Graduated 2015 - shock of loan cost!

[goingmadinthecountry]

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.

But the interest rate ISN'T 9% - it's around 3%. The 9% is the fixed rate of your above-threshold-salary that you pay back

Teach your kids about debt by all means - but get the facts right.

Jeezo, calm down. Wasn't "having a go at you". I merely corrected your erroneous assumption that I (and peoplewho are clued up on student finance) was an example of someone with a carefree attitude to being in debt, and that my parents had had not managed to teach me correctly about money.

If you are teaching your children what you have posted above about student loans being normal debt, to the point that your DD would give up on a degree that she really wants to go and has looked into, then that is a real shame she's making that choice based on erroneous information.

What you have "heard" about the mortgages is incorrect.

Oubliette

Mine doesn't want to get in debt and will want to work to save asap.

I'm not against them having to pay, it's the fact that it's government and I don't trust them wrt moving goalposts. Look what they have done to benefits and tax credits/ cb.
They can do anything they want to, any government can. They like to have a hold over you and this is proven with them not allowing the 5k maintenance loan without the fee loan. There must be many who could manage on this and a pt job, but they want you to have debt.
That's not for me, or mine by the sounds of it.

The people who paid 6k fees a few years back probably had no idea they'd end up paying so much back. My ds1 friends are limited because of the debt, he didn't want to be.

Yes, it's the way we have brought them up, but at 18 I consider them grown ups, they make their own decisions about what they want to do.

Aye

My apologies, I thought you were having a go at a different attitude.

Trouble with forums, you can't always tell the tone

I do think it varies with mortgage companies tbh, my ds1 is a broker.
Only just started though so still learning, not his usual type of work at all He said that some are beginning to use the info to determine affordability of repayments.

To illustrate the mortgage point:

Say for example your graduate earns £30k per year after they graduate. With no debts, they'd get a typical mortgage offer of 3 times their salary, so £90k. With a loan, the amount the repay each year is taken off their salary, which is 9% of £9k a year, so £810. So their salary for mortgage purposes becomes £30,000 - £810, giving them a mortgage of £87,570.

Only £2,500 less than if they had no loan.

Thanks, I like flowers

He said that some are beginning to use the info to determine affordability of repayments.

Some are, that's correct, but this is in no way the problem you think it is.

What they are looking at is that you:

-Earn (say) 30k and so does your partner.
-You each take home 1900 after tax, NI, student loan etc is deducted. So have 3800 net income.
-You want a mortgage of 200k
-It will cost you say 1200 a month in mortgage repayments.
-They want to see if you can afford 1200 out of your combined 3800.
-The more outgoings you're tied into (car finance, credit card debt, child maintenance payments) the less breathing space you have for your mortgage.

Basically if you hade no student loan you could each throw an extra 60 quid a month at a mortgage (or car payment, or fancy steak habit) so a couple with 30k each and no loan will have an extra £120 a month.

However, others without degrees (and thus student loans) are less likely to be earning as much in the first place. So you pay £60 (outof 1900) a month for the pleasure of earning a much higher salary than someone who didn't, but they only earn 20k as no degree, so only take home 1400.

Does that make sense?

daily that's the point though - I don't know how long your diploma took, what age you did it at - or how much it cost but it was perfectly good enough for your job... (thinking about it if I hadn't dropped out I was on a diploma course - at a FE college course that ran from 16-19) - needing a degree you start at 18 and it takes 3 yrs ...and you end up with a massive debt.
A UG degree should be an indicator of a certain academic ability, intellect and transferable skills. And I don't think it is any more and certain employers have realised that (and now want higher degrees).
This doesn't directly involve me but I know of a case where someone with a broadly related degree and lots of experience will have to do another UG degree to continue doing the job they are more than capable of doing...
Meanwhile I have had dealings with someone who has the correct degree who is useless at their job and actually to be perfectly frank is not that bright...

(made up numbers, but close enough for use.)

Aye

it makes sense, it's just me.
i see it all as debt looming over her, and hate the fact that our dc have to be dependant on us for much longer.
I don't understand why at 18+ parent's salaries are taken into consideration as well.
I am also anti loan to begin with as hate the thought of having to pay interest of any type. I know there is interest on mortgages but you need to live somewhere and for us was far cheaper than renting.

If we can save enough between now and then we can loan her the fees interest free and she can find the rest herself. London is just so expensive though and she's sure this is where she needs to be.

Why do you think a student loan would make her dependant on you for longer?

I don't understand all these people saying it's no big deal, it's just a few quid off your salary each month.

If that's the case, I'd rather that the government take a few quid off all our salaries each month in the form of a bit more tax, and take away the tuition fees altogether. Or at the very least, return to the £3000 fees that we had before.

It doesn't make sense in my view that we are saddling kids with huge amounts of debt so early in their working lives. I keep hearing that it's no big deal and that most people won't pay them back in any case, but if that's the case, then the tax payer will surely be picking up the bill regardless. Why not just take the pressure off?

