Why worry about your kids student debt?

[saladcruncher]

I finished uni in 2010, and became eligible to start my repayments from April 2011.

This was under plan 1 - the 'pay via tax method'

Plan 1 has a 25 year write off, so any remaining debt will be forgiven at the start of April 2037.

I'm already 13 years through this and in those 13 years, I've paid off I think up to 90 pounds. And I'm not going to be paying anymore anytime soon.

Basically it looks like I'll reach the write off period and have paid off 0% of my student debt - a free degree in effect.

I took out the full maintenance and tuition fee loans.

My question is, why are some parents trying to pay huge chunks of their childrens tuition fees or living costs in this situation, when the money could be put into a savings account for a house deposit etc in a few years time?

Granted a lot of people won't be earning under the threshold like I unfortunately have been and the write off is later but the principal is the same.

I graduated in 2012. First one in my familybto go to uni and my parents were clueless... they thought the loans were interest free etc...

Today I've just paid 800£ off of my loan from my wage. That's because of a bonus. Yes I earn a good wage but I groan at the amount that comes out monthly and when I get a bonus (Yes I know lucky to get one etc) but my parents are horrified now that the interest is 6.5% I wish they had paid some of it down for me to help me month to month now!

11k to go...

I actually owe 5k less than I thought so that's pleasant.

I wasn't quite truthful as my plan 1 currently stands at around 28k, I have a plan 2 for my PGCE which cost me 9k and is currently at over 8k, and a masters loan which is only 1k. So at least I will pay that one off in a few months 😂

In total I pay off around £400 a month though but for example since April I've paid them 2400 and I've had 1800 of interest added.

So I don't see how teachers are paying that off yet!

But what I will add to the above is that in 2012 I owed 21000 on my plan 1 loan
And in 2024 I owe 25000 on the same loan

I’m paying 15% of my income above the threshold on student loan repayments plus tax and NI. By the time it’s written off I’ll have repaid 3x what I borrowed, over £100k, and some will still be left to write off. If you actually have to make repayments the interest rate is a killer.

If a chunk of loan is repaid because of a bonus, pay off the loan with the bonus. Or at least some of it. My DD took 6 years to pay off the loan. Graduated 2014. Started earning 2017. Paid off 2022/23 tax year.

So you owe more than you started with? That’s really surprising, did you take lots of time out or do a low paying job before teaching? The interest rate on plan 1 loans was really low until recently, as it’s 1% over base rate so wouldn’t have been adding much interest, and the repayment threshold is pretty low too so you’d have to have earned quite a bit less than teacher starting salary to not have repayments. I came out with a £30k loan in 2010 and it’s now down to £12k. I do earn more than my friends who are teachers now, but I didn’t for quite a few years of that.

I went into teaching straight after my PGCE. I've been on a full time salary ever since. I do actually think this is normal for people earning similar to me, as my friends say the same as me.

I think that people considering loans (and parents) should be aware of the impact of compounding interest charges. It is this which means many people, who pay off across the full period of the loan end up paying back three times what they borrow.

Those figures of paying £400 per month are significant. If you have childcare and a mortgage, that £400 is huge.

Lots of people don’t pay much to start with as salaries are low. Then as they get into 30s and want to buy or are paying a mortgage and then are having kids, the burden is significant.

Claearly, for lots of people, taking the full loans is the only option as families cannot give any support and even with working as a student, the loans are needed.

But for families who can afford to contribute more, it’s really worth looking into what the monthly payments might be at different salary levels and thinking about when a typical graduate might hit those. More importantly it’s worth looking at the compounding interest. Fine, if you think you will pay off the student debt within a few years before the compounding interest gets really big, but if you really are going to be in it for the loan haul with the loans, knowing a typical public sector graduate might pay the loans for 40 years and pay the compounded interest which leads to 3x paid back, is worth considering.

People seem to think if it as £40k borrowed means £40k to pay back. It will be a LOT more.

MSE has worked out the lower paid grad will pay more because it’s 40 years. The chances are, this employee won’t have mum and dad to pay fees and maintenance so has no option but to get a loan. Anyone aiming to be a head of a secondary school should start paying it off asap. The structure of the loan means dc should be advised to be ambitious and think carefully about careers.

Yes, but every teacher cannot become a Head and every nurse can’t rise to the highest positions. The majority in those professions will get some promotions but remain on solid but not spectacular salaries which will see them pay their debt for the full 40 years and pay off 3x what they borrowed.

