free? Or tax for all graduates regardless? Is it forever, or time boxed? What about students that drop out? Is it only for those that graduate? At what band does it kick in? Should it also be a higher % for middle and higher earners?

titchy · 25/09/2021 16:41

Well as graduate tax isn't on the cards it's a moot point, and the thread was about the existing scheme.

titchy · 25/09/2021 16:44

But in other countries where graduate taxes operate, they are applied to all who actually graduate as far as I am aware. Fees are often not paid by the studnet at all so rich parents cannot pay in their offsprings behalf and thus avoid them paying the graduate rate of tax.

titchy · 25/09/2021 16:45

There are plenty of examples graduate taxes all over the world btw - easily google able. (And not my area of knowledge at all so you'll have to do some of your own research Wink)

Simonjt · 25/09/2021 16:54

@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.

So someone studying a masters would be repaying their student finance with their new student finance, or someone on a poorly funded phd would be on the breadline. That just discourages bright young people from less wealthy background to achieve their desired career.
PurpleDaisy2114 · 25/09/2021 17:05

I took 4 years worth of student loans. Tuition was paid when I did it and we got no maintenance grant. I've never earned enough to pay it back. Currently it is over 3K per month. If I don't earn that in next 3 years it will be wiped.

titchy · 25/09/2021 17:18

So someone studying a masters would be repaying their student finance with their new student finance, or someone on a poorly funded phd would be on the breadline. That just discourages bright young people from less wealthy background to achieve their desired career.

Errr no. Your masters loan isnt used to repay your UG loan! Or do you mean you pay both concurrently? In which case yes. Not sure the evidence is there that this puts off those from less wealthy backgrounds though. Intuitively you'd think it would, and anecdotally everyone knows of someone who is out off because of the loans, but more and more each year do go to uni, and into masters from low income backgrounds so it (fortunate) hasn't put people off.

NB if you're funded for a PhD you get the standard UKRI rate normally, which is around £1500 a month tax free - certainly more than UG students get. but will probably end up in a very low paid role after

SaddenedByItAll · 25/09/2021 17:23

@titchy

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

It's called a loan. But that's a misnomer. It looks like a tax, it functions as a tax, to all intents and purposes it IS a tax. A regressive one, unlike a true grad tax which wouldn't be regressive.

I'm not arguing for or against either the current loan which is a tax, or a true graduate tax system by the way, just pointing out how one is fairer than the other.

But it is a loan

You borrow and then pay it back
I don't know if any taxes where they give you the money up front and then you pay it back down the lone of you are successful enough to meet the repayment criteria
I don't know if any tax where they give you the money first and then

SaddenedByItAll · 25/09/2021 17:24
  • of any taxes
  • down the line
Simonjt · 25/09/2021 17:31

@titchy

So someone studying a masters would be repaying their student finance with their new student finance, or someone on a poorly funded phd would be on the breadline. That just discourages bright young people from less wealthy background to achieve their desired career.

Errr no. Your masters loan isnt used to repay your UG loan! Or do you mean you pay both concurrently? In which case yes. Not sure the evidence is there that this puts off those from less wealthy backgrounds though. Intuitively you'd think it would, and anecdotally everyone knows of someone who is out off because of the loans, but more and more each year do go to uni, and into masters from low income backgrounds so it (fortunate) hasn't put people off.

NB if you're funded for a PhD you get the standard UKRI rate normally, which is around £1500 a month tax free - certainly more than UG students get. but will probably end up in a very low paid role after

Icecream thinks repayments should begin six months after graduation (as you can see from tje quote), so a masters student would be paying their undergrad loan with their masters loan.
kinzarose · 25/09/2021 17:33

Someone up thread mentioned being stung if you work internationally. Why is that? I assume you still have to pay it if you move abroad?

titchy · 25/09/2021 17:36

You borrow and then pay it back
I don't know if any taxes where they give you the money up front and then you pay it back down the lone of you are successful enough to meet the repayment criteria

And I don't know of any loan product where you pay a fixed percentage of your salary rather than a fixed rate each month, and if you're salary is below a certain amount you don't have to pay anything and won't get chased by debt collectors!

Understand what you mean now @Simonjt Smile

titchy · 25/09/2021 17:38

First para should be in bold and is quoting saddened. Blush

Kinza yes you still have to pay if you go abroad. HMRC has reciprocal arrangements with lots and lots of other countries so not as easy to avoid as some think.

CaribouCarafe · 25/09/2021 17:39

@kinzarose I'm paying twice as much on my monthly Student Loan repayments than I would if I were still based in the UK on the same salary - depending on which country you migrate to, the rates can be pretty extortionate.

I think the worst parts of the loan are, as mentioned above, that the interest rate is quite high and that it accrues as soon as you get the first payment - I know we don't have to pay it off, but it still feels like a weight on my shoulders knowing it's there. I hate debt in general, but this one feels particularly horrid as I doubt I can ever pay it off.

worrybutterfly · 25/09/2021 17:44

It's the interest that is the issue.

It means that if your child is likely to go into a high paying job (I think it's anything over around £40k a year). Then they will pay back A LOT more than they borrowed.

The average amount of student loan is £50k. Someone who earns £40k a year will pay back over £85k in the 30years until it's wiped. Someone who earns £50k a year will pay back over £110k in that time. Neither of them will pay off the loan before it gets wiped.

I was earning £45k a year, paying over £2500 a year in student loan payments and by debt was still going up because of interest.

So it would have been of a huge benefit to me if I'd been able to avoid borrowing from student finance. Me and my partner could have probably brought a house a couple of years earlier, avoiding more rent costs and more property price increases.

Aibu to think the student loan is a graduate tax that you can avoid if your parents are wealthy enough?
worrybutterfly · 25/09/2021 17:44

@INeed2P

I'm not sure where you've got the idea it means someone is paying 50% tax from at all - student loan repayments are fairly small on a below 30k wage, then increase as wages do. It doesn't put tax up to anywhere near 50%?
If you earn over £45k a year it puts your tax up to 49%. So not far off of it.
titchy · 25/09/2021 17:53

You need to check your maths worry! You're taken home in £46k would be about £33k, so £13k in tax and loan repayment - about 28%!

titchy · 25/09/2021 17:54

Yikes! *Your take home on £46k...