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.

Yep, also see it as an additional tax. I’ll be very pleased if my DC choose a high quality apprenticeship instead tbh.

At 18 most people don't really understand the long term implications of financial decisions.
I look forward to my loan being written off after 25 years. It's far larger now than when I took it out, as I had several years working abroad that didn't meet the requirement to pay back. Then I had a minimum wage salary for several years so didn't pay back and now I pay back around £20 a month, which obviously doesn't even come close to covering the interest.
It is what it is I guess?
I think the premise of the loan in this instance makes sense, you're sold on the idea that paying for university will equal a higher salary than if you didn't go, so you only pay once that threshold has been met and as a percentage of your salary.
I think the interest rates being so high is a naff though.
I also went to university as it was the next step, I had a terrible time, wrecked my mental health and barely graduated, but without my degree I wouldn't have had the opportunity to work abroad, so it was worth something in the end.
I would definitely talk through and research thoroughly the options available once its my child's turn though, as I definitely don't believe university is always the right choice.

We're definitely not going down the loan route, it's a huge debt and I'd rather they focused on getting on the property ladder. I do feel for people who have no choice but to take out these huge loans.

25k now is not far from minimum wage, it will be even closer , or less than minimum wage in 3 years time when those starting now , graduate.

Is it strictly necessary though?

If he gets his desired a job as an engineer why won’t he be able to repay his own tuition fees?

I'm plan 1, I pay no attention to mine! It is what it is,

Yes, the threshold is amended upwards over time. More slowly than inflation at the moment.

So how do people feel about these figures, for plan 5 repayment on a £30K loan:

earning £30K - repay £133K over 39 years
earning £40K - repay £60.2K over 20 years
earning £50K - repay £46K over 13 years
earning £100K - repay £35.5K over 4.5 years.

Figures from an online student loan calculator. This system massively, massively penalises low earners over their working lifetime. Such as mothers who go part time....

Uni is a waste of time and money for most people.

I got my degree a couple of years late as I didn’t know what I wanted to do. I did uni part time while working full time and qualified for the part time grants, so fortunately my fees were paid for me and I was given book money. It did help me in a way as I then got on a grad scheme, but equally, it wouldn’t have been impossible to get where I am now without a degree if I’d taken a different path when getting into work. It’s swings and roundabouts sometimes.

I definitely think apprenticeships are the way to go now. They’re far more broad than they used to be when I was leaving school.

Why? Those were the terms we took the loan out on and most of us were well aware we'd never pay off the whole balance, as was the govt.

It’s not a £30k loan though - it’s more like a £60k loan for a three year course.

£9,250 fees + up to £11,100 maintenance loan.

Does your calculation include interest? If I look at £100k income, £30k loan, it says it will be paid off in 7.3 years at a total sum of £42,551.

Also… not many grads are going to be getting £100k from the get go. 0.01%.

Oh ok. OP is complaining about paying off the loan over a 'lifetime'. If she doesn't want to do that she can pay it off surely.

From what I'm reading here it's cheaper to not pay it off in which case don't complain. Unless there are some credit score disadvantages to having it outstanding?

@SlugsWon I just bought a house and it didn't come into affordability for borrowing amount. I didn't have to declare it.. obviously they would have seen the payments on my payslips but that is it.

Yes - this is with Plan 5 terms and current interest rates. The numbers I chose were reasonably arbitrary, and I couldn't model for salary rises, you have to give a one off salary.

The point is that most people think the cost is the total amount you borrow. The real cost is considerably different and depends on how much you earn, not on how much you borrowed, with lower earners doing the worst.

That does seem punatitive.

But also I don't get how that works as when I put in 30k it told me it was £450 a year repayment a year, and that by 39 isn't 133k.

Is that the amount owed and then written off as it just goes up and up.

Or do you actually pay back 284 a month on 30k

@Frowningprovidence the calculators will assume salary rises over that 40 year period.

Just checked the calculator -it assumes that your salary goes up in line with inflation. The one I used was here:

https://www.yourstudentloancalculator.co.uk

and it does give a good breakdown. You can see the tipping point at which point your loan balance starts to decrease.

Treat it as a tax. For those parents thinking to pay off student loans to help their kids you would be better off using that money as a house deposit for them and not paying off the loan.

Sadly the interest starts from day 1, so by graduation the debt is much greater. And the interest rates on the plan than my DCs are on (2?) has gone up and up and up. I wish that we had been able to do what a number of their uni friends parents did….loan them the money to be repaid to us interest free, or low interest. The debts have skyrocketed, and repayments hardly cover the interest being added each month.

On plan 5, the amount goes up so you pay more but it's worth the same in the end. You pay (say) the worth of 1000 bananas, but if you buy the bananas several years on they cost more (and you're earning more. We hope)

Should it just be about career development? What about curiosity, research, invention, innovation?

Im not sure uni is worth it commuting from home as it's a half way house learning to be independent and making social links and joining clubs which often have evening activities. For parents it's a double whammy of unaffordable rents for young people wanting to leave home as salaries don't cover it and tuition fees. Perhaps sue government for not preparing parents when they bought in higher interest rate on loans and cut maintenance.
Other thing to go for is a UK equivalent to bidens loan forgiveness

We have friends in Australia where nearly all their friend group "commute from home". That's absolutely the norm. For example in Melbourne there is more than one university and they commute in rather than moving to another city.

Because 6% on anything over the threshold is still a big proportion of your money to pay for 25 years, and even more over 40 years? I'd be in favour of going back to what we used to have. 10% of students, comprising the most academic young people with a career requiring a degree in mind, are encouraged to go to university. Rather than the current system.

Everyone should go to Uni! Not going to get the grades for the course which would lead into a career? Never mind! Do a 3 year degree in Media Studies, or Japanese Pottery, or something else which will have no impact whatsoever on your earning potential. Go to an old Polytechnic and the course you could do as an apprenticeship will be coming out of your salary for 40 years but at least your parents can tell everyone that their darling son is at University now, so everyone who made a sympathetic face when he got a fistful of 3s and 4s at GCSE can STFU.

We've been selling kids down the river on the false promise of a land of milk and honey after you throw your graduation cap, and the Universities and the Government have just been rubbing their hands at all the extra money they are raking in, at little to no benefit for the people who were talked into taking the loans out.

If we go back to old 10% going to university we need to ensure there is a level playing field. It's bad enough even with a higher proportion of young people going to university, but there was very little social mobility with only 10% going to university.