To say people don't realise the trap they're getting in with student loans

[septemberbaby7]

I graduated 10 years ago and I've been repaying from my salary ever since. But due to interest rates I now owe more than I did 10 years ago!

I am one of the 'lucky' ones, as I am on Plan 1 which is wiped after 25 years and my tuition fees were still approx £3k rather than £9k. The newer plans are not wiped for either 30 or 40 years.

I pg approx £70 a month which is less than the interest added. I have accepted this will be an additional tax I'll pay until my 25 years is up, as it will be wiped before paid off. Maybe if the interest was lower I would have had a chance of paying it off but no chance as it is.

I went to university as it seemed the natural progression and I wasn't sure what to do with my life. But I don't think it helped me get a job - I did an additional course after uni to get into my chosen career and a degree was not required.

At 18 you're basically signing up for a lifetime (in your working life anyway) of an additional tax when you've only just entered adulthood.

I agree, I think the way that such a high interest rate is applied to these loans is ridiculous.

I thought they were meant to be a good deal! I’ll have to have a look, my DD is applying to uni and so I’m on a steep learning curve,

The new system is different- interest is set at the rate of inflation so you only ever pay the equivalent of what you borrowed.

I agree. I was having that exact same discussion with my husband a few days ago, as I think we need to start saving for our kids uni costs asap to be able to pay upfront.

I'm foreign and use to think the loan system in the UK was brilliant. But the interest rates and repayment plan is a definite trap!

In comparison, in my country most banks would offer interest-free loans for bachelor students or low interest (1-2%) to master students. You do need a guarantor but it's much better value in the long term.

I am advising my two academic children not to go to university unless they 100% know what they want to do and that the job it should lead to is at least 10% national average income. We can't help them despite earning pretty well due to CoL and because we have 3 kids. That's obviously not their fault but puts them at a huge disadvantage to people with well off parents.
It will end up being the preserve of the well off.

I agree than your generation has had it much tougher on university funding. Compared to their parents’ generation it’s night and day.

That said, we haven’t adapted at all. Most students still go away to university for the experience of their parents while in many other countries in Europe, students live at home and travel if they can do so. I was reminded of this over the summer when friends in Lyons and Ireland both told me their children would be commuting to university in the nearest university. Not possible for those living rurally of course.

Other countries like the US start college funds for their kids from early childhood and prepare - we haven’t adapted to that either.

It’s an unpopular view on MN but we are still doing courses that don’t positively impact our career prospects and that’s an issue for many as it was for you. It would be unfair to ask the tax payer to fund lifestyle choices when there’s such a COL crisis.

Apart from the fact it's compound so you pay well more than the original amount.

I never understood why Martin Lewis and others say not to worry about paying student loans off. The interest is high and to my mind needs clearing asap. I made mine a priority and cleared it within about 4 years for this very reason.

You still pay the equivalent. Inflation compounds too. (I'm not explaining this well!)

I think it depends how you look at it. If you paid £70 a month for 25 years that would be £21000. You graduated a similar time to me, so depending on how much your maintenance loans were that’s probably not a dissimilar amount to what you borrowed. How much of loan remains unpaid due to interest is irrelevant to you.

You hit the nail on the head....for most people who earn a normal wage, it's not a loan, it's a graduate tax. People need to think very carefully on whether that tax is actually worth it. Not everyone needs a degree to be great at their job. Personally I think it was a better system when only the very brightest who actually needed a degree for their job went to university. I.e. people going into academia, medicine, engineering - that way it would be possible for the state to help fund those people, teachers and doctors etc.

Martin Lewis has an interesting take on this where proposes that it is called (something like) a 'student tuition payback contribution' rather than a loan. Ie it should be proposed that for X years after graduation you pay X% of salary (above a minimum) as part of this contribution system, in turn for having your tuition paid.
It does make seem a bit more transparent and understandable to me!

Yes but if you need that load to get the job you want the. You have no choice. My daughters are training to do the job they have always wanted There is no alternative. They would not be there for the cocoas life or because they don't know what to do it just wouldn't be worth it.

To take a degree in England now you need either a clear career path to a high salary, or a target career that absolutely requires a degree.

Anything else is an expensive luxury.

My DS wants to be an engineer. He will require a degree and a master's to be a chartered engineer. I've already decided if he gets the necessary A'level grades and is sure that is what he wants, I'll downsize and pay his tuition fees for him.

Depressing but necessary.

It's really not an issue it's just a tiny amount out of your salary each month to pay back the 3 years study

That graduate tax doesn’t help those who choose a local university and commute, or parents who save to fund their children’s education, perhaps by a lot of sacrifice over the years.

On this point, I think Martin Lewis is wrong.

How much is your loan for OP? Around £10k? How has that not been paid off in 10 years already??

I’m in plan 1 too but I will pay it off as I pay £220 a month. It’s a large amount to pay each month but I did need a degree for my job and I probably wouldn’t have as high a salary as I do now without it. I think people need to think bout the career they want before doing a degree and make sure it’s worth doing.

I agree - its a 30 year tax, as much as I am a fan of Martin Lewis I think Dave Ramsey's approach to student loans is better - e.g. try and cash flow it, apply for any scholarships and pay down as quickly as you can.

I think this is the crux.

People just go to uni because that's what they think they have to do... Rather than considering their careers and choices.

They go just because they can.

So many young adults don't bother attending lectures and tutorials, because they're bit invested in it. They then ask for extensions for assignments 😂.

Nobody is holding a gun to these adults heads and forcing them to go to uni.

It’s unlikely to only be £10 with £3k tuition fees. It was £3.5k fees and another £3.5k or thereabouts for maintenance loans so probably at least £20k. Mine was almost £30k for 4 years on plan 1, plus the interest they added.

It was approx £20k in total. I pay approx £70 a month and the interest added is around £90. For the first few years of working I wasn't paying much back as my salary was lower and the repayment amount depends on your salary.

But it's not, is it? He, an adult, can take a loan to pay for his own choices in life.

I’m on Plan 1, have been paying for about 10 years and a couple of years left. I think it’s great value! Unlike other loans You only pay when you are deemed “able” or to have benefited from the education I.e. earning above the minimum salary threshold, so although I could pay it off now, I’m leaving it until it naturally gets paid off. Anyone having period of unemployment or underemployment will be protected from repayments unlike other debts.

But you can definitely over pay. It's not like you absolutely have to only pay the minimum amount.

You could have cleared most of that £20k in years 🤷‍♀️