Student loan worries

[SadBut]

Hi DD is looking to go to university. One unconditional offer
Three offers below her expected grades
REALLY worried about her loans
Can the conditions of the loans be changed by the government AFTERWARDS?
I've seen where the terms of the loan have been changed from Some one paying £20-£30 a month going to £89 per month!!!
Can they do this?

Maybe not but seeing how your daughter ISNT paying 71% tax I don't see how that's relevant?

Even if she's paying 45% income tax and 9% student loan that only adds up to 54% AND its not even that much as that's the amount over the threshold.

So she will be at max paying 54% of the proportion of her salary over £150,000 which seeing as thats nearly 5x the average wage isn't exactly violin worthy.

Unless you're being pedantic and adding random things like council tax in. Even then I'd really struggle to see how you got up to 71% of a £100,000plus wage.

Plus if she's paying £1k a month she should pay her whole loan off within 5 years so won't accrue anywhere near as much interest as the vast majority of her peers AND will spend the majority of her working life without any repayment deductions, again unlike most of her cohorts so, rather than being "fucked over" she's got a good deal on the whole!

You're right, I'll probably starve or freeze to death on my actual pension.

@latetothefisting you do also lose your personal allowance above a certain amount which increases the marginal rate of tax but not what to.

At those levels of income, she is probably paying an effective 60 percent tax as she'd lose her personal allowance. So if 9 percent on student loan, then not far off 71 percent tax. I think the poster's reference to being unfair on the middle also reflects the fact that the truly wealthy pay a much less percentage of their incomes. Not to mention those in gov probably enjoyed a free university education or minimal/modest fees before they were raised to their current levels.

under current terms, the repayments are in effect the same as if there was a "medium" tax band which applies only to graduates, but which you can opt out of with a big enough lump-sum.

without the student loans, income tax is zero for the first £12k ish, 20% on the money earned between £12k and £50k, and 40% on what is earned over £50k.

with the student debt, its exactly the same as if there was a tax bracket of 29% of what is earned between £25k and £50k. The only reason it is done as a loan rather than a tax is so that the debts of those who leave the UK can still be pursued.

You are right that the government can change the thresholds and terms, but in general if the degree will give your DD a higher earning potential, it will be worth it, and if she doesn't end up with a high-paying career she won't pay back much anyway. if she doesn't do a degree what will she be doing/earning in 10 years time? what doors will the degree open up?

the loans system is set up so that those who benefit hugely from their degree and secure a job with £200kpa salaries help to subsidise those whose careers require a degree but whose repayments will never meet the cost of their education, eg nurses and social workers. if you want to avoid that you can always pay the loan off early.

To pay back £1,000 a month you need to earn over £160,000 a year. So could probably save enough in a couple of months to pay the whole lot back. Still be taking home a gross monthly wage of £13,000+ a month 😂😂.

@HazardaGuest That’s how the government sees it. They are propping up the universities. It’s our money. It’s the taxes of people who have never been near a university. Therefore they don’t all agree with the “nice to do” scenario. It’s an investment by the country and there should be gains for everyone. Plenty of job holders don’t pay much back but they are in valuable jobs for society. I understand that. However plenty don’t do much with their degrees and simply don’t need them. I would prefer to see a rebalancing between degrees and work with day release.

@SadBut . Don't panic! To be paying £1k per month in student loan repayments the PP must be earning around £170k pa. So not exactly on her uppers.

To put it into context, at a salary of £30k repayments would be around £27 per month. It's doable.

Think of it as a tax. It's not a loan.

If she becomes a SAHP, she won't have to pay. If she changes to part time, she'll have to pay less. No loan is like this.

I'm from NZ and we have a problem of people moving away. If you go overseas, you also don't have to pay.

You won't be paying it off into your 80's unless you didn't start your degree at 50. It's written off after 30 years.

Does no one understand the loan system?

