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 really don’t think it is necessary but each to their own. I only know one person whose parents did that and she didn’t finish the course!

But it’s not like a normal debt. You only start paying it back if you earn a certain amount, you only pay a certain percentage of your income, it gets written off after a certain amount of time. If she can’t get a job with a decent salary, it may end up being written off without her paying anything. And if she does have a good salary, she should be able to afford it.

I totally agree. I’ve got 10 long years still to go and now I’m earning more the amount I’m repaying seems significant, but I still won’t pay it off before the 25 years is up. I don’t think 18-year-old me even stopped to think about the consequences of it. Yes I got a degree but absolutely not worth the amount I’m still repaying all these years later.

From a policy perspective another choice might be to lower the interest rate but then not wipe it out after a set time

I think it depends on how you look at it. Ds1 is on plan 2 and Ds2 will be on the new one as he starts uni this month. It isn't like you have seen the money and you suddenly take a pay cut, it is taken at source and so like a lot of jobs you don't walk away with all your salary, the salary often includes additional deductions for pensions and schemes that your company offers that you benefit from.

I have a degree I never used in terms of an actual graduate job but I do feel that the degree definitely helped me in getting jobs. Dh took a graduate job right after uni. Ds1 is on a graduate job scheme on a very lovely salary for a training contract with a lot of perks, he needed that degree to do the job in his field and his salary will increase at the end of the training. Ds2 will go further with the degree he is taking too.

Both children went into this with their eyes wide open for job prospects in the market we have now. They don't see it as the total debt, they just see the payments they will be making using a salary calculator. Dh had no debt from uni, I had loads because my parents couldn't afford to support me. No tuition fees just loans that I paid in full but tiny compared to what Ds came out of uni with, tuition fees and minimum maintenance loan.

Because she's paying less than she's accruing in interest.

I agree. I didn't earn enough first few years to pay anything off so it went up due to interest. Then I had a good few earning years and chipped it down a bit. Then went on mat leave, cut my hours and the interest went up to 6%. It's now back to where I started 14 years ago. I'm just waiting for it to be wiped now. I feel sorry for the people going to uni now.

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.

Depends what you earn as to whether you're lucky. The plan 1 repayment threshold is lower, so at certain levels of earnings, even over more years they could pay back less.

I disagree it's a trap. The information isn't secret. And nor is it difficult to understand.

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

Depending on what you earn, that really really might not be worth it. Because it gets wiped after 25 years, you could easily end up spending more in total paying it off early than you would have paid off if you kept going monthly. Let's say you're someone who thinks you're going to have a couple of maternity leaves, maybe go part time while children are young etc, that will bring down the amount you pay because you probably won't be over the threshold for repaying. Spending £20k at the start to pay it all off might end up being a bad call. And even if you don't want children, if your expected earnings are lower, it could easily be a waste of money.
Obviously that is very dependent on expected earnings during the 25 years after uni. But it's definitely not always better to just pay it off quickly.

The reason they say not to clear it is because unlike other debts it isn't counted against you in the same way that e.g. a poor credit rating is. Your student loan doesn't particularly affect your credit rating.

I went at same time ax op and mine was c. £28k. You are forgetting op had maintenance loan as well as fees.

Having this individually linked means that people consider there degree choice more carefully, or should do.

If you pool this together then you end up with far more people than you need educated in a specific subject.

The university should own the debt or at least part of it so of they teach worthless Micky mouse courses they are left with responsibility for this.

@septemberbaby7

how can it be 'a trap'

its all explained in detail before you sign up for it.

no one is trapping anyone.

yes, you may want it be free again, but the country has bigger needs.

if they're not going to earn bigger salaries than without doing it, then 'going to uni' is just 'an experience' & why shouldn't they pay? No ones suggesting travel should be free.

It's absolutely not a graduate tax. A graduate tax wouldn't exempt people old enough to have gone when it was free and people whose families were rich enough to pay them out of it upfront. A graduate tax would be fairer than what we have.

