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?

Its explained in the article i linked why poorer graduates will pay back more over their working life.

"Under the biggest reforms of student loans in England for more than a decade, many lower-paid earners face an increase in their total lifetime repayments of more than £30,000. Meanwhile, the highest-earning graduates will see their lifetime repayments fall on average by £25,000 compared with the previous arrangements, according to an analysis by the economic consultancy London Economics.

The research forecasts that a graduate earning £37,000 by 2030 would pay back £63,100 over the course of their career, while a graduate earning £70,000 would pay back just £55,000.
Gavan Conlon, a senior partner at London Economics, said: “This is effectively a massive subsidy to predominantly white, predominantly male graduates. It’s deeply regressive.”
Patricia Marquis, Royal College of Nursing director for England, said: “These changes are a disgrace and will blatantly disproportionately affect nursing staff.
“It means nurses will be paying back their student debt sooner, more of it, and for longer. At a time when there is a recruitment and retention crisis in the NHS, this will only exacerbate it.”

@FoxCorner I agree with that. But that wasn't what PPs were commenting on.

The comments were that it disadvantages people from the poorest backgrounds. It doesn't - because most people will have similar enough loan amounts leaving university that it makes no difference.

Of course it will benefit anyone who would have cleared their loans anyway. And the only ones realistically who are clearing their loans are those on very high incomes.

There is only 1 category who is better off as a result of the change - Those who would have paid before 30 years were up anyway. They're going to pay it off even sooner and therefore pay a smaller amount on interest as the interest rate will track with inflation rather than above it. But that can't be a large number of people as a % surely?

Absolutely everyone else is equally disadvantaged by the changes. So I just don't like how the focus is on particular economic backgrounds or particularly job families. It feels equally crappy for everyone other than those who would've paid it off within 30 years anyway

This is simply not true. Around 23% pay back in full now and after the new rules come in from next year then over 55% will repay in full.

Yes interest accrues from as soon as each payment is made each year.

More will be repaying it only because the length of time in which you must repay has increased so dramatically. The actual amount you repay is vastly more for those in lower incomes because it takes them much longer while compound interest is accruing, it is unfair.

@Curiosity101 - and, tbf even the 1 category who might have an eventual advantage from paying off their loans earlier always had the option to pay back more under the previous system - so they would probably prefer to have had higher repayments (leading to eventual earlier clearance) just as an option rather than being forced, so they could have chosen to focus on a house deposit or mortgage first. Just because they might eventually be a bit better off by the time they've paid it off aged 48 while their peers are still having deductions for the next 12 years doesn't mean that they might have preferred to have a bit of extra cash in their late twenties!

The thing that annoys me about student loans is that the tuition and maintenance loans are kept together. While there's some logic in the idea that if you didn't benefit enough from your degree to pay off your tuition fee loan then it can be written off after x years, it seems really unfair that one 18 year old can go to uni and take the full loan for 3 years, stay earning under the repayment threshold (or emigrate) for the rest of their working lives, and so have 3 years of rent, food, and beer entirely paid for by the state (with the vast majority of that money going to landlords, pubs etc rather benefitting the university at all), whereas an 18 year old working full time (more likely to be working class) wouldn't get a penny and would have to fund their own lifestyle!

Also people can choose how much maintenance loan to take out and can sometimes reduce it - e.g. by living at home whereas they have no influence over tuition fees.

10 years after starting university I owe more than when I took it out - around £65,000 now. I started earning over the threshold 3 years after I left.

Think of it as a tax. That's how it behaves now.

Repay the loan - yes, but the loan plus interest?

And given it's over 30 - 40 years, the effect of inflation on the actual value of that loan changes things as well.

You only have to look on here to see the amount of parents who save for their childs university fund to see this isnt true.

Wealthier parents have always chipped in to cover rent, bills etc whereas poorer parents can't, so not everyone leaves uni with the same amount of debt.

Wealthier parents have always chipped in to cover rent, bills etc whereas poorer parents can't, so not everyone leaves uni with the same amount of debt

If someone leaves with £60,000 of debt and someone leaves with say £40.000 of debt, but both people end up in a similar job, with similar earnings, what's the effect of the overall amount they both pay back when you consider the interest that goes on as well?

No it’s not. A portion of student finance used to be a maintenance grant for those from families on very low incomes. The tories scrapped that and swapped a grant to an extra loan that those from the poorest backgrounds can be saddled with.

The loan you get is also based on your parents income, nothing to do with your eventual income. The only thing your future income dictates is how much you pay on any given month.

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 orabsolutely 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.

It disadvantages students whose parents can't afford to buy them out of an ongoing graduate tax. That will be usually be lower and middle income households. It's not so much that it singles out any one group, rather that one group are able to evade it. It will not be equal.

I agree with you about the middle income students whose parents don't contribute often really struggling while they're at uni, I don't know if it's like that now but it was when I went in the 00s. Like you, I had all the help going because my parents didn't have a pot to piss in, and I was better off than some of the middle income students. But this is a different point.

Erm because they HAVE to - the maintenance loan is means tested. The most disadvantaged group, in terms of 'access' is the children of middle earners who can't afford the several thousand a year they're 'supposed' to have. On paper, at least. It's based solely on income, no consideration of multiple DC etc.

@Curiosity101 is correct. Doesn't make much of a difference.

It's not really the fees though - that's been frozen for years. And the same regardless of whether you do an expensive science course, or cheap business course.

It's the living expenses. Mainly rent. Residence halls are very expensive and LL's see students as cash cows.

We will see more people just living at home and going to their local uni... or getting a degree online. Or as PP said doing an apprenticeship.

Yes under the current scheme 23% pay back all loan and interest in its entirety and after the new 40 year comes in 55% will pay back all the loan and interest in its entirety so it is simply incorrect to say noone pays it back.