Page 6 | Aibu to think the student loan is a graduate tax that you can avoid if your parents are wealthy enough?

Tryingtryingandtrying · 2021-09-25T09:57:00+00:00

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?

worrybutterfly · 25/09/2021 18:04

@titchy

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%!

Sorry I'm basing it on the old higher rate, it's been a while since I hit that bracket with going part time. So it's now at £50k and over, it puts your tax up to 49%

Figures from money supermarket so I doubt they are incorrect.

Once the NI increase goes on it'll bump it over the 50% mark.

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

SaddenedByItAll · 25/09/2021 18:13

@titchy

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

Burin this instance you are paying back the fixed rate, but the amount is capped depending on your salary

It needs a shake up
Bursaries for students in medicine, law and engineering
Withdrawn funding for David Beckham studies or surfing studies and anything with fine art in the title

Reward those who chose to read in a subject that vocational and benefits society
Let those who want to do 3 years of loafing pay for the privilege
(I generalise on the subjects listed above)

titchy · 25/09/2021 18:16

You're still nowhere near worry. Gross of £50k is take home of £36k. 28% take rate.

titchy · 25/09/2021 18:21

*Tax rate.

Yes I agree it needs a shake up (though I won't agree that certain courses shouldn't get any loan - unless you want certain subjects to be the preserve of the rich, and for schools to struggle to recruit Art and Music teachers ).

I wouldn't offer bursaries to law or engineering students either, or medics come to that - they're not low income occupations. Nursing, teaching, social work though - yes to bursaries.

worrybutterfly · 25/09/2021 18:24

@titchy

You're still nowhere near worry. Gross of £50k is take home of £36k. 28% take rate.

I think you need to reread my post and the attached table.

If you don't like how the table is worded then you should probably take that up with Martin Lewis rather than me.

titchy · 25/09/2021 18:28

ML's table clearly says MARGINAL rate of tax. Your post implied total tax rate.

titchy · 25/09/2021 18:29

(And 28% is still lower than the 33% basic rate which I remember...)

kinzarose · 25/09/2021 18:31

@titchy thanks for that. Do you have any idea where I can find out which countries are reciprocal, Google didn't reveal anything.

worrybutterfly · 25/09/2021 18:37

@titchy

(And 28% is still lower than the 33% basic rate which I remember...

)

Do you also remember the cost of housing as a percentage of income at that time?

titchy · 25/09/2021 18:38

You're supposed to let SLC know if you move abroad so they can re-assess how much you pay (it becomes based on local salary). I believe debt collection can in theory be undertaken in any country (though I'd guess in places like Afghanistan it might be difficult to enforce...), and of course any debt to UK Gov would be flagged as soon as you came back to the UK.

HungryHippo11 · 25/09/2021 18:42

Well I guess its not "fair", but what in life is?

Rich parents could buy a house upfront. I have to get one with a mortgage and pay interest and pay it off in installments.

Rich parents could buy a new car upfront. I have to get one on finance, pay interest and pay in installments (or get a cheaper secondhand one)

This is just the same. They're still paying for the service, just upfront rather than after the fact.

titchy · 25/09/2021 18:42

Oh yes housing costs were much lower I agree!

Sorry I'm just being picky because so many parents worry about the loan their offspring take (the offspring themselves aren't too bothered - but financial illiteracy of teens is another thread!), and when people imply that on a salary of £50k you'll lose half your salary in tax and loan, which is completely untrue - a few parents will read that and believe it and do their utmost to put their kids off uni for the wrong reason.

DGRossetti · 25/09/2021 18:51

@kinzarose

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?

How ?

JumpingPiglets · 25/09/2021 18:53

How do the wealthy avoid it? I don't understand. The wealthy pay it upfront by paying the fees etc without taking out the loan. Wealthy graduates pay it faster than poorer graduates. They might avoid the interest, but they don't avoid the core amount.

titchy · 25/09/2021 19:00

How do you pay if you're abroad? I'm sure SLC has the ability to receive international payments. And flag debtors with immigration if they return...

Are you suggesting people should move abroad, remain untraceable to the authorities and never return to visit the UK @DGRossetti

CaribouCarafe · 25/09/2021 19:18

@titchy

How do you pay if you're abroad? I'm sure SLC has the ability to receive international payments. And flag debtors with immigration if they return...

Are you suggesting people should move abroad, remain untraceable to the authorities and never return to visit the UK @DGRossetti

Speaking as a British expat, SLC sent a letter to my UK address asking whether my circumstances had changed and informed me I had to legally notify them if I gained employment abroad.

I now pay them through a direct debit each month but you can also pay online through the web portal manually each month if that's your preference. Not much too much hassle, although obviously the way it works in the UK with the amount being automatically deducted from your pay is the simplest of all approaches.

DGRossetti · 25/09/2021 21:09

@titchy

How do you pay if you're abroad? I'm sure SLC has the ability to receive international payments. And flag debtors with immigration if they return...

Are you suggesting people should move abroad, remain untraceable to the authorities and never return to visit the UK @DGRossetti

Of course the SLC can receive international payments. If you feel like sending them that is. The US has very little interest in aiding them as DB knows (especially as he's a US citizen).

MitheringMytryl · 25/09/2021 21:13

They used to say you had to keep a UK bank account in order to pay them, which was very difficult, but they now accept international payments.

titchy · 25/09/2021 21:23

Of course the SLC can receive international payments. If you feel like sending them that is

Errr right. Ok. If your conscience is ok with that I guess it's an option, if not exactly legal or principled

kinzarose · 25/09/2021 22:23

I would be interested to know how many people (if any) are prosecuted for failing to keep in touch after they move abroad.

SaddenedByItAll · 25/09/2021 22:29

@titchy

*Tax rate.

Yes I agree it needs a shake up (though I won't agree that certain courses shouldn't get any loan - unless you want certain subjects to be the preserve of the rich, and for schools to struggle to recruit Art and Music teachers ).

I wouldn't offer bursaries to law or engineering students either, or medics come to that - they're not low income occupations. Nursing, teaching, social work though - yes to bursaries.

Didn't make myself clear at all it seems

Bursaries for medicine, law and engineering
Repayable loans for others
I guess the status quote remains as is but you get a free pass for a good
Vocational degree that benefits society

CaribouCarafe · 26/09/2021 07:47

@kinzarose

I would be interested to know how many people (if any) are prosecuted for failing to keep in touch after they move abroad.

Not sure on the numbers but do know my brother (and consequently my parents) got hounded by SLC when he moved abroad and didn't respond to any of their comms for 5 years. I think they did threaten legal action, at which point he gave them the details they needed. Turned out he had been earning beneath the threshold for all that time so was a whole palaver over nothing

Original poster

Tryingtryingandtrying · 26/09/2021 08:07

@worrybutterfly has hit the nail on the head I think.

"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."

A graduate tax would mean there was no way of your parents avoiding this tax for you. Yes your parents do have to pay to avoid this, but far less overall.

The loan system is essentially a 30 year tax for 83% of people. Including those who will never hit 6 figure salaries, like nurses, teachers etc.

OP posts:

RufustheBadgeringReindeer · 26/09/2021 08:49

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

Yes…i worked it out to similar figures a few years ago

I have no issue with them paying it back, its the interest rate i have an issue with

Seeline · 26/09/2021 10:51

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

Those figures only work if graduates start their working life on those salaries. I think that highly unlikely. The figures will vary massively depending on how people's salaries increase over their working lives.