To not feel very sorry for some student loan whiners

[Viviennemary]

There's been a lot of complaining about student loans and its wrong they seemed to have move the goalposts re paying back. StillI I read about this woman complaining her student loan is £120k and is going up every year. She was a student for 10 years fgs. Just as well the tax payer wasn't funding her. I hope these folk arent just going to be let away with not paying.

DD worked 32 hours (which for her role was part time but I think is generally considered full time) around lectures and seminars.

She didn’t have placements or labs etc so her course was lower contact than I imagine some are. It was humanities and slotted in fine around work.

Strongly agree with this.

Also agree with PP that for the most part students’ experience during the pandemic was suboptimal. At the time, everyone was at a genuine loss. To a large extent I believe we did the best we could with the data we had, even if hindsight would suggest changes.

Much more concerning is that the pandemic seems to have shifted expectations all around. Key aspects of the implicit contract between students and staff have broken down and the qualitative aspects of learning have changed for the worse. Yet, because staff are desperately overworked and less is overtly expected of students and the new way is less demanding, no one is challenging this.

The fact that students aren’t (on the whole) terribly engaged with their studies seems irrelevant. Needless to say, those who are remain a joy.

I am not British. I am also unclear on this point.

Is prestige the issue?

For avoidance of doubt, these professions are unquestionably worthy of respect and good pay. Why does that equate to a degree?

Thanks yes it’s probably more doable for some degrees with lower contact hours.

This is true but it is a question of the chicken and the egg.

For example radiographers make good money and are arguably worth more. If they could routinely qualify without a degree, that would shift a bit of the salary data in favour of the non-degreed (because market forces would keep salaries up).

Similarly some well paying accounting firms offer apprenticeships leading to qualification and a permanent job, again without a degree. That’s another small salary shift closing the gap with the degreed.

Some senior workers in the skilled trades have a better hourly rate than professors!

Etc

The more good training pathways we have, the less the gap.

Or maybe we should call it what it is: a loan to pay for a university degree for people who can’t afford the fees upfront.

I’m paying interests on a mortgage, people whose parents bought them a house don’t pay anything, I’m not calling it a disgrace though, that’s just life.

(I’m not saying the way the loans are structured is good, just answering the ‘tax’ aspect).

Brilliant post, sets out so clearly just how wildly unfair the student loan system is. The richest students pay the least. Mothers, lower earners, and students whose family can't provide financial support pay the most.

In the UK, many professions are now only open to those with a degree. This is a formal requirement in many institutions like the NHS, or professions for which you need a registration with a governing body. You are just not allowed onto those careers without a degree.

This is what I am challenging - the degree is actually unnecessary, it is just a gatekeeping mechanism set up by those in power, to prop-up the universities.

You can scrutinise all you like but the problem is, for most people it's a choice of take the loans or not go to university at all. I agree that there are too many graduates now, but it would be so wrong to only restrict university to those who can afford to pay. What would you have said to my extremely academic DS who got all A*s at A level? University was exactly the right place for him and he did extremely well there. He has graduated with over £80k debt (4 year masters) and is working in a job that he absolutely needed his degree to get and uses every day (stem job) - great. But graduate salaries are now so poor. His job pays only a little above minimum wage so his debt is increasing fast. The point is that wage stagnation/deflation, particularly in relation to the cost of living, has meant that the jobs which need a degree no longer attract a decent salary. And having taken out that massive loan, with the freezing thresholds it's no longer true that you will only start repaying if you earn a good salary. I would hope that his salary will rise significantly, but the interest his loan is attracting is likely to mean that he will in the end repay significantly more than his loan and still never clear it. He (and we) are happy that the loan exists because it enabled him to go to uni. We just want the repayment terms to be fair.

