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Higher education

Talk to other parents whose children are preparing for university on our Higher Education forum.

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Original poster

Graduated 2015 - shock of loan cost!

165 replies

goingmadinthecountry · 17/05/2016 18:29

Dd1 graduated last year and her fees loan (didn't have maintenance loan) has increased already from the £27,000 for fees to £30, 160! Obviously lots of people are in the same boat but I'm truly shocked at the amount of interest already. Next year's MSc will be another £10500 before living expenses. Can't see her buying a flat anytime soon!

I think it's the amount of interest that's shocked me the most.

OP posts:

ItsAllGoingToBeFine · 18/05/2016 11:16

Surely it would be simpler to go back to free education? Ie the government gives the money to the university per student rather than a complex and expensive bureaucracy involving loaning money to students, and administering the collection through wages at a certain wage level, especially considering that almost half of loans won't get repaid.

Original poster

goingmadinthecountry · 18/05/2016 11:47

I'm 52 - I'm pretty sure I'd be feeling demoralised 30 years after my PGCE knowing I had accrued a huge debt and the interest meant it wasn't going down at all. Like NewLife, I don't like debt and have brought my children up the same way. It's depressing.

It may well have stopped me from returning to work when I had to pay childcare.

OP posts:

jeanne16 · 18/05/2016 12:23

It will also be taken into account by banks when looking at affordability of mortgages. A friend was quizzed by her proposed lender on a £4.99 monthly direct debit. Of course they will take the student loan into consideration so it will affect the amount your DC can borrow.

AyeAmarok · 18/05/2016 13:13

NewLife4Me thanks for the inference that I am someone who isn't bothered by debt!

I have a very sensible attitude to debt. Other than my mortgage (which my huge student loan had no impact on*), I have never had any debt. I own my car outright, I don't buy things on credit, have never been in my overdraft, if I don't have the money for something I wait until I do rather than stick it on a credit card. I don't have a 'bad attitude to debt'. My parents were the same.

Student loans are not considered "debt" in the normal sense of the word. So if you are teaching your children that it is something that is 'typical' debt, that they need to worry about and is going to ruin their lives, to the point that it will stop them deciding to go to university, then you are doing them a massive disservice.

*If when I took out my mortgage I was pushing myself to my absolute limit financially they may have taken into account that I had £50 a month less net income to put towards the already tight mortgage payments, then the bank may have mentioned that. But as I'm not stupid and was being sensible, when I mentioned my student loan the bank manager/mortgage advisor said "Oh that's OK, we don't count that as debt".

The scaremongering on this thread is awful, and very ill-informed.

DailyMailFodder · 18/05/2016 13:38

The scaremongering on this thread is awful, and very ill-informed

I agree,

It would be a shame if people are put off going to University because they dont understand the way student loans work.

jeanne16 · 18/05/2016 13:47

When did you take out your mortgage, Aye? The banks have tightened up considerable recently and ask for all outgoing so when assessing affordability.

AyeAmarok · 18/05/2016 13:54

It was only a few years ago, after all the tightening they kept telling me they had done.

Which incidentally was way less tight than I had been expecting, I think that the rules are still pretty lax to be honest, they were trying to throw way more money at me than I needed or wanted.

hayita · 18/05/2016 13:58

Surely it would be simpler to go back to free education?

With over a million students in undergraduate education at 10-15k each, this would require upfront payments by the government of 10-20 billion or so each year. So either all people may more tax (1k+ per year more) or we accept our national debt increasing substantially. Neither are simple solutions.

2boysnamedR · 18/05/2016 14:05

Does the debt effect applications for further loans like mortgages?

Thing is that the government change a lot of rules without consultation and sometimes without making it common knowledge.

I am more worried that for my ds that they might change the rules down the line.

Like with pensionable age, I can't make hard and fast plans for my retirement because the pensionable age has gone up ( twice I think) since I started working.

How do we know students loans won't be taken out post 30 years in future?

ItsAllGoingToBeFine · 18/05/2016 14:33

Does the debt effect applications for further loans like mortgages?

Yes, of course it does. Any loan will be given based on the ability to repay, so any commited expenditure will be take into account.

2boysnamedR · 18/05/2016 14:35

But is that in context to the repayment? Like its £60 a month off your disposable income - not "hmm you have a outstanding debt of £50,000"

ItsAllGoingToBeFine · 18/05/2016 14:36

However, as student loan repayments tend to be quite low, although they are considered, they may not have that much impact. However, the government is or has sold off most of the student loans to private companies, who may be less generous in their terms.

AyeAmarok · 18/05/2016 14:49

But is that in context to the repayment? Like its £60 a month off your disposable income - not "hmm you have a outstanding debt of £50,000"

Precisely.

Don't let the doomsayers on this thread worry you, they are catastrophising because they don't understand them properly.

I have one. It's no problem whatsoever and had no impact on getting a mortgage at all. It is 100% NOT a reason to not go to university to do a degree that will get you a good job.

