Plan 2 Student Loans- much higher interest, Times article - parents pay off

[fluffythecat1]

Our son is potentially heading to university in a few years. I follow Martin Lewis for his excellent financial guidance and have been concerned about his advice on student loans. Before, it was advisable to get a loan and in likelihood not pay off the full amount under the old system, now it seems the interest on them has changed as discussed in this Times article from yesterday, meaning that even with a good job, there is a significant long-term burden for graduates.
What are people’s thought? Gap year to earn some money before going? Put any money in a child trust fund towards it? Reducing the amount of loan taken looks key.

I had £21k student debt — why did my twin owe £40,000 more?

https://www.thetimes.com/article/8598d6cf-cb9e-4e78-9a51-7b1023ce53a6?shareToken=e66982418968f371f402de3a5c210f99

Article in today’s Times.
An almighty student debt reckoning has arrived.

https://www.thetimes.com/article/390a250a-d4c2-4488-9b49-bef654848117?shareToken=8dcffe09aca691f4430d7f976f860953

@Isekaied because you suggested that adults should fund themselves ? And it's 2 kids, both doing 5 year degrees (something else we hadn't budgeted for). Becoming a doctor is expensive.

Not a chance for majority of us. I don't have £20,000 free income after tax every year.

Oh and mine work 60+ hours a week, often at night. Work ethic doesn't make you rich unfortunately.

@Reprehensile And what savings do you and she have? Enough for a house deposit? She’s not going to get a vast amount for a mortgage. Paying up front is only good if you have the spare money and deposits for homes. Otherwise the repayment of £90 a month on the loan is no saving. How many years to save the equivalent of £60,000 you spent?

I didn't say adult should fund themselves.

I've said a couple of time. If parents have enough money they should calculate whether it's better to pay the money upfront then or use it for housing deposits etc.

I agree with Martin Lewis.

Students shouldn't be put off from going to University if they cant self finance just because of the costs.
Especially if the degree is gonna be worth their while and is essential for their future work.

I think those of us who disagree with Martin Lewis are not in any way disagreeing with this particular sentiment. It’s where there is a choice he advocates definitely taking the loans. That is where I disagree.

Yes. It’s a position of privilege, that’s for sure.

For those saying that RPI means the loan balance is just standing still, there are different ways of calculating inflation. This article is old but explains it well: https://www.theguardian.com/education/2018/jun/28/student-loan-interest-rates-rpi-retail-prices-index-inflation

Yes I know. I was pre-empting people saying that my kids wouldn’t work hard because we paid their fees. I have seen it said many times here.

I am a doctor btw and did 56 hour shifts in the 90s. I know about hard work.

I agree. There will be money for house deposits. It would have not made sense for us for our kids to get loans. Despite the prevailing advice from ML being to the contrary at the time.

It wouldn't make much difference if they all voted, as the population is still heavily weighted towards older people due to the post war population boom. Favourable policies have followed that aged group through their lifetime.

Did you have to pay £250,000 to become a doctor ? Because that's what your F1/2 ST1/3/4/5/6 are doing. Doubt you'd be able to save enough to pay your kids fees as a junior doctor these days.

Okay take home pay for a min wage job paying 25k is 21,519 a year or 1793 a month, so fairly close to 2k. When I was 18 and saving for uni I worked full time in a factory during the day and four long evenings a week in a pub, hence savings plus living expenses.

Right ok. But saving 20k in a year to pay for halls and fees is steep. Are parents supposed to fill in the gaps for other things like travel to work, lunches, meals, any social activities like the gym or the odd night out. Yes obviously they should have savings so they go with money.
How long ago were you at uni? Because fees and the cost of living has pushed prices beyond what is affordable for most.

Of course I would not. Times have changed. It’s become so much harder for students. I had my fees paid for in the 90s. I was so lucky. I have a bad headache today and I am not quite understanding your point so apologies. It’s tough out there. I am glad my kids did not choose medical careers. When I interview amazing students for medical school, I worry about their futures and their enthusiasm almost saddens me.

