Student loan repayments are completely unfair

[Sammy900]

I've thought for ages that student loan repayments are a complete rip off. I'm so glad they are now all going under review.

They were mis-sold at the time as a minor "graduate tax" that you'll barely notice and there weren't any other options available to enable low income households fair access to higher education.

I didn't realise then that this would turn into a lifelong debt, with snowballing interest that makes it impossible to clear.

I'm on the original plan 1 which just goes on and on until I'm 65.

The next plan 1 deal after 2006 then decided that 25 years was a fair term (not 47 years!!). Such a huge difference in what will be paid back.

Any other standard loans have much shorter terms.

It was based on the assumption that you would continue to be a low earner for the rest of your life and not move up the career ladder.

I really think that the government / treasury should look into the fairness of the terms of the original plan 1 loans too not just Plan 2.

I think you can submit your case to your local MP and with the treasury committee if you feel that you are paying back a student loan on unfair terms and now is the time to do so.

I really hope this gains momentum and something can be done about it finally.

What are your thoughts?

Seems very unfair and makes university an unattractive option

All the student loans are fucking outrageous. As you say plan 2 and the original plan 1 especially.

I’m sure Martin Lewis meant well but he didn’t half bang on about they were nothing to be concerned about
The freezing of the threshold plus ridiculous interest is a hideous trap - these students have been shafted

Yeah I remember his advice a few years ago when I looked into it saying, just ignore it. Don't worry about it. I wonder if he's changed his tune now?

I work in education, and hosted student finance talks. The speaker was often a university rep or someone from the ‘student finance roadshow’.

Those talks always talked about compounding interest.
I do think they need to be reviewed though , but I’m not sure a shorter mortgage style loan is the answer

Totally agree.
Signing 18 year olds up to lifetime of debt is unconscionable.
There needs to be a lot less universities and a lot more on the job apprenticeships.

I’ve never earned enough to pay my plan 4 one back, I have about 8 years before it’s written off. They take money when I get my bonus then offer me a refund when they get my p60. When I called about my rent d the guy said ‘ you know this balance goes back into the overall amount owed?’ Yep give me my £90 please.

I am on plan 1 (I think... loan taken out in 1999).
I have probably payed back a total of about £30 over the years. I dropped out my course, but the debt is still hanging over me.
I don't even know what I owe as I can't log in to my account, as I had the loan pre-internet.

It is a massively unfair thing if you cannot progress quickly.

I took a student loan to do my teacher training. I triggered the repayments after a year or two... But at that point also triggered the interest which surpassed the payments.

And so 9k became 11k.... I continued to progress and am now eating away at it. But if you don't have that assurance of a higher pay scale you are f**ked.

I have been teaching for 19 years, with some part time and mat leave. I had an original plan 1 and still owe the same amount I started with. I might be able to pay it off in the next 5 years.

I have a plan 1 and a plan 2. They are both gathering interest at a faster rate that they are being paid back. I do look on it as a graduate tax as I don't have to pay it if I stop work.

It is the amount of interest that is added that is tough. As neither will ever be paid off- but will be written off eventually. I am not a huge earner so payments are manageable, but it does mean it is just increasing

They need to look at reducing the interest rates and they would stand a chance being reduced.

One thing, if I had two part time jobs I wouldn't need to pay it back. As they don't combine incomes

It's infuriating isn't it. I'm sure for years before I was earning enough to pay it back it was just sat there gaining interest for all that time. I've hardly touched the original amount I took out and it's 22 years later!

I’m on a Plan 1 replacement but post 2006 so mine does have an end point in sight. So I’m one of the lucky ones. Still 11 years though. I’ve worked full time since graduating in a job I needed a degree to do but just in a low paid sector. I think in 15 years I’ve paid off about £2.5K. The compound interest on my student loan seems to be doing a lot better than the compound interest on my pension pots!

I’m at a stage in my career where my repayment is manageable. To clear my loan quicker, I’d need to get move up the career ladder but any jumps in salary and my repayment will be quite big. But it would apparently clear it in about 5 years. I feel like I need to make a big jump, suffer the short term pain for the long term gain.

It’s a discriminatory policy. It negatively affects women who may take an extended period of absence from the workforce to have children, sometimes multiple leaves of absence and may reduce their hours after. The repayments work for those in finance or law who can quickly be on a higher wage and move through the salary brackets quickly but not really for anyone else. It’s also only taken out by those from working class backgrounds.