I sometimes wistfully look at what my net take home pay would be if I didn't have a student loan, and imagine what I would buy with it. Then I remember that I would have anywhere near as much money now if I hadn't gone to university and that I had a great time there

AyeAmarok · 18/05/2016 15:21

And actually, as the repayment threshold for the new loans doesn't kick in until 21k (the old threshold is quite a bit lower) the students with the new loans will actually have slightly more disposable income each month than they would have under the old repayment system. I think it's to the equivalent of about £400 a year or so, therefore more available to save and pay your mortgage.

It'll just last longer.

Original poster

goingmadinthecountry · 18/05/2016 15:22

I certainly never intended to put anyone off going to university. It won't stop dd3 going in due course. I just think to have accrued over £3k interest when the base rate is so low on the new 9k a year rate looks an awful lot when you see your first statement.

Maybe I am looking at it all wrong - probably my age and the golden era of student grants I grew up in.I'd never advocate someone turning down a place at university. When she has eventually finished, dd's earning potential will indeed be very good. I do think it's a pity that so many students need to make a choice based on finance rather than personal choice (eg not London because of living costs even if that's the most appropriate course for you). I also feel for those students living at home to save money who would choose to live away if money wasn't a barrier.

What the hell, was going to fund my own MA next year from my salary. Maybe I'll apply for the new MA loan and pay it off at a slow rate as well.

OP posts:

AyeAmarok · 18/05/2016 15:23

remember that I wouldn't have anywhere near as much money now if I hadn't gone to university.

Was what I meant.

Kennington · 18/05/2016 15:27

How are they supposed to save for a family and buy a decent property? I think a certain amount of uni fees is ok but not at this expensive. If someone does a nice course but it isn't that attractive to employers, eg art history then they will be playing catch up forevermore.....

Kennington · 18/05/2016 15:28

Actually what I wanted to say is that house parties are too high so it makes things like student loans a bigger deal than they should be.

unlucky83 · 18/05/2016 15:49

The whole university/fee thing makes me want to bang my head against a wall!
Fees are needed because the previous labour government increased university attendance - to keep down youth unemployment. Aiming to get 50% of people to go to university has actually devalue degrees - hence more people doing masters and Phds to distinguish themselves. And it is has led to the drive to make 'everyone' need a degree to do 'anything'...
People who do 'pointless' degrees are unlikely to ever earn enough to pay the whole loan back - maybe not even start paying it back so don't need to worry about it and people who do get a higher paid job because of their 'worthwhile' degree (and possibly a higher degree) will pay it back - or at least some of it thereby subsidising the pointless degrees.

titchy · 18/05/2016 15:55

Two things:

PG loan repayments will be on top of UG loan repayments, so if you have both you'll be paying 15% (9% UG plus 6% PG) of your salary over the £21k threshold.

Interest accrues from day 1 at the rate of RPI plus 3%. However once you've graduated the interest rate varies according to your salary, from RPI if you earn less than the threshold, to RPI plus 3% if your salary is over £41k.

RPI currently less than 1%.

SellFridges · 18/05/2016 16:58

Thanks for those clarifications Titchy - I didn't know that PG study was now financable with student loans. Mine was paid for with credit cards and parental support. The new system is much improved.

As far as I am aware, student loans are NOT considered by mortgage lenders as debt. They would come in to play in affordability, the same as any other deductions to your payslip like Pension, Cycle To Worketc would. And I agree that if your mortgage affordability is called into question because your budget can't accommodate your loan repayment of c. £100 then thats the right decision by the lender!

Student debt is not akin to retail debt. We should be teaching our children about this.

AyeAmarok · 18/05/2016 17:38

As far as I am aware, student loans are NOT considered by mortgage lenders as debt.

This is correct. It doesn't go on your credit file as a debt. It is not considered "debt" by mortgage lenders or anyone other lenders.

DailyMailFodder · 18/05/2016 17:49

I don't think the fact that more people get degrees these days devalues them. I have a diploma in something that had I studied it recently would have resulted in a degree - it makes no difference what it's called. My diploma is worth no more or no less than a degree. It the same thing with a different name.

NewLife4Me · 18/05/2016 17:49

Aye

Wtf are you having a go at me for?

Teaching my children about debt has gained my ds1 a home already paid for when he was just 22 and certainly no debt of any description hanging over him.
I think it's important to teach our children that owing money is debt, how ever you dress it up.

I have heard that mortgage applications may be affected with the 9% interest rate, previously 3% or interest free the banks weren't bothered.
If people are having to pay it back, it's an out going that banks will look at.

OublietteBravo · 18/05/2016 18:03

A mortgage lender will take into account the amount of student loan you repay each month when working out 'affordability'.

Yes - it is shocking how much interest builds up. I did a PhD after my undergrad - I repaid more in interest than the original loan amount (I have paid off my student debt though).

DH and I are aiming to get out DC through university debt-free. After that, they're on their own

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