Student loan - do you worry about debt?

[Paraela]

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

I very much thought of my student loan as debt rather than a 'tax' and worked hard to clear it. It took 10 years.

However I graduated with total student debt of £28k (in 2012), so nothing like the £50k+ they come out with now.

My 2 DCs are at uni on an overseas basis, so full fees and no loans for me. DCs don't worry too much either, DD just asked for an iPhone 16 for Christmas 🤔😱😂

We had the money there to pay the whole tuition fees and maintenance loan (due to inheritance) but we opted not to. DS didn’t want us to pay the whole amount and it seemed futile to pay half as the actual amount you pay back each month is the same regardless of how much you borrow.
We made the decision to leave that money in a high interest ISA where it’s earning plenty of interest and then give it to DS when he needs it for a house deposit.

@filka Obviously knows you have the money! Which you probably do if you are paying international fees here.

No! If they are paying it back then the are doing well!

It's NOT like owing £50k to a bank at a fixed interest rate regardless of your income leaving you at risk of default if your circumstances change.

If your income falls you pay back less or even nothing at all.

I do find it worrying that the loans are being viewed as a debt. Most of us see debt as a mortgage, a bank loan or finance for a car. All of these must be repaid. A tax based on your income with no reference to the sum borrowed is completely different. It’s only really students who get the full loan who have £60,000 on their account, Or 4 year undergrad masters that can mount up. Students with parents paying £thousands don’t need to get to £60,000 on a standard 3 year degree. Working in the holidays helps too. It’s a case of knowing how the system works and deciding if it’s the best course and outcomes based on costs.

i find it worrying that it isn’t seen as a debt. It isn’t a tax based on income with no reference to the sum borrowed at all! That’s just how one particular journalist has encouraged people to think about it. It’s literally a debt. It might not be payable if your income drops to below minimum wage and it might be wiped out after 40 years but it’s still a debt at high interest rates and of course there is reference to the amount borrowed. The more you borrow the longer your repayments last!

literally the only reason that it used to be true ti say that most never pay it off is because of the compound interest and high rates meaning that it is so enormous that some never catch up. They might not ever manage to pay off all the debt but they certainly pay off the amount borrowed in most cases. It’s just then it carries on for decades longer!

The £28k quoted above from 2012 if you apply inflation to that in today's money that £28k would be a debt of £39k , but even so I agree the loans today are higher even in real terms than they were.

I have always said if you are in a family where women do not work much after having children (and here in London we do have quite a few cultures like that for religious or other reasons) then you probably wil lnot be repaying the loan. If you intend to follow your dream and become a famous actress or artists (ie you will never make much money at all - very likely) then again your loan is a gift from tax payers. One man used his loan to fund his costs to get to ISIS to fight for ISIS in Syria.

Ok. Martin Lewis does have a degree from LSE.Albeit in government and law! He’s not just a random journalist and his advice is more trustworthy than most!

Whst is the standard definition of debt? In the uk it is generally seen as money that must be repaid, unless written off, and a loan has agreed repayments that do not fluctuate with income. The student loan is not a defined debt in the usual way and does not have to be repaid in full if the means to pay reduce. Therefore it is entirely different from a loan from any other institution.

As millions of students need them, and parents don’t have thousands and thousands of £ available, so what is the point of calling it a debt and frightening them? What they pay is determined by what they earn. Yes, there can be differences based on plan but if dc want uni, this is the cost. The state is owed £230 billion by students. Substantial sums will be written off. Those on lower salaries without degrees pay for this, or we borrow it!

I wholly endorse dc looking at value for money, but by being so negative we risk the best dc not choosing the best unis because they are financially risk averse. The more we harp on about debt and how bad it is, the least financially astute make decisions based on money and not on career aspiration. This affects the least affluent the most. Those who don’t need uni or who are not likely benefit really do need to think hard about what they do, but getting a well paid job is the best outcome. We know many grads are not able get these jobs.

UK government borrowing during the last year was the third highest since records began in 1993. This is of much greater concern. This is the real debt that funds students and everything else we want.