DD is aware of friends that have been saving part time job money through sixth form, took a year out to work and save, and now continue to work a fairly high number of hours whilst at university (e.g. 2 or 3 days a week or more, often causing them to miss lectures, workshops, labs etc) to make ends meet. They are still taking loans to cover the shortfall.

I don't think a model of expecting students to entirely self finance is reasonable. The current model also expects parents to chip in, with loans being means tested on parental income, and more and more parents are struggling to do this.

I think we will see a move towards students commuting to their local university or taking on distance learning in conjunction with jobs. Both of these will still need parental support. Going away to university will revert to being the preserve of the rich who will happily pay fees and maintenance up front, whilst still having enough to provide substantial house deposits, cars, further training etc.

This is what this thread is making me think: please remember that in the real world (not the Mumsnet world) most families are nowhere near being able to afford to pay fees and expenses up front. For most young people, the loans are essential; they simply wouldn't be able to go otherwise. Why should they limit their horizons to roles that don't need a degree, just cos mum and dad can't afford to support them?

The other thing I think is so unfair about the English loans system is that the poorest have to borrow the most. My DC's best uni friend has a deadbeat dad who she's not in contact with and a mentally ill mum who can't work. This girl got full loan and it took her four years to complete her degree due to having to take time out of it to care for siblings when her mum had a mental health crisis when she was in her second year - so she finally graduated a year late with £70k+ debt. She got a 1st. If that's fair, when the ones with rich families who don't have these impediments to study graduate not being subject to pay the extra 9% tax for their entire working lives; paying upfront feels like a tax avoidance scheme to me!

Not really fair, the mess is the increase to £9250, thats down to the Tories... as is the use of RPI etc
Labour though, are not doing the right thing and reforming the system, so will increasingly get the blame.

Fees are only going one way as Uni numbers drop and the move towards apprenticeships.

I don't understand how this country can get out of its economic doom loop & fix the NHS, if we do not encourage Higher Education and the benefits its gives us all.

We are destroying our once World Class University sector.

Plenty of these young people will still be under 18 when they sign the form to apply for the loan. You wouldn't be allowed to sell a 17yo a mortgage or a credit card, so why are we encouraging literal children to apply to borrow thousands and thousands of pounds for a degree?

It's also very unfair that young people from England, NI, Scotland and Wales all borrow on different terms.

I agree with a lot of that. Expecting children to come up with the 20k funding a year is just mental from part time jobs etc...

I don't think we are in a place where we can all commute or even support our children through commuting uni. Our local universities outside of Oxford are Oxford Brookes (the top out of the three but Headington is chaotic to get to), Buckingham or Northampton which are quite a lot lower down the ucas table. Her offers were contextual as we are considered a more deprived area with less children going in to higher education, commuting to limited unis will push us down further.

What I do see a lot of is lower income families who are benefitting from the maximum loans or rich families sending their kids debt free. It feels like the middle earners who are being squeezed in this. I earn a good wage and this year my daughter will get a 6k maintenance loan based on last years earnings but I have warned it will drop next year as I will earn more money this year. I'm going to give her some of my bonus which I pay high rate tax on so she should have about 9k and if she goes to Durham she should get a small £700 bursary. Her dad and I will top her up monthly but I feel like we are stringing so many things together to meet the cost.

Thankfully she a saver and has saved quite a bit of her own cash to top herself up, she's taken a gap year and has multiple jobs. I also want her to have fun as well so have encouraged her to go out as much as possible, exercise, ride horse, go to the theatre, cinemaa etc.... because she's still 18 and should have some fun.

But they have no choice if they want to go to uni and their parents can't afford to pay? Whether they understand the terms of the loan or not they have to sign up or not go to uni.

Parents need to start saving when their child is born - that’s more common in the US and not really our culture. Money invested every year in a JISA cld have reached a tidy amount by the time the child reaches 18. This is the missed opportunity. £1k per year is much more manageable for many more families than £20k per year when the children are 18. There will of course be those that can’t afford this amount and for them there must be state support of some sort, but we see on here all the time the total shock of parents faced with the cost of uni only when their child reaches 18.