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.

How is it a tax on being poor? Most students take student loans, not just those who are poor. The threshold was much lower when I started repaying mine.

@Em8725

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.

Maybe you need to open your eyes and think about it logically ..not just ' I will never pay it back so I'm all right, Jack'

Would you be happy if your mortgage company was allowed to randomly change the terms of your agreement? Let me guess, you will never afford a mortgage so you don't care? Same principle 🤔

You mention driving lessons. Graduates have all these kinds of costs as you well know, and I think it's very unfair that this generation have so much to pay back that some of us never did. I'm early 40s and didn't have to pay tuition fees. My student loan was tiny and the interest rate was capped at inflation...it was 1. something percent! When I bought a house it was affordable.

On top of student loans and out of reach housing, this generation also have covid to pay for and the social care bill for boomers who are going to live til theyre 120 probably!

[quote VanCleefArpels]@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[/quote]
Is that you, Therese Coffey?🙄

@PinkPlantCase

I’m still angry at how high the interest rate is, that’s why none of the loans get paid back because the government keep adding to the bill at an alarming rate.

A bill that the government chose the size of in the first place when they made tuition fees 9k.

I took out just over 50k of student loans, my total bill with the interest is now over 70k only 6 years later.

The interest is extremely high. And that’s part of the plan.

The student loan repayments with interest don’t always go to the U.K. government any more. It originally went to the government owned Student Loan Company, but the UK Government has been selling off the loans very cheaply to private debt companies.

All pre-2012 student loans now belong to private companies. It is very possible, that future sell offs of loans will happen to private companies.

The real winner in this are the private debt companies which I am sure many MPs have personally invested in.

As said above the threshold used to be £17m then about £21k so going back down to a level even above that is not particularly unexpected. I have saved the state £150k for my 5 children's fees including post grad loans the youngest did not take out by not taking out the loans.

I wonder how many students actually end up paying it back

@PinkPlantCase

I’m still angry at how high the interest rate is, that’s why none of the loans get paid back because the government keep adding to the bill at an alarming rate.

A bill that the government chose the size of in the first place when they made tuition fees 9k.

I took out just over 50k of student loans, my total bill with the interest is now over 70k only 6 years later.

It's sickening. All these people saying ' I agree with it' wouldn't take a loan out where the balance actually goes up every year even though you're paying it

It's grim. Isn't it now 52% of earnings which will disappear before it reaches their pockets ... NI, tax, loan, PG loan ... doesn't leave much for the avocados and coffee does it ...

@PlanDeRaccordement very insightful comment , this is all about gradual privatisation of education.

@PlanDeRaccordement

I mentioned this was going to happen on the last thread about U.K. student loans and all the Martin Lewis cult members did not believe me. U.K. student loans are not a graduate tax, I hate how Martin Lewis calls it that because it acts nothing like a tax. So no, this is not a “tax on the poor”. It is simply requiring a debtor to pay back sooner and more towards what they borrowed.

They are loans with a very high interest rate which is going to be even higher as it’s linked to the RPI (Retail Price Index). And the government has the power to change some of the T&Cs at any point in the life of the loan. Other loans have similar mechanisms to change T&Cs, how many of you have a 20-30yr mortgage but the interest is only fixed for the first 3-5yrs? How many of you took advantage of the mortgage holiday?(that was a T&C change that benefited the debtor instead of the lender).

They have to get more money back from the debtor because the cost to all taxpayers, including the poor 50% of population who never went to university, when the loan balance is written off is immense. The student loan being “written off” means the government pays off the remaining balance in full, from tax revenues.

Well that's stupid of the government then. Why have they made the interest rate so high when they end up paying back a large chunk of it?🤔

Well that's stupid of the government then. Why have they made the interest rate so high when they end up paying back a large chunk of it?🤔

My suspicion is that the MPs have made the interest high on purpose. So that when (not if) the loans are sold by the Government to private debt companies. Companies that the MPs are personally invested in. The MPs then get the governments money laundered through a student loan debt company to line their own pockets.