Society needs graduates. We need doctors, teachers, engineers etc, and more generally, it's good for the country as a whole to have an educated population. If graduates earn more as a result of having a degree, then they should be contributing more through income tax already.

My generation was lucky enough to have access to a free university education. Now I feel that we're shafting the next generation by making them accrue these huge debts.

DH and I will be saving up to get dd through university without huge debts, but I'd prefer to pay a bit more tax to make it more manageable for everyone.

If you are earning £60000 and find you are paying nearly £500 per month, I think people will be resentful. That's a figure that would make a significant difference to lifestyle, hardly just a few quid.

It would also appear that the Government will freeze the 21k threshold. Even Martin Lewis that people quote so frequently in support of taking the loan, has now said that changes facts.

The fact is if your DC is doing a degree that will only lead to a very low paid job or in fact they don't intend working much ( may want to be a SAHM), then they should take the loan as they will probably pay back very little.They can just watch the amount increase and be written off in 30 years time.

However do bear in mind that even the lowest paid with surely be earning more than 21k in 30 years time!

If your DC is going to have a well paid career with pay increases, then they will pay back almost double their student loan and their monthly payments will not be insignificant. My DC was the 1st year of the new loans, and she would be paying £250k pm if she had a loan. I think that is a lot.

If you are earning £60000 and find you are paying nearly £500 per month, I think people will be resentful.

You wouldn't even pay half of that. It would be about £290. And £320 under the old loan system. Which is really not much out of a 3k a month salary.

I really wish people would stop stating completely incorrect scare stories about this.

Just looked at a student loan calculator - for dd's chosen career path she might be expected to pay it back over 10 and a bit years, paying back £38k on her 21k loan. That's before figuring hr LPC and MSc. Plus a career development loan to help fund living next year. That's quite a lot in my opinion.

Maybe it's her fault for being a high achiever? Or mine for not being a very wealthy parent? Squeezed middle being squeezed even further.

I've gone from being reassured on this thread to being frustrated on her behalf again.

If you are someone who will pay back their loan (ie a high earner) then yes you'll pay back a lot more than you borrowed.

But as most parents don't have 50k to throw at each child who wants to do a degree in the hope that one day that child may be a high earner (most won't) then what's the alternative? That they don't go to university and therefore won't get the same good job?

I know I'd much rather be paying a few hundred a month out of a high salary, than nothing out of a low one.

If you have some money, but not millions, you'd be better letting them take the loans and giving the money to them when they graduate and get a good job so they can use it as a deposit for a house.

What annoys me about rhis is the fact that the interest, which looks as though it can be as much or more than the fees, is a nice fat profit for banks. I am not sure of the ins and outs of these things I admit but as I understand it if the government was prepared to borrow the money on the taxpayers' behalf the interest rate would be lower, but because they are so hysterical about 'the deficit' they force a more expensive 'deficit' on graduates. Which is basically backed by the taxpayers of the future. So they are robbing the future to make themselves look good now, and putting more business the bankers' way at the same time.

I am not sure I'm actually against the system of student loans and means tested repayments, but the fact that it is all sold on to finance companies at high interest rates is what annoys me. It just strikes me as way too good a deal for the banks. Its a bit like PFI isn't it? Sorry, that was a bit of a rant!

You wouldn't even pay half of that. It would be about £290. And £320 under the old loan system. Which is really not much out of a 3k a month salary.

This is exactly the kind of comment that I don't understand. How is it that people balk at the idea of a small rise in income tax (say, 1% or 2%) but think it's ok for graduates to pay back a much bigger proportion of their salary in student loan repayments because it's "really not much" out of their overall salary?

It is a lot of money going out each month. That's not to say that it might not be worth the investment, but I genuinely think that we need to be honest with young people about the potential implications of these debts. They are not insignificant.

MUCH harder for a school leaver to earn £60k than a graduate....

In my post above I meant my DC would be paying £250 pm, not £250k pm obviously!

If parents do not have the money to help their DCs, then obviously they need to take out a loan. No one is arguing with that. However it is ridiculous to then argue that they will be paying back a trivial amount of money. They will pay back a lot. It is best to just go into this with 'eyes wide open'.

Yes they will be paying back a lot, out of their much higher salary.

If they aren't comfortable with that they they can not go to university and then probably never have a professional job and a high salary.

This is a very interesting thread. Can we, as parents, pay off our DCs loans at some point if we wish? I assume we can. We have one on the old loans and one on the new loans. One DC may be a high earner. Not sure about the other!

Interesting question bojo, does anyone know. I know with the "Green Deal" loan scheme that the govt set up for people to insulate thier houses (that no-one took up - the interest rate was 7% -- that there were also PENALTIES for paying off early. So nice for the banks.. Hopefully not same for student loans, but one of us should probably make the journey to google to find out!

yes they can be paid off at any point in time.

It's not £60 a month though is it

Dh and I both owe student loans. We pay£520 a month atm. That's a lot of money for most people. In comparison that's often some people a months rent/ mortgage/ childcare fees or at least a %.