Was I the only one who didn't realise what you start paying interest on your student loan from the first day of year 1 ?

[CobsNobs]

For some reason I had heard (maybe misheard) Martin Lewis saying that you don't have to worry about student loans until you finish uni and start working and in my head took that to also mean that you wouldn't start accruing interest until that time.
Obviously I was completely wrong but just in case anyone else had made the same assumption I am posting here.
My son is doing a 4 year course and will be borrowing £54k but at the end of year 4 that sum will have increased to approx £64k.
Scary!

(In my defence I am not from the UK and never had a student loan).

https://www.mumsnet.com/talk/am_i_being_unreasonable/5011126-to-pay-off-student-loan

A short interesting thread from someone towards the end of their student loan.

Teachers earn fuck all for the work we do.

Student loan deductions aren't considered if you need to apply for universal credit, which a few of my colleagues have had to do. That's unfair because it's deducted at source and you have no control over how much you pay back. Eg I earn approx 2400 per month as an experienced teacher after deductions but if you run a UC calculator you have to enter the amount before pension and student loan deductions.

@Hoppinggreen
Did you choose to pay for her education? If you did that's really down to your finances. How else should dc access loans? The state pay out even more to the well off? To the ones who have never bothered to save? Not saying that's you but money from the state should go to the most deserving dc and one way of working that out is household income. Why should tax payers pay up front for all dc when some parents are well off?

Teachers should earn a lot more. Thanks for all the work you do.

Yes we did choose to pay and I do understand your point.
I suppose because thay are repayable loans that it seesm odd to me that our income is what matters BUT if as has been said previously a lot of it is never repaid I can see how that makes a difference and is taxpayers money being spent on the dc of the more well off.

I think the system doesn’t work at all. The highest earning students will pay less back despite earning more. Women have to pay back more because they’re more likely to go part-time or take time out of work for children. It would be much better as a graduate tax.

However, I wouldn’t encourage parents to pay for their children’s university unless they’re very well off. Student loans don’t count for the affordability part of a mortgage, you don’t have to pay them if you’re not earning, and they’re eventually written off. The £45,000 would be more useful as a house deposit.

Actually I think they do count for affordability. Prior to the 2008 financial crisis, it was always said correctly that student "loans" weren't like other loans, and weren't taken into account when determining mortgages. After that though, lenders were required to consider actual affordability ie incomings and outgoings, as part of their assessments, and since then I'm pretty sure that student loan payments have impacted how much someone can borrow. That has really not been consistently made clear; and now that it is 40 years not 30 years till write off even more significant I think.

@OOlivePenderghast how would a graduate tax work?

Confess I really haven't followed any of the debate on loans v graduate tax.

Thanks

@Xenia
Some students have to work very hard to get their degrees eg medicine, pharmacy, nursing, engineering etc because they have a high number of contact hours + study time each week. A degree is compulsory for a number of jobs which are critical to the running of this country.
My DC both did healthcare degrees and the older one's student debt is £85k. To do become registered to do her job she had to do a 4 year integrated masters degree. If you are in hospital her role is essential for your survival.

Interest is also accrued when on maternity leave. Seems to unfairly penalise female graduates.

I think about mine. I pay off about £300 a month but the amount of my plan 1 loan is greater now than when I graduated , over a decade ago.
At the time I felt it would be just 'a tax' that I would never pay off and wouldn't need to worry. Except my nursery fees are over 2k a month so some of that £300 would be handy.

@NamechangeRugby I have just listened to the BBC You and Yours programme you linked. The quick versions is:

Lizzie went Newcastle Uni to do Economics from 2012-2015 (Plan 2 £9250 tuition fees). She borrowed 37.5k and started to pay it back one year after graduating in 2016. When she started to pay it back it had already gone up to 42k. In the last 8 years she has paid 19k in student loan repayments and now earns well. However, in that time her amount owed has gone up by 22k.** She is paying back £400 a month and as an economist has worked out she will pay back around 110k. She borrowed 37.5k, that is a lot of interest.

