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.

I agree with lower g the threshold. Kids go to uni, get a teapot degree they will never use, and don’t repay the money for three years if socialising

Yes I know it’s a generalisation but it happens a lot.

Why should there be so much debt eventually written off?who do you think actually pays for that! They borrowed, they repay. Maybe they will think clearly now about if it’s the right thing for them

@Mollymarvelous

Already lots of kids from low income families struggle to go to university with the cost of living if not topped up by parents. Would this not disincentivise them to not go even more?

No evidence at all for that! Kids really aren't out off going because of the loans.

I've lost count of the number of posts I've seen on MN with people saying that the student loan isn't really a loan, because most people never have to pay it back. And that the student loan actually benefits those who are likely not to get high paying jobs, because they never have to pay it back.
You trusted the government? Why? They've drastically changed the terms of the student loan before. Why wouldn't they do it again?

I wouldn't mind lowering the threshold if the interest rate was reduced. The 5%+ interest makes it near impossible to pay off, which means a lot of people end up paying way more than they borrowed.

That said, lowering the threshold doesn't solve the main issue of youngsters needing degrees in order to get jobs that don't really require them and don't pay that well. I work in STEM and 10-15years ago you wouldn't have needed to spent £50k on a degree to do my job, instead you would have got paid to learn on the job through an apprenticeship.

Another way to punish the young from the tories! I did an undergraduate and a postgraduate degree, so my repayments are 15% of my income over the threshold. Coupled with the NI increase, rising inflation, below inflation wage increase, insane housing costs etc how exactly are young people supposed to get a start in life? I am on a good salary and extremely lucky to have already bought a small house but I have no idea how I’ll ever be able to afford a family sized home or afford nursery costs on top of all this.

A couple of years @Briony123? I think not
In the end, I had three jobs in order to pay mine down and be debt free. I think it took four years to have enough extra to repay.

@titchy yes sorry it’s my anecdote I don’t have much evidence other than those I know and my experience . But I have seen threads on here recently with parents not able to see how they can supplement their child going to university.

Why aren’t kids more aware of the cost of the loans . Doesn’t that seem a recipe for disaster signing up unaware of the long term cost to them and possibly their family.

@PattyPan it was Labour that invented the student loans system

[quote Mollymarvelous]@PlanDeRaccordement thanks for correcting me. That’s what I was trying to understand. Why would loans be sold for less than they are worth.[/quote]
Loans are typically sold for less than their face value to offset the risk of some of the debtors not paying them back. However, to sell £890m in loans for only £160m is suspiciously low and not in the government (taxpayer) best interest in my opinion.

@Mollymarvelous

I think this is a divide between people who fundamentally believe education should be heavily subsidised/free / available to everyone for the good of society/ economy ( which in reality we know to be ‘unaffordable’ versus those that see higher education as an option for those that ‘deserve it’ that should be paid for by the individual and a private service which is what the loan system is now moving us towards

You could argue that about secondary education.... maybe you'd like people to have to pay for their kids' comprehensives. If they can't afford it they can leave at primary age and do down the mines...

Why aren’t kids more aware of the cost of the loans . Doesn’t that seem a recipe for disaster signing up unaware of the long term cost to them and possibly their family.

Because they're teenagers! Teens take drugs, drink too much, drive too fast, jump off bridges. They're not renowned for making sensible adult decisions bearing the future in mind!

@LittleMysSister

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.

It’s a tax on being poor because poorer students get more maintenance lawn while those from better off families are eligible for less as they are meant to be topped up by their families. DP and several of my friends whose parents are better off than mine didn’t even take a maintenance loan and their parents just paid them an allowance, whereas I took a maintenance loan of over £5k a year x 4 years.

@titchy

Why aren’t kids more aware of the cost of the loans . Doesn’t that seem a recipe for disaster signing up unaware of the long term cost to them and possibly their family.

Because they're teenagers! Teens take drugs, drink too much, drive too fast, jump off bridges. They're not renowned for making sensible adult decisions bearing the future in mind!

I think it's more due to people like Martin Lewis pushing the 'its a graduate tax' narrative

@PattyPan
It’s still not a tax. Yes poor people will need to borrow more money to pay for university than rich people would. But that is the same with anything else you buy- cars, houses, consumer goods. Using the term “tax” implies that the payer has no choice, when with student loans there is choice to not take out the loan/go to university.

@ofwarren

I agree with lowering the threshold 🤷

So do I. In life you borrow money and pay it back. What message is being sent, borrow what you want then walk away

@VanCleefArpels yeah, for £3k and still had maintenance grants. The tories took it to a whole new level, especially coupled with all of their other policies which have been to the detriment of young people.

And people saying 17k would be a good salary - assuming a 40 hour week, it’s below the living wage!

@Theendoftheworldisnigh

I've lost count of the number of posts I've seen on MN with people saying that the student loan isn't really a loan, because most people never have to pay it back. And that the student loan actually benefits those who are likely not to get high paying jobs, because they never have to pay it back. You trusted the government? Why? They've drastically changed the terms of the student loan before. Why wouldn't they do it again?

Yes I have too. It’s Martin Lewis to blame for that. My DD is at a Scottish university and her friends from English schools all firmly believe their student loans are “free money” because “they’ll never pay it off” and “repayments will be less than what I pay for broadband” etc.

@PlanDeRaccordement It functions more like a tax than a loan as you can’t get rid of it by being bankrupt and it is tied to your income.

@Chloemol

I agree with lower g the threshold. Kids go to uni, get a teapot degree they will never use, and don’t repay the money for three years if socialising

Yes I know it’s a generalisation but it happens a lot.

Why should there be so much debt eventually written off?who do you think actually pays for that! They borrowed, they repay. Maybe they will think clearly now about if it’s the right thing for them

This. Money needs to be saved somewhere or recouped somewhere to oay for the NHS and social care.

Yes I have too. It’s Martin Lewis to blame for that. My DD is at a Scottish university and her friends from English schools all firmly believe their student loans are “free money” because “they’ll never pay it off” and “repayments will be less than what I pay for broadband” etc.

That's a crazy attitude.

This everyone going to uni thing has been a massive mistake

@toomuchlaundry

I wonder how many students actually end up paying it back

commonslibrary.parliament.uk/research-briefings/sn01079/

Expectation is that 25% repay student loans in full.

I think it's ok as long as it's not retrospective. My kids don't have loans so it doesn't make any odds to me personally. 27k seems a high threshold.
Maybe a tiered % payback would be good.

[quote PattyPan]@PlanDeRaccordement It functions more like a tax than a loan as you can’t get rid of it by being bankrupt and it is tied to your income.[/quote]
No it doesn’t function “more like a tax”. It functions exactly like a student loan repayment because that is what it is.

Taxes are levied against private assets or income to basically tithe off some of the value to fund the government.

Student loan repayments are paying back what a graduate borrowed from the government.

Loan repayments are by definition not a tax. Student loans come with many different T&Cs, for example student loans in the US also cannot be discharged through bankruptcy. But their loans, the repayments are not calculated as a function of income. So just because U.K. student loans have different T&Cs, it doesn’t make them not a loan.

@HungryHippo11

Higher education will become unachievable for many Why? You only pay it back when earning over 20k and then it's a percentage of your earnings over that. If you're earning over 20k then you're not "poor"

It does depend where you live in the country. Earning £20k in London and other big cities (where a lot of the graduate jobs are still based) is not a big salary, especially if you are having to pay housing /commuting costs.

I think I meant rectroactive not retrospective