@TizerorFizz remember our parents got their degrees fully paid for, then they brought in maintenance loans, then fees too. It has been a gradual process to move nearer to the American system where individuals pay for their own education. I for one am glad we still have a system that allows people from all backgrounds to go to university. I don’t see how we can keep that whilst insisting individuals pay for their own education.

www.gov.uk/get-undergraduate-student-loan

@SadBut there is a loan calculator tool on the website, which you and your DD can use to estimate how much she will be able to borrow for maintenance. If your household income is no more than £25 000pa, she will be able to borrow the maximum, at or above c.£72 500, only the minimum. (Plus, in any case, the tuition fee, but this is paid direct to the university, not to her). As it is your household income that determines what she can borrow, it is expected that any amount below the the maximum will be made up by a parental contribution. (See screenshot for 2023 / 2024 .maximum amounts avaliable - I am assuming, as others have and you havent indicayed that they ate wrong, that your DD is resident in England).

Starting in 2023, she will be on Plan 5 - see screenshots for detaiks of this and how repayments work, with examples.

The loan is your DD's; she has to apply for it, in her name, and is ressponsible for ensuring that it is paid back, although as pp have pointed out, any repayments due (because her salary is above the repayment threshold) are deducted at source, just like income tax and NI. (Obvously there would be a different mechanism if she was self employed).

Hope this helps.
.

@HazardaGuest
You are not correct. In fact way out!

I am late 60s. DH is 70. I didn’t go to university but DH did. In the early 1970s. Around 10% of pupils went when he did. Now it’s approaching 50%. Vast difference. The expansion has to be paid for. Comparing generations is pointless. The numbers are vastly different.

His parents were assessed for the maintenance contribution. Everyone went through this process. The contribution was assessed by Grants and Awards departments at city or shire councils. I worked for one. Parents submitted financial details and a grant was made, or not. DH’s parents, like thousands of others, were asked to pay. In many areas this was the majority of parents.

We cannot possibly go back to those days. We have a huge university sector and those who benefit should pay. They do - either via fees, loans or general taxes. We do need an educated population but we perhaps need a refocus as to how this is achieved. People do not pay for their university education here. International students pay the commercial rate. Home students borrow less than half that amount quite often. Or even 1/3 of that amount! The courses are subsidised. Doctors courses greatly subsidised. The courses of many high earners are subsidised. So everyone can go to university at the moment because we have the loan system and capped fees. I cannot see why this should change.

It is true though that the reforms will disadvantage lower earning grads and women. More reason to make sure the degree counts.

You don't need to dig her out from anything! She will only have to make repayments if she has the income to pay them!

The school is relaxed about this because they understand the student finance system.

Please God don't her out of going to uni because you have completely misunderstood the finances of it!

So you don't want her to go to university. That's the situation here.

You don't want her to go so you are scaring her into saying she can't go because you can't afford it.

You are making her feel guilty for wanting to.

Now she can stay in a bubble with you and get a job in Tesco.

@TizerorFizz i do actually agree that more work based training should be offered, I hate Tony Blair for his “I want 50% of school leavers to go to university” speech. The answer isn’t to put the OP off supporting her daughter to go though is it? When the system is that 50% get degrees it means everyone needs to aspire to that or as a pp says they may find themselves stacking shelves in Tesco without much choice to do anything else.

@HazardaGuest
I agree. The op should be supportive. No need for histrionics about loans. Nearly all students have them. It’s the system so make it work. I’m a fan of “aim high”. The best course at the best university. I know “best” is subjective but if you can get into Durham, but accept Derby, you are not getting the bang for your buck. Make it worthwhile and make it count. All degrees are not equal.

Rolls Royce seem happy enough with Derby as a provider fot their degree apprenticeships.

Presumably Durham turned them down, though.

@mimbleandlittlemy It looks like you don't, either. It's 40 years for plan 5. I'm 45 and starting university. So should I be lucky enough to have income over 25K (current amount), I'd be paying until 80.

Honestly, don’t worry about it. I’m just finishing my 6th year at uni. I got the full loan. I owe about 160k I think… I’ll never pay it all back unless I get an outstanding career and then I’ll be very happy to repay it!!

How much does your dd earn to have to pay back this much?

You won't, it will be written off by the time you reach retirement if not before.

They're not written off at retirement! Haven't been for years!

Remember that taking the full student loan allowance is not an obligation. You can finance the course and or living costs yourself.