The government believed 27% of the 22/23 cohort would repay in full. They suggest 65% from now on. Obviously this depends on wages but in effect most students have not paid these loans back. They are taken out over a very long period which gives them different characteristics. If is therefore all of us who fund them, one way or another.

Just because Martin Lewis went to LSE does not mean that a student loan is not a debt. Just because it's a long term debt does not mean it is not a debt - is a mortgage not a debt then?

DC need to be encouraged to think very carefully about their options and not simply to automatically go off to university just because they haven't decided yet what they want to do. They also shouldn't be encouraged to go when they have very low grades since they are likely to struggle to gain a good degree.

Children (and they are still children at just 18), need to understand what they are signing up to. It is debt whether you like it or not.

Yes and the regulations allow the loan terms to be changed too so it might even become more debt like in future. I don't think any one is confused about it . it is called a student loan because it is a loan. If people take the master's loan too as plenty of potential lawyers do in my profession then I believe it then becomes 15% of salary over the threshold not 9% paid back. I thought most of my children would earn £100k plus (4 became London lawyers) so felt it was more likely they would be having to repay some so I just paid the fees as they arose (not something most people can afford of course). It is pity I didn't get a tax set off for that as happens in many countries and when I went to university my father could covenant the money to an adult child sg for university rents (as we only got a tiny minimum grant our parents made it up to the full one) so my parents therefore in effect could set against tax the sums they paid or topped up, something we don't have today now those on £70k+ have the highest tax burden in 70 years (with no chance of tax reductions in the forthcoming October budget either)....

Did know this exist. What country is it? It would be great if they will allow you to offset fees from taxes. It will encourage more people (parents) who can pay to do it and less student loans.

DS is on Plan 2. He's taken the tuition fee loan and receives the minimum maintenance loan. He hasn't taken any loans for his current placement year because he is earning a reasonable salary and can afford not to. We debated the 7/8% interest rate on his student loans and decided to mitigate/offset our decision not to pay his tuition/maintenance ourselves by ensuring he maximises his LISA (£4K) which obviously attracts the 25% government bonus. Admittedly, we also didn't encourage a gap year for DS because of the change from Plan 2(2022) to Plan 5(2023).

Yes - but we can't and they are still likely better of with a degree than not.

So we are where we are - universities (DH in HE ) are underfunded, students loaded down with debt and often struggling as well - and government not getting paid back - a poor system all round really.

It's not great but dd1 was sure she wanted to go to uni. She got into a top 10 uni doing a science. Is anyone really going to say to their dc that they mustn't get a higher education, as its not for the likes of us, it's only for kids whose parents can fund their entire higher education? I think that would be quite sad.

I need to read about these plans. Are there likely to change every year? Or is everyone now on plan 5?

https://www.gov.uk/repaying-your-student-loan/which-repayment-plan-you-are-on

https://www.moneysavingexpert.com/students/which-student-loan-plan-am-i-on-/

It is when they took the plan out and which bit of UK they are in and getting the loan from.

Lost a whole post!

I remain of the deeply unfashionable view that far too many children of mediocre or sub par academic ability are being encouraged to go to university, study worthless degrees, and take on debt they will never afford to repay.

Because it's all a business now, the system has flexed to accommodate this by lowering standards and through creeping grade inflation . Even subjects such as languages at A level are considered impossibly difficult. Only 2500 children took German A level last year. It's horrifying.

We need tradespeople! Builders, plumbers, gas engineers, plasterers, electricians.

Train the non academic types in those fields, and leave academia to those best suited to that sort of intellectual discipline.

Oh and I think the national debt has been recorded a bit longer than 1993 @TizerorFizz .
I would hazard a guess that it's around 1694...

I’d rather money be diverted from those going to Uni where a degree isn’t essential or in areas of over capacity and instead more funding for trade apprenticeships. You’re right we need more people who can do practical skills and less professional services.

Thank you

That's not a deeply unfashionable view, it's the most fashionable and commonly expressed view of higher education on mumsnet.

Is it? ok !