Student loan - will interest be charged from day 1?

[AliceMay55]

We are planning for DS’s uni. Is everyone eligible for student loan or does it depend on parent’s earnings ?
Shocking interest rates ! Will the interest be charged from day 1? I understand repayments will start when they are above a certain income threshold, does interest just accrue at ridiculous % until then?

It starts as soon as the payment is made to the Uni/student.

https://www.gov.uk/student-finance

As long as you meet the eligibility criteria every UK student for a first degree can apply for a tuition fee and basic maintenance loan. There are higher maintenance loans according to household income.

Yes, from day one. Building up nicely for the Hedge Fund owners.

It's very complicated.

You only pay back a certain percentage of your income, if you earn above a certain amount and for a certain amount of time.

So 2 people with the same loan could end up paying back very different amounts until the time has fnished depending on their earnings.

It's basically a graduate tax.

You don't end up paying all of it back, and certainly you don't end up paying all of it back with interest.

Yes it's from day 1 of it arriving in the person's account (or in the case of tuition loans from the day it goes to the uni).

Interest continues to accrue until it is paid off, including when payments are/aren't being made, same as any loan.

It's the only loan which gets written off after a set period though. I suspect lots of people won't pay their university loans off to be honest.

The total I owed when I finished uni was ~£20,000 but that was a 4 year degree and was when tuition was only ~£3k

University finance is very affordable as finance goes. You're never going to be left destitute as a result of it, if you're on a low income/no income then payments stop. It's not really for you to worry about though... It's for your son to decide if he thinks going to university will be worth it long term and whether he wants to pay for it.

For a government that talks about levelling up, this is a pretty bad offer, disadvantaging the people from the poorest backgrounds.

There's also calculators that help demonstrate the point.
https://www.student-loan-calculator.co.uk/

Eg. 2 students, both leave with the exact same debt (£50,000)

One starts their career post uni earnings £24,000 and gets a payrise of 2.5% every year. They will pay back £20,111 over 29 years before the remaining £76,883 is written off

One starts with earnings of £30000 and gets a payrise of 2.5% every year. They will pay back £41,772 over 29 years before the remaining £70,970 is written off.

As someone else mentioned, it's more like a tax that you'll most likely pay for 29 years than like a true loan.

How so? The cost to the person is based on their eventual income. Nothing to do with their parents?

Couldn't agree more

The rules are changing this year and are much more disadvantageous for students. Have a look on Money Saving Expert for an update.

I’m actually pretty pissed about my loans tbh. I do t think it was fully explained to me.

In 2022 my total loan amount was 90K now it’s 93K! Thousands gets added on every year.

England has got the highest tuition fees in the world sadly. It wasn't always like that but the tories have tripled them.

The changes coming in this August mean that richer graduates will pay less overall and nurses, teachers etc will pay more. https://www.theguardian.com/education/2023/may/13/nurses-teachers-student-loan-reforms-biggest-squeeze?CMP=Share_AndroidApp_Other

As if it's not already hard enough for young people with high house prices. We live in a country that makes it ever worse for young people

Because students whose parents can afford to help them will, while poorer students will need to take out higher loans to cover all their costs.

Students from poorer backgrounds will end up paying back/'being taxed' much more than students from wealthier backgrounds who had family to help pay towards some of their costs.

Of course, there are always going to be wealthy parents who refuse to give any financial support to their children, but a lot will, even ifs just help with rent, food, bills etc.

But from this August it will be for 40 years so 29 years isn't relevant to the OP

@Curiosity101 hi did you mean £70,000 gets written off ??? As that’s way more than inflation of loan ??

It's changing from what Curiosity has written from this August

https://www.moneysavingexpert.com/news/2023/05/martin-lewis-good-morning-britain-student-loans/

This is about the changes coming in

And the constant rhetoric from our HE sector is that the fees are too low and thats why so many of them are financially failing (nothing to do with gross mismanagement of course). The sector is about to face some very unpleasant truths and a rather large contraction. Personally I think unless you get into a red brick on a course with a direct career path, it is a total waste of money.

Actually worse than a waste of money, a weight around your neck for the rest of your working life. Add that 10% extra tax, to a 35% average base rate, 14% NI and at least 20% VAT on everything you buy, and of course council tax, how much are you even left with at the end of the day.

This is how I feel too. The benefits just won't be there.

Apprentiships just seem like such a better option, especially as you can do degree apprenticeships via employers.

Ok, so I've just checked the changes coming in. I assume the calculators will be updated soon to reflect the changes, but the one I linked definitely is still the existing payment schedule.

Right now loans are effectively "A 9% graduate tax on earnings above £27,295 for up to 30 years". The loans themselves are currently charged at interest rates above inflation, most people won't clear it.

Now it will be "A 9% graduate tax on earnings above £25,000 for up to 40 years". The interest rate will be lower as it will track with inflation. Most people won't clear it.

So yes - every single student who has loans will be disadvantaged by the change over all in the sense that it's still likely that most people won't ever clear it. So most people will end up paying it for 10 additional years.

I still 100% disagree that it disadvantages the poorest students, I was one of the poorest students and eligible for absolutely everything (grants, bursaries and loans). The vast majority of people I knew had the full amount of loans etc available to them regardless of their household income. And the middle income households were the students who struggled most through uni as their parents couldn't afford to make up the difference. The only students I knew who had no loans were international or absolutely loaded (and I mean absolutely loaded). So I expect this change will effect the vast majority of students equally and don't agree it singles out any one group at all.

I do however think that university funding and fees need a massive rethink though. We're struggling for nurses, midwives, teachers etc and they have no option but to go to university to do that job. I do think we should be incentivising courses that really are in demand and benefit us as a society.

My DD graduated 10 years ago. Her loan is now over 70k. It will never be paid off.
Youngest DD is ruling out Uni entirely.

I wouldn’t recommend unless it leads directly to a career path tbh

I have a plan 1 loan and a plan 2 loan so I’m paying 9% on each one - that’s more like 18%. It’s a lot out my pay packet each month which wouldn’t be so bad but it never goes down the loan only increases and I’ll basically be paying until I retire