It’s all very well to say students need to be ambitious and earn lots so they can pay off fast…but we know most won’t do that. So should those students (and most people don’t even know which category they will eventually fall into) not go to university, or only those whose parents can afford to pay the costs upfront or very soon after their kids graduate? Where will any kind of upward social mobility be then? Already, canny and affluent parents who can pay upfront do so or pay the loans off soon after for anyone looking like they might be long term payers of the debt. Many remain oblivious to the fact their DC might pay 3x what they borrowed over the course of their lifetime and have many years when those debt repayments are a major burden.

Alternatively ask the SLC to reassess - you'll get some back as they calculate monthly rather than looking at what is earned over the whole year

@WombatChocolate That position on salaries for grads is not just limited to teachers and nurses who can earn well enough! Others really do earn less. Many of them do not need a degree for their work. 20% of grads don’t so it’s hugely expensive for the state and their parents to have a degree that hasn’t opened any doors. I’m just saying everyone needs to think about that now. I don’t think uni numbers will decrease, but they should. If most don’t realise about loans then they can do what careers they wish but ambition to do well used to be important. Now no one cares very much.

Many of them do not need a degree for their work.

@TizerorFizz this is the elephant in the room. Last week my DS's school newsletter included a summary of university offers received by their year 13's and there were degree subjects like "Creative Writing" and "Journalism" that so obviously don't need a degree. These aren't children of wealthy families with connections and money to burn. It's heartbreaking to think that young people are being conned into thinking these degree subjects will buy them a foot in the door for their dream career. What's worse is that their teacher-advisors celebrate their success rather than warning them off.

Both those subjects will provide a student with plenty of hugely useful writing skills (useful for many many jobs) and the opportunity to showcase their journalistic / creative writing.

I suspect you'd be hard pushed to find a trainee journalist role that didn't ask for a degree these days.

On the point so many seem to pin their arguments on about 20% of graduates not in a graduate job - you do realise this is one snapshot on a fixed week 15 months post graduation? Most of that 20% will end up in a grad job a little while after the survey - it's not like they're suddenly not graduates anymore. The lifetime earnings, even taking into account loan repayments, makes going to university on average a net gain of a couple of hundred £k.

I graduated in 2003 and took out full student loan and maintenance grant. I have not paid much off, if any at all since. I became a SAHM a few years after graduating and been one for sixteen years.

I get the occasional letter asking if I am working etc, but I just ignore it. Hopefully it will be written off like yours OP🤞

There will be many out there in this situation. Similar to myself due to caring responsibilities and health issues.

"I suspect you'd be hard pushed to find a trainee journalist role that didn't ask for a degree these days."

I agree. But the point is that they are not asking for degrees in journalism. 🙄 To be a journalist, you need to have something interesting to say. A degree in journalism will give you some skills, but not enough to make you more valuable than someone with a degree in history and 3 years of experience writing for a student magazine, or writing a unique blog, or writing voluntary/cheap copy for a local freebie newspaper.

I'm in a complete panic. Dd is a first year medical student, max loan as we are low income. I've no idea what plan she is on, and I was always told to look at a student loan as a graduate tax? I'm worried about what this will all mean for her now, can anyone explain? I did undergrad abroad so don't have personal experience.

She's on plan 5. She will have to pay 9% of earnings over £22k a year for 40 years. If she doesn't work, or earns under the £22k threshold she won't have to pay anything. If she hasn't paid it back in 40 years time it is written off. No one will come looking for it.

In that sense it is a graduate tax - it works the same as income tax and NI in that you pay a fixed rate above a threshold salary. Don't panic.

Thanks @titchy . What happens if you stop work but don't claim benefits, eg to become a SAHP? It says you need your supporting person to fill in a declaration, but also provide bank statements showing how much they spend on you every month, is that true? Also, if you go abroad and lose touch with them, realistically can they track you down? I'm not asking on a moral ground, just wondering what their remit is over you.

You need to demonstrate that you're not working cash in hand, or ha

You need to demonstrate that you're not working cash in hand, or have an income from another source and are trying to avoid paying tax and your loan payments (which is illegal obvs) - that's why they can ask for that sort of evidence. But as long as all is above board and you are genuinely a SAHP that is perfectly fine.

In theory if you go abroad you are still liable for repayments (salary threshold is adjusted to the equivalent salary for similar earners in the new country) - I don't know but I'd imagine that countries with shared tax processes would be obliged to let HMRC know. Otherwise you'd be stung with a very big bill upon return to the UK.

We really do have to accept it’s a tax. For some it’s avoidable but not for others. Everyone can read up on MSE or Finance England and unis always give talks on finance.

She has the potential to be a high earner so my advice would be for her to pay off what she can as early as pos to avoid paying stacks of interest