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?

Most of those adults never went to uni or did so when it was free. They also got the same messaging as we did, just a small tax that is written off. The information on just how crazy the interest rate policy was was near on impossible to find. It was also the generation when the focus was on everyone going to uni. I do strongly recall the focus being in going to uni rather than having the audacity to ask questions about how the loans work.

You don’t have to have gone to uni to be able to look into things before you sign up. Lesson learnt, I guess (no pun intended).

So I took student loans for 1995-1999. I had free tuition and the grant for living was based on parental income. Both worked so they were meant to contribute a certain amount b it couldn’t actually afford it. So I took out the loans. When I started work I was earning a teacher starting salary of around £15k annd then after a couple of years got the repayment amount so I ended up paying them back. It was a few years after graduating. I rented for a year and then bought a house. After another year sold my house to move in with partner and basically used my equity to pay off the loans. Housing market was great and it was a decent amount. Kind of regret this now as fast forward a few years, married, kids, part time wage, divorced, single parent on part time wage. Oh and we bought a house that we sold for pretty much the same as we paid due to relocating. Basically house sale profit went on fees and deposit for next house. However house prices crashed and we ended up in negative equity for quite a number of years. I did go back to uni whilst working part time as a single parent to do my masters and took out a post grad loan. That was 8 years ago. I’ve just not hit the wage for repaying £50 a month direct from my salary after going from part time to full time but hang also taken a pay cut on the FTE salary compared to previous job.

I do wonder if paying off that original loan was a good thing. Maybe it actually was.

My eldest is only a year off thinking about uni. It is worrying.

Perhaps it’s time for the thinking to swing the other way and for people not to expect to go to uni by default (or at least delay it/do it alongside a job). There are plenty of other options.

I think it is interesting to actually nail down the following. Where does the Government get the money to pay out God knows how many millions of pounds in student loans?

I doubt if this money comes out of general taxation..So who is bankrolling this money?

Maybe the friend, the Bankers in the City of London? You know the people who really run the country.

What annoys me about this conversation is (mostly older) peoples first response will be ‘do an apprenticeship/ don’t go to uni’ okay but I’m 34 I don’t have a Time Machine to go back to aged 17 and make a different decision. We are talking about hundreds of thousands of people who were told they would pay back an insignificant amount and that it was a fair system- lied to- and who are now struggling for life under a misssold loan. Our parents didn’t realise we would be burdened in this way, we didn’t.

The conversation at hand is about how to rectify these unfair loans NOW for the people struggling under them. Interest should be scrapped and refunded for those who have overpaid in my view.

@StevieNic The amount you pay was ALWAYS linked to earnings. You earn more, you pay more. There was no lie. You just clearly didn’t understand. My DD is your age and paid hers off years ago. You had the £3,000 fees! What a huge advantage! No, there were not apprenticeships but if you are moaning about payments you must be doing well. They are insignificant if you earn £30,000. You obviously don’t. So well done and your degree has got you there.

When I completed by daughters student loan application, to confirm my earnings, I was unaware just how unfair this 'loan' is. Its likely she will never pay it off. It was not made clear to her that whilst shes earning less than the minimum the very high interest (more than mortgage interest) continues to be added. Even when she is paying the interest is eye watering.

Cleary there are issues with systemic unfairness. It's not all fine and dandy. People aren't just moaning for nothing.

That's why the treasury are reviewing it all and it's all being exposed. Lots of people are realising what a shit deal it was and want something done about it.

People are realising that they don't want the same financial burden for their own children, are considering other options for them.... options that weren't available back then.

@LiviaDrusillaAugusta my Mum wouldn’t have had a clue what the contract meant had she reviewed it for me. The teachers didn’t understand it.

Not to mention she was a very unwell woman (alcoholic bipolar) - not all young people have parents who are able to support them and university shouldn’t be out of reach for those from deprived backgrounds.

Exactly...it is the Plan 2 loans that are the worst. There's a petition on the mn petitions site, worth a sign and share though I don't particularly like the elitist wording of it...it's the signatures that are important and at least whoever set it up had the ooomph t do so

The bit people didn't understand was the extent of the interest. It's not a small amount of interest, it's huge.

Exactly, it's not really the paying of the original loan back. I'm pretty sure most people accept that they have to do that (even though the fees are extortionate these days!).

There are other issues as previously raised (like fair access to further education and professional careers, change of terms, discrimination, etc), but mainly It's the way the compound interest is applied and the length of the term. Leading to perpetual debt over a life time for some.

Some people have it a lot worse off than others, I totally get that. I'm not suggesting that my situation is the worst by any means. Everyone has their own individual experiences.

My intention here was really to highlight and discuss all the unfair issues having really sat and thought about it, spurred on by the current review.

