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).

No, I take home 2500 a month, I just have 3 student loans.

This is extreme!!!! I've been using my student loan to get an actual degree and change my life. Why you so bitter???

It's easy to get carried away and panic but the way I see it is a tax on your earnings just like any other tax. You pay back a bit every month out of your wages according to how much you earn there are calculators online to see how much you will pay back monthly on the salary you will be earning. My daughters will be midwives at the end of the term and will pay back around 100 a month on their starting salary. They would not be able to be midwives without university fees so we see it as a necessary evil to be honest ! However if my kids had wanted to go to uni for a good social experience and not sure where it would lead them job wise then no I would not advise it.

The best thing is for medicine.. we get an nhs grant to cover tuition fees for y5 of the degree.... can also get assessed for a bursary. I got a bursary of 0, but student loans decided that "because u have a bursary".... regardless of telling them a bursary of 0 is not a bursary, they remove 1200ish of the amount off the amount of maintenance loan you're allowed, so we ended up with £166/m to fund all rent/food/bills....and you're banned from working during term time at uni due to course demands and if caught can get warnings of being kicked out of uni

It’s Xenia - she is a long term well known MNer. She is a solicitor who is extremely wealthy and used to own her own island (verified since many people actually know who she is). She has rather right wing views but isn’t a troll.

It's outrageous. Mine has 6.6% interest, that's higher than my mortgage.

I really think there will come a tipping point where younger generations overhaul tons of shit that's been placed on them. Housing, environment, education, loads of stuff - anyone under 50 or so has been shafted. It's not without political consequences.

It's also shocking how women who may take breaks in their employment (e.g. due to maternity leave) will have extra years worth of interest to pay, and therefore repay a larger total sum than their male counterparts.

Interest

How much interest you’re charged depends on which plan you’re on. You’re currently charged:

• 6.25% if you’re on Plan 1
• 7.8% if you’re on Plan 2
• 6.25% if you’re on Plan 4
• 7.8% if you’re on Plan 5
• 7.8% if you’re on a Postgraduate Loan plan

My SIL has openly said she never intends to earn enough to ever have to pay hers back. BIL is a high earner so she'll be ok

Makes me quite angry actually.

With respect, you don't earn as good a salary as you think you do.

Also the threshold at which you start paying dropped (so most will start paying when they get their first job, and that will increase as starting salaries increase (below inflation) but the threshold stays the same. Plus there is an extra 10 years that you pay it for (now 40 years, not 30). And it is those extra 10 years that will be the most lucrative for the Student Loans Company (from age 51 to 61, when wages have probably reached their highest, so the 9 per cent of salary above threshold will be a very big chunk of money every month.

Plan 5 is actually RPI as an interest rate, but the Student Loans Company reserve the right to change the conditions. So while RPI has been very high (it was around 13.5 per cent last year), the SLC have capped the interest rate temporarily at 7.8 per cent. But the actual interest rate is RPI - which can go very high for periods of time.

I thought Martin Lewis had revised his advice? It doesn’t make sense in the current interest rate environment, you can be paying hundreds of pounds a month in your thirties, whilst trying to pay nursery bills and buy a house, and still have no chance of every paying it off. It makes no sense at all for middle earners. Combine it with the loss of child benefit etc after (I think) £60k and it’s shocking.

In which way has he revised his advice? I looked on his website last Feb and it was all very much ‘take the loan, don’t bother trying to fund it yourself’…

@Sunshinedaytoday So if you're paying 2k childcare as well you're literally working for nothing? 😞

I don’t know why a poster thinks it’s ok to mention drama and art students as less deserving somehow. Don’t you watch tv/films? Buy books with covers? Buy designed items? The world will be a very monotone place if we all do maths and science.

The interest rate is too high - and variable - whatever course you are on

'The new system leaves many who start university straight after school still repaying it into their 60s. Many typical graduates will pay over 50% more than under the prior system and a few double'
MSE Plan 5 loan info here.

It concentrates too much on lower earners. If you're earning 50-70K you'll be worse off. And banks absolutely take it into account when applying for mortgages, in exactly the same way they take into account childcare bills. Paying an extra £300 a month absolutely does make a dent in your ability to pay things.

The new system only works for the very low paid, who won't pay anything back, or the very high paid, who will pay their loan off so quickly that interest won't build up.

Plan 2 student loans and plan 5 are very different beasts - the MSE guidelines I linked to above are more recent.

Good post- it is misleading to say “most people will never pay it off” (although now most will, 61%, will pay it off) because it is principle plus compound interest at eye watering interest rates. Even though now, 39% won’t pay it off, almost ALL students will pay back thousands of £ more than they borrowed.
There is another misleading statement about that saying that because the interest rate is now RPI, then after accounting for inflation, you’re only paying back what you borrowed in real terms. So so sneaky! And 18yr olds are young and naive and will not understand this as many adults don’t even get what this means.

Its like saying baby boomers aren’t making huge profits on their houses by selling what they bought for £65k for £650k because after accounting for real estate inflation, they are only getting back what they paid in real terms.

With the threshold lowered to £25k and frozen in less than 10yrs it will be at minimum wage….so even the lowest paid will be paying something. Imho, unless they stop the threshold freeze.

I think only the 18yr olds who took A level economics would understand the sneaky pitfalls on Martin Lewis advice page.

So go to uni, get a worthless degree, can't work as no jobs in that field in your area, 50k loan written off - nice.😂

To be serious - will the Labour party write off or do away with the loands just like the Liberals promised🙄

You don't start paying interest you are charged interest

Student Loans are only repaid if the earnings threshold is hit so whether payment of that interest will eventually be made depends on the students income over the loan lifetime

In 20 years I've only paid one installment, I don't think of it as debt and don't worry about it.