My son had the same. The website clearly specified all the face to face contact there would be for labs, seminars etc, with only lectures online. There was going to be something f2f most days. As soon as he arrived it was changed to all online with I think only one f2f lab a week. Then of course there were the quarantine periods when he was shut in his room with sandwiches delivered for meals. He eventually came home and did his course online for the rest of that year. But it still cost him £8k in accommodation fees (paid by his full maintenance loan) and the full course fees for online only instead of all the labs and f2f he was promised.

Sorry, I should have been clearer. I am not British but I am a Russell Group academic.

I think a major problem in the UK is that many people associate a degree with membership in the middle class. As long as that’s the case, it will continue to be desirable.

In my home country you can be socially respectable as a skilled tradesperson, HCP, etc. The ramifications are far reaching.

I agree completely that a degree has become a facile gatekeeping device. I don’t know that it is so much to prop up the universities as it is laziness. (I am in STEM so the issue doesn’t arise in my field. Also, the occasional person with real talent but no degree can usually wiggle in somehow though certain pathways will be closed off).

In any case, I have said above I would like to see more non-degreed training pathways to good employment. For this to happen and be taken up at scale, we need to decouple the degree from a class-based signifier.

I borrowed just the tuition fees, £12,000 for a 4 year course as I was working FT while I studied. It was a degree related to my job. It wasn't necessary for my job, but would help for progression.

I checked this morning, and my current balance is £11,500, after 6 years of payments. I started paying back at £85 a month and my current salary means I am now paying £114 per month. So taking an average of £100 a month to repay, I have repaid so far £7,200, on a £12k loan.

An online calculator suggests I have another 9 years left before I am clear, on my current payments.

I could have got a bank loan and repaid it back in less time and probably repaid less money. I have no objection to paying it, but at least make it clear and fair.

Yeah yeah, I had 3 full-time jobs, did a full-time degree and had triplets 🥱

There is a move towards hcp apprenticeships, but it is a slow transition and places limited. The degree programmes were set up to give a more professional framework and raise standards.

But it isn’t actually true. The Plan 2 loans were explicitly structured so that higher earners pay a higher rate of interest ie the rich pay more. So you have to be earning £51k to be paying the highest rate of RPI + 3 %. Given that the median income in U.K. is £39k, those earning £51k are higher earners/rich.

Students from lower earning families can get bursaries from some unis which don’t have to be paid back at all. If your household income is £16-50k you can get a non repayable bursary from Imperial of £4.4k per year, at Cambridge you get £1k-£3k, at Oxford it’s similar.

Less than 5% of UK students pay upfront - a smaller % than go to private schools.

So why don’t you get a bank loan? This is what I don’t understand. You’ve done the calculations and yet you aren’t taking the logical step.

Is it because at the back of your mind is the fact that there’s a possibility - however small - that you may fall on hard times and never have to pay it back in full?

In my opinion, the cancellation feature after 25/30/40 years is stopping people make choices that would make them better off.

I can’t understand why any parent who is in a position to do so wouldn’t take out a larger mortgage at a much lower interest rate than the Plan 2 loans, repay the loans and get their offspring to pay them back. They would save so much money. (Obviously not everyone is a homeowner, but those that are could do this.) It can only be because of the chance of cancellation.

Plan 5 loans are a different story as the interest rate at RPI flat is probably comparable to the mortgage rate.

The problem is that the ONS data is backward looking (it has to be!). It doesn’t reflect the reality of students graduating today where the graduate premium for most is non existent.

Also the graduate premium varies massively by region in the UK. It’s held up reasonably well in London, but elsewhere it has declined considerably. So poor students from poor regions who go back to work in those regions, do particularly badly out of going to university and yet pay the same fees as those from London.

The decline in the graduate premium as university participation has increased is a uniquely U.K. problem, not seen in other developed countries in Europe and the US.

There’s an interesting discussion on it in this blogpost

https://tomforth.co.uk/graduatepremium/

And re mis-selling

The govt was trying to do 2 things at once:

• increase % going to university
• increase funding for universities

But these 2 policies were in conflict with each other. The government had to sell student loans as “don’t worry you’ll only pay it back if you earn oodles of money” otherwise they couldn’t simultaneously sell the idea that they wanted more people to go to university. There was an obvious conflict of interest which stopped them being entirely honest.