Personally, I have put up and shut up and made my repayments for over 20 years thinking that there was nothing I could really do about it, but not really getting anywhere with the debt. My original loan was 23k, with interest it went up to 35k. I'm still 20k in debt today, 26+ years after I started uni. Madness. So yes I am peeved about that. Again, not saying that mine is the worst case. I feel really bad for people who have other much worse off deals, on Plan 2 for example.

This is the first time "unfairness" has ever been looked into properly so am hopeful there will be a positive outcome.

@Sammy900 But who is asking you for that money? It’s still based on your income. It’s irrelevant in many ways. You cannot just pay your fee amount because fees today are £9500 approx so the government needs money from the loans to pay for HE and the taxpayer is in to the tune of £250 billion worth of unpaid loans! It’s debt of course and now the people who only paid £3000 fees don’t want to pay! Just out of interest, how much do you earn?

Your point just demonstrates that the system as it stands isn't fit for purpose. There might be £250 billion in unpaid loans but why? Is it fair that only successful graduates pay this back as a collective life long "tax"? Unfairly being penalised for succeeding in their own individual careers. It's their fault for being a professional, so they should pay for it all and everyone else's unpaid loans to boot?

Shouldn't the government look at other ways they can guarantee the loans are paid back, through employers for example, for the jobs that stipulate that degrees are essential.

Why is this an individual student burden only? We don't make the rules up. A lot of people have to take a loan out in order to access further education to be able to work towards a career. You seem to be coming from the perspective that people can always fall back on an option not to pay their loans back and can always just never use their degree. As if they only went to uni to get some "free" money and education for nothing to then decide not to have a career or use their degree after all as if it was some calculated con.

Life isn't like that. People don't usually pretend to have career aspirations in a contrived way just to get their hands on some state loan money they never intended to pay back. Its bonkers to think that. Reminds me of when I was younger and people use to shout "tax dodgers!" at students haha. Yeah ok mate I'm just here to live in poverty on your hard earned tax contributions for the cheap cider party, not really to learn anything or ever get a decent job and pay my taxes myself. Oh yeah by the way, it's a loan not "free money".

Is there an element of Ponzi scheme? Financing new loans from the interest and principal paid back on the old loans?

Personally, I have put up and shut up and made my repayments for over 20 years thinking that there was nothing I could really do about it, but not really getting anywhere with the debt. My original loan was 23k, with interest it went up to 35k. I'm still 20k in debt today, 26+ years after I started uni. Madness.

You must have been paying very, very little per month to be in that position after 20 years of payments.

Well said, OP

Yes for quite a few years due to life circumstances, maternity leave, children, working part time, etc my loan was accruing loads more interest than the repayments being made back. I only really started to pay more off than was being piled on in interest to start chipping away at the actual loan in say 2016 onwards and I'm now making substantial contributions. Many others aren't. I'm not in the worst position. I appreciate that. People on Plan 2 have ridiculous interest rates compared to me. I dread to think how much that would've amounted to if I was on plan 2. I'm fighting the cause for all not just saying woe is me.

If the government recognised that this would be a life long debt, then why didn't they also recognise that major life events might impact on the ability to repay this back. There are no pauses to the interest accrued, even when you don't qualify to be able to make any repayments, it just keeps snowballing.

If the government recognised that this would be a life long debt, then why didn't they also recognise that major life events might impact on the ability to repay this back.

I just fundamentally think that a loan that you don't have to make any payments on if you earn below a certain threshold is making accommodation for the fact that life events might impact your ability to pay - far, far more generous accommodation than any other form of loan you could ever get. Essentially, your student loan didn't affect your life at all from when you graduated until 2016 and even though you paid so little in that time you still pay just a fixed percentage per month now - you don't have to 'make up' that long period. Don't you think that's pretty great, really?

But the interest was adding on every day for all that time. That's what "makes up" for the time earning below the threshold. And I will end up paying all the interest because it's not written off for another 23 years for me.

But do you think you should end up paying less because you took a long time to pay it? Because that's what not paying interest means.

Only recent loans are 40 years. Before that they were written off after 30. There’s a lot of whinging here but people benefit from the degrees. The repayments are income based and the 40 year loans are a bigger issue for the less well paid as they last for longer. The 30 year loans obviously are not as bad.

Mine is 43 years

Just to quote an earlier post from H202too, commercial loans in comparison don't keep accruing interest for potentially a lifetime if you aren't in a financial position to pay them back,. You could (for arguments sake) have a "clean slate" after 7 years if in financial difficulty, and that is deemed fair by the FCA.

Student loans don't pause during unqualifying years which would be more reasonable, they keep gathering compound interest and then come back to sting you when you are finally better off and are then faced with a much larger debt to pick back up until you retire.