To not class student loan as ‘real debt’

[Mamamamamm]

I read a story recently of someone saying about the interest on student loans and that they went up to £40k a year and it meant more interest was being added on to their student loans so they were no closer to paying it off. They said they had sat their children down and said that they should really think about if they really wanted to go to university because of the amount of debt.

Now, let’s forget about the principle of it - that it costs so much yet you’re training so you can contribute to society etc. But , you only pay the monthly payments once you’re earning over a certain amount . The amount you pay also depends on what you earn. So for example , I am on just under £30k so pay £7 per month , I’m due a promotion that will take me to £40k and it will go up to £86 per month -but , I’ll be getting an extra £500 per month in my take home so it won’t affect me really as it’s just like tax , NI - it’s going before you get your take home and nothing you can do. So each time you earn more, yes it’s taking more but it’s not going to leave you short ?? It’s also something that is written off after 30 years so you’ll never pay it off anyway and won’t have to pay it if you lose your job , payment will reduce if you take a lower paid job etc .

Yes I’m sure it’s annoying to see that balance not really going down but it’s not something that affects your credit score . Am I being naive here ? Surely it’s not a reason to deter your children from going to uni ? It’s like saying don’t earn more because you’ll pay more tax ?

Genuinely don’t get it , please feel free to educate me if this is a really naive view !

The new loans are a shockingly bad deal. I'm not surprised those with them are fighting back. There is no need for interest rates to be so high.

If you are a higher earner you will pay a huge amount back in interest.

I have felt shackled and mis-sold by my loan and I am on plan 1.

I will be persuading my children against going to university unless the career they want absolutely dictates it. These loans will follow them for life.

It’s still a debt you owe though, even if the terms means you pay less when you earn less and it will eventually be written off. However, surely the point of getting a degree is to earn more?

My view is that you should only get a degree
if your chosen career can’t be done without it. There are so many different routes now. I’m the only on of my siblings without a degree. Yet financially the most successful. None of them use their degrees.

I also believe that the view of travelling away to uni should be reconsidered now the costs are significantly higher and the terms of the loans have changed. Who’s to say those terms won’t change again for the worse.

Wait til Op goes in that bracket. They might start changing their tune…

Wrong. It’s now the affordability factor. My daughter was asked about her student loan payments when she recently applied for a mortgage. It’s a definite cost of living.

If you get a bonus how is half taken from you? 9% of it will be taken. If you get a bonus it’s mostly tax that is taken

Which is what the poster said. You’re assessed on actual take home so the fact that 9% is taken off is included in the mortgage calculation. Same as the £200 a month you pay on your credit card/car loan/childcare is included in the assessment.

Your monthly repayments are recognised when your mortgage (or any other sort of credit) affordability is considered.
Some can’t get a mortgage, and won’t for years to come because of the perpetual repayments.
I guess that’s a problem.

We are certainly talking to our DC about the wisdom of running up debt at Uni as opposed to doing an apprenticeship/internship instead.
I guess it depends what people’s qualification requirements are for what they want to do for a career/job.

The difficulty is getting a job without a degree is hard as so many have them and they are often a CV sifting tool.

Plus so many jobs/employers now require degrees when those roles didn’t in the past.

It is also a 'tax' that disproportionately affects women for longer.

When I had a student loan (now paid off), I fou d the 51% rate over £50k disincentive enough

To think some people will be on that rate for almost their entire careers… awful.

It's debt. Debt is money, owed by one party to another and if you go into that debt to just use the get out clause that you haven't earned enough to repay it I think that shows a piss poor attitude myself.

I am going to pay my children's fees and living costs up front because I would never expect that they would go onto a degree course with the entire intention of not earning above the threshold for repayment. It's just not what you do.

The student loan repayment tips the effective tax rate to 51% over £50k now.

The government taking more than 50% of earnings is high - even on the additional tax rate you don’t pay that, it would be deemed unacceptably high.

The government taking more than 50% of earnings is high - even on the additional tax rate you don’t pay that, it would be deemed unacceptably high.

its crazy, particularly when 50k today is the equivalent to 27k in the early 00s!!!

Do you think now is the time to go back to the days when you went to University for specific careers, doctor, lawyer, teacher etc? I was in a low paid CS role (barely above minimum wage) and I was one of the few that didn’t have a degree.

I can see less people will be going, basically universities got greedy and will, over time reap the results.

But even without the loan it’s 40%. Maybe plus NI? Point is a big chunk is always going to be taken.

Open to all other options to fund HE!

If NMW keeps rising as is, with the threshold frozen until 2030, people on NMW will most likely be paying off SLs in 2029....

Yes it's been said for years that too many people are going to university. I think the tide is beginning to turn now

I have some sympathy with that approach, but not all careers that need degrees are well paid. I’m thinking of teaching and nursing in particular.

I’d like to see student loans gradually written off over 5-10 years for teachers in state schools and healthcare professionals who work in the NHS. I’m sure it would help recruitment and retention.

I pay £300 a month student loan
I pay £400 mortgage
My half of the childcare is £1200

Could really do with that £300 to be honest.

I only have plan 1, but I feel like I’ll be paying it off for the rest of eternity. I don’t even think about it. Daughter is at uni now doing a five year course, and the amounts horrify me, but she talks like it’s a tax to pay off her education. If education was an upfront fee without loans, she would never have fulfilled her dreams so 🤷🏼‍♀️. Son is going to a local uni so I’ve told him to get a job and not take the living loans!

Neither of my children went to university. After three years in the workforce each was on same/similar salaries to graduates where they work, but their take home pay is more because they aren’t paying loans off.

I can see both sides.

On one hand, successive governments have chosen to structure student funding as a loan/debt system. To that extent, strictly speaking graduates do have a debt.

From the individual's point of view though, it's probably unhelpful to think of it as a debt. It operates more like a graduate tax, with repayments depending on income and stopping, with the "debt" being written off, at a particular age. It doesn't affect credit worthiness, except to the extent that it reduces your available income for affordability calculations.

IMHO it would be much better to call it a graduate tax, and to avoid the seemingly unjust situation where higher earners may end up paying less in total than those earning less.

That's a regressive tax because the less wealth a person has the worse they are taxed. The worst kind of taxation, surely?

I agree OP. It’s the only loan you’ll ever get where the repayments will stop if you don’t earn enough to repay it. Any other time, even if you lost your job, your creditors would be after you every month even if you were only on JSA.

It’s debt with different rules. 🤷‍♀️