There is no reason why any dedicated government official would agree to such a high interest rate to be paid by the government.

For a start it was the Augar report that suggested £20k . The latest reports in the press suggest it will be lowered to £23k/24k. Currently 54% do not pay back their loan. This will mean that only 33% do not pay back their loan.

I don't think this is the incentive for young people to work in £20k jobs in the UK that the government thinks it is. Certainly from April onwards. Or even to train up for £27k a year jobs now - the overall tax burden on them is too much, and unfair.

There's a 'lying flat' generation in the making, interwoven with some very angry activists. It's not stable.

@PlanDeRaccordement @TheHouseILiveIn can you now borrow more today against the loans if they have higher interest?! Any economists ?

@PlanDeRaccordement

Well that's stupid of the government then. Why have they made the interest rate so high when they end up paying back a large chunk of it?🤔

My suspicion is that the MPs have made the interest high on purpose. So that when (not if) the loans are sold by the Government to private debt companies. Companies that the MPs are personally invested in. The MPs then get the governments money laundered through a student loan debt company to line their own pockets.

There is no reason why any dedicated government official would agree to such a high interest rate to be paid by the government.

That makes a lot of sense

[quote Mollymarvelous]**@PlanDeRaccordement* @TheHouseILiveIn* can you now borrow more today against the loans if they have higher interest?! Any economists ?[/quote]
Sorry, Molly, I don't know what you mean

I think the interest rate is more of an outrage than the threshold to pay it back

The interest rate is high so they can sell the loan book but it is also high to discourage richer students from taking the loan, investing it somewhere, making money ( due to cheap loan) and then paying it back.
You can tell this is the case as interest is higher during the 3 year study period than after you graduate ( for lower earners anyway)
I remember someone explaining this is the reason when fees were introduced

@TheHouseILiveIn if loans are sold off do higher interest loans generate more money in today.

I wondered if there were any economists who could explain how this process works.

[quote Mollymarvelous]**@PlanDeRaccordement* @TheHouseILiveIn* can you now borrow more today against the loans if they have higher interest?! Any economists ?[/quote]
Not sure what you mean. You can’t borrow against a loan, as that is a liability not an asset. You can however sell a loan. Typically a loan will have a face value, which is higher the higher the interest on it. But the Government has been selling student loans at a deep discount compared to the face value. For example it was reported that £890m in student loans were sold to Erudio for a paltry £160m.

I didn’t realise the interest rate was so high. Not sure if I’m being thick but if you are paying back 9% of earnings over £20k and it’s going up by 6% do you ever really get anywhere?
I have one hoping to start in 2022. She will have a £27750 tuition fee loan and due to our skintness will have with around £27k or £36k maintenance loan depending on whether she is in or out of London. On a graduate salary of £30k am I right in thinking with the £20k threshold she will pay £900 a year? That’s not a feasible way to pay back £54k+. It will go up and up and she’ll be paying 9% of her salary forever. Even just the tuition loan with no interest would take 30 years.

@Mollymarvelous

£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.

It's not a good salary for someone with a family etc but for a graduate who has just finished as a student, it's a LOT more than they are used to. They just have to carry on with limited funds until their salary increases as they progress. Payback used to start at £17k and was the entire salary above that £17k, not just a percentage of it. Most graduates had paid it off within a couple of years.

@Xenia are you saying you covered the costs for your children ? So they didn’t need to take out the loans and pay them back at all ?

20k is not a good salary! I graduated 25 years ago and new grads average was about £24k then.
I had student loans for living costs, as I wasn't allowed full grantdue to parental income, but parents refused to support me in any way.
The interest rate has always been outrageous on student loans in England. (Post grad interest rate was 8% when I looked into it, despite base rate being 1% )
It is a completely unfair system at the moment.

Having well educated citizens benefits the whole of society, why on earth would a country not invest in its young?

@PlanDeRaccordement thanks for correcting me. That’s what I was trying to understand. Why would loans be sold for less than they are worth.