Government to lower threshold for repaying student loan

[whatareyalaffinat]

Article in the Financial Times late last night, reporting that the government is considering a number of measures relating to student loans. They want to lower the point at which a graduate starts repaying their loan to £20k down from £27k.

This is to push more people into ‘useful’ and vocational subjects. They want to decrease the amount of debt that is never repaid.

This is not a graduate tax, this is another slap in the face for our young who have given up so much these past few years. This also hits those most who don’t come from families with wealth. This is in essence a tax on being poor.

What other loan contracts can be changed by the lender at a second’s notice?

The government can borrow money at 0.5% but student loans are 6%+ and set to rise.

A complete farce.

@puseyst £20k or thereabouts is a common first grad job salary out with the big law firms/ management consultants etc

So can they change the conditions for existing loans, or would this only apply to new applicants?

The graduate tax principal is one I support - but I don't think a salary of £20k indicates you have benefited from HE.

@Mollymarvelous I totally agree we need to have a debate about living costs and the requirements for parents to contribute, although even this is not insurmountable if students go to local universities (not always possible I know). But the fees aspect is in my experience not something many undergraduates even give half a thought to - they know a little bit will be deducted from the pay packet eventually but I’ve never heard it mentioned as a reason not to pursue a degree

£20k is not a good salary. The cost of living is rising sharply. NI going up . The outlook seems dreary for workers at this level.

Students with rich parents won't have taken out a loan, and so for part of their income, this is an extra 9% tax for those without wealthy parents

I'm not so sure about this. They might uptake less of the 'living' element - though that's not exactly by choice, because there's a sliding scale of expected parental contribution based on their income.

And as noted above, the rhetoric (from Martin Lewis and others) has very much been 'take the loan, its excellent value and you might not have to pay it back at all'

Anyone who sounded a cautionary note about the extent of the government's powers to change T&C was usually pooh-poohed

But the possibility of change has always been there, and I'm not surprised it's being considered now.

But it will be that bit harder for graduates, who will find themselves repaying when they had not expected to do so

£20 k in todays world is not a high wage its only a couple of thousand over minimum wage full time job
My ds considering uni next yeat, we can't afford to supplement him
So yes he will bow have to consider again as by time he leaves uni he will be 22/23 and time to start saving for a place of his own , likely have to move away and be paying rent as jobs here are few and far between
Or he doesn't go to uni and starts saving for house etc now
£25000 threshold is better , again its the poorer people affected

Are they looking to retroactively apply this? Are current students suddenly going to have the terms of their loans changed?

@Itsinthetreesitscoming

So can they change the conditions for existing loans, or would this only apply to new applicants?

The graduate tax principal is one I support - but I don't think a salary of £20k indicates you have benefited from HE.

Yes, they can change for all loans that are not yet fully repaid

Full time minimum wage job is £17142.00 based on 37 hrs , £18532.00 if 40 hrs
So how is £20000 a great wage its just over minimum wage realistically

@OhYouBadBadKitten

Are they looking to retroactively apply this? Are current students suddenly going to have the terms of their loans changed?

I don't know, and this is a huge worry.

In no way is £20k a high salary. The cost of living, housing in particular, means that is a very, very basic salary and not something that represents a graduate salary.

If we didn't have the large fees for uni in the first place we wouldn't have so many loans,

I agree with it too. I thought they should’ve done it 20 years ago. I paid mine off long before I earned the salary requiring me to pay it off.

What do you mean they should have done it 20 years ago? I went to uni 10 years ago, before the fee increase, so my threshold for repayment is £19,390. This proposal will be talking about plan 2 loans (from when tuition fees went up to £9k) that didn’t exist 20 years ago.

@worriedatthemoment

Full time minimum wage job is £17142.00 based on 37 hrs , £18532.00 if 40 hrs So how is £20000 a great wage its just over minimum wage realistically

That what i think. If you take 40 hours a week im thinking a 9% student loan repayment on 20k might actually give you slightly less income than minimum wage by a few pounds. Although i didnt go to university so i dont know if it comes out your pre tax pay.

@SickAndTiredAgain

I agree with it too. I thought they should’ve done it 20 years ago. I paid mine off long before I earned the salary requiring me to pay it off.

What do you mean they should have done it 20 years ago? I went to uni 10 years ago, before the fee increase, so my threshold for repayment is £19,390. This proposal will be talking about plan 2 loans (from when tuition fees went up to £9k) that didn’t exist 20 years ago.

www.gov.uk/guidance/previous-annual-repayment-thresholds

I have student loans. I was making voluntary contributions as the interest was originally low enough that £25 pcm paid the monthly interest and a bit of capital. Ok it wasn't a lot but chipped away slowly. Then they put the interest up and my interest charge is £50 a month. So I pay nothing and I'll never pay it all off as I was a mature student. I don't see anything wrong with lowering the threshold, but the interest rates need drastically reducing as well as otherwise the payments made at £20k salary will not reduce the loan balance at all.

@Elephantsparade it’s not 9% and it’s only levied on the amount earned above the threshold not the whole wage. At the lower end it’s the equivalent of a couple of coffees a week

I agree with it as well. Surely if you arent planning to get a higher paid role why go to university and incure the debt? Unless people are looking for something for nothing.

It doesnt penalise the poor does it because if you are under the threshold then you dont have to start to pay it back.

20k is not a good salary. I earn than in admin.

I finished my degree 4 years ago. I have small children and I can’t afford childcare for them so I’ve been in part time jobs since I finished uni. My debt with interest is now 68k. My threshold was always 22k so I’m not concerned that it’s been lowered. I still won’t get to the point of ever paying it back as I can’t even look at full time work until next September 😂.

I also need to be driving first to get something decent full time. I really don’t see why there’s uproar about this. I always knew I’d have to repay some of it. I’d have been paying it already if I’d stuck to my life plan and not had kids so soon.

Think some on here are missing the point this hits the middle income families hardest.

If parents are super wealthy mummy and daddy may stump for tuition fees and dole out money for students living costs and child will automatically get a job in daddy’s law firm or daddy’s business or with one of daddy’s cronies with a high salary or go into politics once they graduate etc.

If child from a low income family goes to Uni they will qualify for the higher rate Maintenance Loan so no need for mummy and daddy to sub them whilst they are there. Also sadly most are unlikely to become really high earners so they may not achieve a high salary or pay off their loan.

Whereas, if you are in the middle income bracket you miss out on the maximum loan and regardless what your financial commitments are if your DC want to go to Uni these days you will have to stump up for heavily subsidising the Minimum Maintenance Loan or child won’t even be able to afford Accommodation costs never mind anything else and in all probability your child will have to work through Uni to also contribute. So your child is taxed on the loan and you are also subbing them or topping up the loan whilst they are in Uni. So a double whammy.

@worriedatthemoment without a degree your child might struggle to get paid enough to even think about buying their own place. As PP have said many “graduate” jobs used to be available to bright school leavers, and salaries are often not what some here would expect for a graduate.

It’s entirely normal for young graduates to live in rented accommodation for several years while establishing their careers, living the young life (!) before thinking about “settling down”

@VanCleefArpels

I assume you're a working class or recently 'middle class' tory voter?

Its pretty typical of this government to move the goalposts once people are locked into the debt.

I agree with it. All these extra tution fees paid to the uni funded by student loans that might end up never getting repaid... Gov are probably paying out more now than when uni was free! Unis are also letting in most students that apply as they want the fees. Not bothered if they are capable or not. Too many courses that don't guarantee a good paying jobs at the end of it.

Also the interest racks up even if you don't earn enough to start paying back. So when you do start earning enough you could owe a lot more than what you borrowed.