I wouldn’t mind a graduate tax because at least then it would be a level playing field.

YANBU. I’m on Plan 1 and had no idea that I’d have the debt till 65 when I took out the loan in 98. As you say, the interest snowballs and I’m never going to clear it before then.

It feels very unfair. If I’d been a year or so older I’d have had a full grant as my parents were low earners.

I was on Plan 2. Higher rate tax payer yet still not able to make a dent in my loan. I'm not sure how many years it would've taken me to pay back but it was decades.

I ended up taking out a loan for my balance of 18k, bit the bullet and will now pay it back in two years of being particularly frugal.

I can't help thay think that uni, for the most part is a con. And as for Martin Lewis saying about thinking of this as a graduate tax - I think that has been really unhelpful to the 18 year old out there that can't think further than next week.

Its almost criminal having these kids sign up for a massive, possibly lifelong financial commitment when the reality is they would be declined by the bank for a 1k credit card.

We need more apprenticeships and work based qualifications.

I'm considering getting a loan and just paying it off quicker...but will wait and see what comes out of the review first. Hopefully when scrutinised they'll see how unjust it all is.

How is it fair access to further education / professional careers for the lower income kids when later on they are penalised for the rest of their life when they do actually get a decent job and pay their taxes on top like everyone else?

It wouldn't be so bad if it was just the original loan paid back with a small amount of interest maybe...but to double triple the charges and for it to go on for 47 years until you are 65 when others are written off in their 40s is just criminal.

I can't believe they've got away with this for so long

Lucky enough to be old enough (ha ha) not to have gone to uni in the student loans era, however my children are both approaching university age in the next few years.

What are people’s thoughts on the current loan?

I'm 45 and paid mine off about 12 years ago. And I'm not a particularly high earner. It's hardly a "lifelong debt" in most cases.

I’m conflicted on this now.
The interest is unfair , and that higher paid grads have an even higher interest is completely unfair and the time you have to pay it is worse than a mortgage.
If it truly was a low cost loan many more would clear it earlier in their careers.
BUT I am reading articles with people who have been students longer than the usual 3 years then surprised their loans are higher than everyone else.
They’ve basically lived off the tax payer for 4-5 years or even longer and to now complain seems a little rich of them.
And also people that have paid v v little in their early careers as they didn’t earn much and now complaining when they have to pay more.
They weren’t complaining when they were paying nothing or £30 a month. They weren’t happy with the loan system then.
So on balance yes it’s unfair and should be fairer but some people could also have made better choices themselves, maybe worked first to pay for their masters and living themselves rather than taking a loan.

One of the more recent loan plans paid back for 30 years, but the Tories were worried young, academic people from lower income families weren't being punished enough for having the audacity to progress to higher education, so raised it to 40 years. As if young people don't have it hard enough already.
Obviously they knew that those young people who were fortunate enough to have had mum and dad bankrolling it would be unaffected.

You don't seem to understand the system. Whatever you owe when you get to the point where it is wiped is...wiped. Not repaid. Doesn't matter if it's capital or interest. If it was a mortgage that wouldn't happen- you keep paying. Most people never repay the capital they borrowed, therefore the interest is irrelevant. It's also the only type of loan where repayments fall or stop if your income falls.

If you feel your loan is unfair please confirm that you have already repaid all the capital you borrowed.

It’s such a difficult problem. The UK has pushed the cost of higher education onto individuals, which has created these massive student loans, but there’s no appetite to increase taxes to increase public spending on HE. More and more jobs require higher level skills but the graduate wage premium has been eroded. Apprenticeships are great but it moves the cost of education and training onto employers (including public sector employers) and they can’t/don’t want to pay for it either.

Part of the loan is about living costs while studying, so one solution could be to restructure terms/semesters to enable students to either work while studying or to complete a degree in two years rather than three. The criminally high cost of student accommodation needs to be addressed as well.

The unfairness is in the fact that if you are a middle earner you end up paying back more than if you are a high earner. It’s a regressive tax.

Totally agree. He has a lot to answer for. He really over did you should definitely get a loa even inf you can afford not to and forgot to mention till the impact of compound interest and the potential for rules of the game to be changed.

But if most people never repay the capital what is the point of the punitive interest rates? That’s the bit that is unfair not repaying the capital. Make it the same as inflation at most with a cap for high inflation years. That would be fairer and then, like magic, majority of grads could actually repay their loans within a reasonable number of years.
why have massive interest if not to artificially inflate the debt and keep grads indebted due to compound interest