Also because there’s a delay in people realising the enormity of borrowing so much money, govts have got away with it for a long time.

I don’t agree with this take - the killer is fees of £9k per year, not the maintenance loans. I also borrowed for a post grad, not to avoid getting a job, but because it was required for my career. I don’t mind repaying it, it was a loan, but I do mind the fact that after almost a decade of paying it, it’s gone up by £8k and that the government has unilaterally changed the terms of the agreement.

In general though, if you got your university education for free, you absolutely have no right to criticise those (esp on plan 2) for feeling screwed over (not you specifically, but in general)

Oh so all those graduates in Pharma, the NHS, Defence, Education, Life Sciences etc etc that we so desperately need are a bunch of lazy arses....

Nice to know what the 'right wing think of young people...

On the paperwork, the T&Cs of the loan changed, 17/18yo's told the TH would increase in line with inflation... yeah but Govt didn't really mean that, so changed it.
Used RPI to measure the rate of interest, Govt has discredited RPI for everything else, no one told the student the interest rate would go up the more they earned.

So not only does a well paid worker pay far more in tax, lose Child benefit/Childcare, they also have a far higher interest rate more too.

No private company would be allowed to do any of the above, which is why Govts wont let the FCA regulate student loans, they know they are a scam.

@Alexandra2001

No private company would be allowed to do any of the above, which is why Govts wont let the FCA regulate student loans, they know they are a scam.

Yes indeed, I mentioned above about how the regulated financial services sector have to jump through hoops to do "due diligence" and "Know your client", have to give clear warnings to clients, etc., but none of that applies to student loans where students just click a couple of boxes on the webpage. That wouldn't be allowed if that same student wanted a loan, pension, life insurance, etc., as there'd be loads of warnings if done online or evidence of proper consultations if done in person. You are quite correct about them being a governmental scam.

Most lump-sum unsecured loans are made for a defined period and rate, and the repayments necessary to repay the loan over that period are calculated and compared against the borrower's income to check for affordability. It is considered irresponsible to lend in a way that deviates too far from this process.
Student loans do not stick to this process AT ALL.
Repayments are calculated as a function of the borrower's income, and interest is calculated as a function of the amount borrowed. Since those two amounts are in no way related there's scope for all sorts of unintended consequences, depending on how each individual's career progresses over the decades after they leave university. It's a sh*t-show.

The Plan 2 loans were explicitly designed to be progressive so that the higher your income the higher the interest rate, up to RPI + 3%. That feature hasn’t changed so students didn’t read the Ts & Cs if they think this is a new feature. The problem is that graduates on £50k don’t think of themselves as higher earners. (They’re HENRYs!)

In 2022-24 govt stepped in to temporarily cap the interest rate as underlying interest rates were so high.

One egregious feature is that the maximum (“higher earners”) interest rate is levied while the students are still studying so have no or very little income at all. I can only think that govt did this because they thought no one would notice. Dreadful.

@TunnocksOrDeath It’s been a shit show for tax payers too and any business paying tax. So many loans were not/are not repaid. The certainty is that payments are linked to salary. The difficulty is the income rate is low and of course higher tax comes in at around £50,000 too.

We do of course need graduates but not as many of them. We have not got figures on grads without grad jobs or no job at all but it’s inevitably much higher than it was. The earnings premium is getting smaller too. This is because we don’t have growth and there are not enough grad jobs and we have a huge public sector which is not productive.

Young women are more likely to do Mickey Mouse degrees than young men and they end up earning less than working-class men with a trade by age 30.

It's great to get A-levels in literature and the Arts but they won't pay the bills.
Young women need to be actively encouraged to focus on stem subjects - that's the way to close the wage gap.