Student loan - do you worry about debt?

[Paraela]

Do you worry about how much debt are your children accumulating with the student loan?

Better to think of it as a graduate tax than a debt. They may not ever pay it off.

If you could afford it will you pay your child university fees?

No becuase the debt is irrelaivant.

Its just a tax of 9% of everything they earn over 27k (plan 2) - simple

the total amount is irrelevant as are the interest rates, neither DD is likely to pay it off in full in the 30 years...

Beyond that its not worth thinking about

No - because unless they're a very high earner they'll never pay it all back.

Over 25k on plan 5

and 40 years

No not immediately. I would put the money away in an high interest account and wait until they finish uni and are established in a career. I would then look at the options re them using the money as a deposit for a house vs paying off student debt once they have a better idea of their career trajectory.

What’s the earning amount when you start to pay it back? Is that the £25k a year?

What’s the point of going to uni and getting into so much debt if you’re not going to be a decent/high earner?

Degrees used to be aspirational and a route to good employment and opportunities - is that not the case anymore? £25k a year is entry/low level job so surely most graduates would work up from that and be paying the loan back through wages?

I have paid half of the fees as DC1 is commuting from home and I would have had to top up maintenance by the same amount.

The grads who will actually pay more are the earners who don’t earn well above the threshold for 40 years after graduating. Mainly because it’s now a tax for 40 years. So it continues to be levied for much longer. The higher earners pay it off more quickly and can pay off lumps of it. My DD paid hers off but not this current plan. So I think the best advice is wait and see. Take the loan, pay it off if career is likely to mean payments over 40 years. These grads will pay more BUT - If you are going to struggle to find circa £60,000 don’t do it. Could there be a better use of the money? What about home deposit? Would you have that as well? Is it one or the other? Is DC doing a degree where good earnings are very possible? Or an arts degree where it’s far more difficult to earn highly? Weigh it all up because it’s not easy!!

The taxpayers.

@Sailonsilverrgirl On previous loan plans, around 50% we’re paying the loans back. As it was over a shorter period, half of grads didn’t pay it back. Now it’s 40 years. So if you don’t earn that well, that’s going to be much longer and more money. It should bump 50% to over 80%.

Yes, the money comes from taxpayers. The loan debt the government holds is £230 BILLION. We also know a number of grads barely pay anything back and never do grad level work. There is an argument that some courses should be culled. Also many never got paid off because women (mostly) stopped working or went part time earning under the repayment threshold. So pretty much a free education. Now more returning to work full time will resume paying.

So many people are not going expecting the kids to be high earners?

I am concerned that the student loans scheme will go bosoms vertical at some point with so few people ever earning enough to pay back the loan.

My DC1 is hoping to become a lecturer, not terribly well paid.

The last time I looked at it you could have two jobs, each earning just under the threshold and not pay a penny back. The system is screwed up.

So if you could afford to pay their fees and they were likely to end up earning enough that they’d have to pay it all back, would you pay it? Surely that’s preferable to avoid paying back all the interest?

on Plan 2 it was 20% paying back in full on Plan 5 it aiming for 50%

So did your child just borrow half of the fees?

Reality - if you do the maths they need to get to 60-70k very quickly to get close to paying back under Plan 2 - it's only the very higher earns who pay the Plan 2 ones back around the top 20% - under plan 5 it'll be more like 50% - its really not worth worrying too much about

I assumed it was like a tax and everyone would take it out. However what is happening is that richer families are not taking the loans and even less rich so their children live at home and /or work have a miserable time at uni. The societies that made university such a brilliant place must be suffering and nightlife is disappearing. Students are reporting being lonely. So graduates from poorer families who have the most debt but then do well will take longer to get on the housing ladder and have fewer children. Really poor system.

People go to university to do interesting education and then do interesting work. It's not necessarily about high earning. The concern is that many graduate jobs law (often), lecturer, nurse, architect won't earn enough for basic housing or having children

No idea what the plans numbers are. DC only applying this year so assuming plan 5

@Weyohweyoh that’s why I’ve paid half, I’ve been saving for years for my maintenance element. The fact that they can commute to a really high ranking uni for their subject means I’ve just thrown it at the fees.

I paid 100% of year one to avoid accruing interest, have paid half of year two and expect to be able to do the same for year three when we get there but haven’t committed to that.

yep Plan 5 so a worse deal than my DDs

9% over 25k for 40 years - though I think the interest rate is lower

It is just the fact that you will see that extra tax in your payslip for pretty much the rest of your working life is demotivating.

What happens if you move overseas to work?