Personally, I don't pay mine back at all and am pleased about that. I signed up to it when I wasn't even an adult, and the government later sold it without my consent. It's possible to earn well over the repayment threshold as long as the income comes from different sources, and mine does. So fuck them.

NTFT but Martin Lewis did a really good podcast about this earlier this year.

He says to think of the loans as a graduate tax - you pay a bit more because generally graduates earn more. He also went through figures

Made a lot of sense and was quite reassuring.

Plan 1 gets written off after 30 years.

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

Most people don't though. Most people reason that it's better to pay the minimum and have it written off. I could give up work tomorrow, never repay another penny, the amount I owe would go up and it would still he written off in 10 years. There's not really any benefit to overpaying.

I suppose it’s a matter of perspective- because I’m thinking of it as a graduate tax, I’m not worrying about getting rid of it/ thinking of it as some terrible burden.

I think the damage is psychological more than anything. People are told they have this personal debt which many will never pay off.

But the reality is the new plan with 9% over 27k isn't it? Means average people in average salaries aren't paying much at all. And unlike other debts the repayment relates to your earnings, not how much owed, goes down if you earn less, isn't part of a mortgage application.

It’s dead easy to sit there and say “oh you could just overpay to clear it” forgetting that the best time to clear it would be when your wage is probably lowest and you are probably trying to save for a house deposit and then maybe a baby.

im similar age to op £3k fees. I owe about £20k still, it started at £28k (4 year course and max loan as poor background) .

im earning quite well now so i did consider paying extra because my better salary finally tipped me into the level of ill pay less if i pay it sooner. About £250 a month comes out of my salary for it and half of that covers the interest so it’s still only coming down very slowly. Anyway I decided to save a nest egg first to cover emergencies and then i got cancer. And I am so glad i have £20k saved to cover not working for 5/6 months rather than no student loan.

I don’t know why it isn’t a bigger issue , it probably will be in another ten years when a third of the population is effectively paying 30% tax on everything above what I expect willl be minimum wage by then.

personally I think the government should give us tax back on additional payments, so treat it like salary sacrifice pension. I’d be more willing to chuck money at it then.

It's true.

If you're going to university for a 3 year piss up, it's probably not worth it anymore but if you need a degree for your chosen career, then just get on with it.

Student loans really are just numbers on a bit of paper and a 'graduate tax'. Not a particularly fair one given that, the poorest students end up borrowing and so repaying more, but it's not the same as taking out a bank loan.

Maybe it was different when you went, but these days the average debt graduates have upon leaving university is about £45K. If you don’t have rich parents willing to help, how on earth can you pay that off asap?

Most engineering courses are masters. It's not a separate degree. Husband is an engineer and paid his student loan back via salary contributions. Not a high starting salary.

I've paid mine off too (law).

I actually believe it should be considered a graduate tax. Which it is by any other name except the government couldn't call it that because everyone would lose their mind.

You are right. When I earned peanuts (part time, young children) I paid nothing. Now I earn more, I pay it and don't really miss it. Would I rather have that £70 in bank every month? Sure. But would I rather have that fairly small sum, or a degree which has opened up career options that weren't otherwise available? The degree. No brainer.

For comparison, my sister in America graduated 20 years ago with $200 k debt and had to start paying back huge sums within one month of her graduation date. She was working behind a till at the time. That's not what we want for our kids!

I have been saving for my children to do degrees since they were born and have always been surprised by people who don’t (when they could facially afford it even if making some sacrifices). DS1 just graduated and walked straight into a great job of his dreams. He is an engineer so obviously need a degree to do his job. A good degree from a good university opens so many doors. I also wanted my children to have the university experience even if they were not top academics. I loved my uni years and would also not have had the break into my first job and had the career I have now with no degree.

I've just paid mine off this year - 22 years after I graduated 😆 I graduated in 2002 and had borrowed somewhere around £12k. Tuition fees were £1000 per year at that point (which I didn't pay as came from a single parent household) and I took maximum maintenance loan (circa £3k - £4k pa).

It isn't a graduate tax by any other name, because it only applies to graduates who were too young to go when it was free and whose families weren't able to buy them out of it upfront. An actual graduate tax would be better, I agree.