** Not sure if the amount owed is now £45k (42k +3k) or £64k (42k + 22k). It is scary, whichever way you look at it.

I find it shocking that they can change the interest rate

Yes you can vote, get married, drink, smoke, fight for your country, take out a mortgage BUT your ability to go to university depends upon your parents! If your parents refuse to support you, then often you cannot go because you cannot afford it.
It also affects the amount of loan you can get.
Absolutely ridiculous.
Years ago I had a friend who’s father refused to support him through university so he didn’t go,
This was before student loans existed. If your parents earned above a certain amount then they had to subsidise you.
Can you imagine needing your parents blessing before you could join the armed forces for example. Or get married? Or have a drop of alcohol.

Martin Lewis drives me mad with his don't worry you'll never pay it off mantra! It's so misleading. If you end up being a highish earner you definitely will, plus a huge amount of interest. I've had various discussions with my DC currently at uni. They don't want to have an extra 9% tax until they are 50 (or 60 in new plan). They are borrowing the least they can get away with, working part-time in hols, doing a paid internship this summer and will focus on paying their loan off ASAP. I do think it's ridiculous that universities all charge the same tuition fee nowadays. Some of the lesser courses/unis are really not providing value for money and in turn these students are likely to earn less, therefore the tax payer will indeed end up subsidising their loans.

At the moment, 50% of loans are not paid off. They have never been loans in the accepted sense. No one is obliged to pay them off on a lower income. They are a graduate tax. I am not sure why anyone thinks they are not. They are 100% linked to income.

In fact women who work part time pay less. Especially if their income falls below the threshold. How are part time workers disadvantaged? They clearly pay less. They have been a category of grad that hasn't paid anything off.

As a nation, do we want our young people to go to uni in the numbers they currently do? If we do, they need to make a contribution. They are not paying the going rate for the degrees and are subsidised by overseas students and the government (all of us). There is quite a big argument for closing some unis and reducing others. The expansion has arguably taken a lot of housing away from the rented sector.

Martin Lewis is correct. He mostly is! It is a graduate tax but the length of 40 years means the lower paid will pay more because they will pay longer. That's food for thought regarding whether some degrees are worth it. Then we are back to culling them. We desperately need HE that's not a degree to be far better and much more valued.

I'm 43 and still paying off my undergrad loan!.My pay currently is so crap I'm only paying about £10 a month.
And I'm also about to take out a postgraduate loan so I can do a Masters and retrain (currently in education).
Hoping it will be worth it!

@NamechangeRugby

Grad "repayments" are wholly based on what the grad earns. Please read MSE Martin Lewis for a full explanation. This is already a graduate tax where what you owe matters not one jot in terms of what the grad pays. Neither is it a requirement to be paid off - a feature of a standard loan. So although we don't call it a graduate tax, in effect it is. It's totally based on income. If you don't earn, you don't pay. Just like income tax.

@Sunshinedaytoday You must earn an absolute fortune!!!

I think the interest charged on student loans is too high. My DD took years to pay hers off and she only took a loan for 2 years as used her savings for her first year to keep the debt lower. When these young people graduate this debt is taken into account when they apply for a mortgage too.

Ds1 finished uni 6 years ago on a salary of £45k which pretty soon increased to £60K and now £80k
Despite a reasonable salary, he still owes more than the day he graduated

Me too, I’m on 42k, though I doubt 🧐 d be on that if I didn’t have the degree (and the postgrad studentship I got off the back of it).

I'm glad we have a different system. Interest only clicks in if you settle overseas. My son moonlighted at a hospital emergency department to pay off a large chunk of his student loan, buy a car for placements and have money for next year's fees. He has a lot of energy and drive and now a great tolerance of foul smelling bodily excretions and drunk and drugged people who threaten to kill him. (He assumes they won't recognise him sober.) I am sure that will stand him in good stead in his future medical career.

I only just paid mine off aged 38 this year - I did postgraduate study and the interest kept mounting while I was on my Masters and PhD courses, even though for those I had funding via scholarship awards. It’s been a big stressor my whole adult life and I don’t think enough is done to educate students before they take them out. They’re only 17/18 when they apply, that’s very young - I doubt a bank would lend them similar amounts of money at that age.

Marti Lewis DID say that, but several years ago when that was the case. The system changed.