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

I'm actually a carer to two of my children in the family as they've got additional needs. It's one of the reasons I can't get back to work.

And it appears many have done what I have done as life goes on your circumstances can change and the dreams you had as a young person can be easily snatched away from you in the blink of an eye.

Life isn't black and white.

Some seem to be using this thread to argue out the points of who should go to university and who should pay.

This is about the repayment thresholds being lowered and an unexpected high interest rate being applied to a loan that young people did not understand. Young people already feel shafted by the government and past governments and this is an extra nail in their coffin. Even high earners will be losing hope they will ever clear the debt before 30 years passes.

What will happen is they will stop having children, stop paying into pensions, stop buying houses. They will leave the country. They certainly won't be saving money so their children can go to university.

You can argue young people had a choice but they really didn't. There have been no government youth employment schemes for years. Good apprenticeships are elusive. They have a high drop out rate. They've helped older employees upskill. Even trades apprenticeships are difficult to secure.

Despite much bleating about Mickey mouse courses, most people are trying to study the courses that will help them get a job afterwards. Humanities and MFL courses are closing and the numbers studying computer science and economics have swelled. Last year UCAS applications to engineering grew the most because that is now the career which is reported to have a shortage of workers.

They've had poor employment prospects to contend with and now the chancellor has changed the terms and conditions of their hefty loan to help plug the gap in the overall budget. Why aren't more people angry about this on behalf of our young people?

I think that people are angry. The National Union of Students is running a campaign and raising a petition on this issue.

If they are not going to pay off the loan and, just what was the point of going to university?

You can do evening classes if it is education you are after.

I started my career as a care assistant. I knew I wanted to work in the NHS.

After a couple of years, I decided to go to uni and train as a doctor.

I now earn about £180K a year. The HCAs earn about £29K.

Even if I did end up paying back £250K on the £100K I borrowed in fees and loans, I’d still be infinitely better off financially.

Even at stupid loan rates, as long as you choose your degree to make sure it’s one that definitely improves your income, you’re still better off going than not

If you choose poorly, or don’t graduate, then the gamble isn’t worth it, but for most people the final balance sheet of lifetime earnings will always favour uni. There’s little point moaning about it

They are certainly complicated issues. I have posted on here before now my 1979 or 1980 notice from the local authority about making sure parents top up the tiny tiny minimum grant to the maximum (I still have the records). Only 15% of people went in those days. I have my uncle's 1936 Durham invoice - which is the equivalent of £9000 a year fees today - amazingly similar. he did medicine but as my father was born when their father was 49 he couldn't afford for my father to do that too as retired by then so my fahter did a different degree first of only 3 years and then grants came out after WWII so after that he did medicine - he was doing exams until he was about 30.

Roll on to when we went and my parents could covenant money to us for the rent etc and that was tax deductible. Yet the sums I had to pay for my 5 children at university (I funded them without loans) could not be set against my tax which would have made a massive difference to me. My five chidlren are unusual in having no student debt - I regarded the unviersity stage as a continuation of paying private day school fees so I just extended that pain by a few more years but it was certainly an expensive business. The last two qualified as solicitors 2 years ago.

Some people hav eused a student loan to fund their expenses to go to fight for ISIS. Some people have totally abused the system through schemes to defraud eg" In 2022/23, 53% of the £4.1 million fraud detected by the Student Loans Company (SLC) by value was at franchised providers" https://www.nao.org.uk/press-releases/investigation-into-student-finance-for-study-at-franchised-higher-education-providers/ "Earlier this month, I was made aware that there is a disproportionately large number of Romanian students settled in the UK who receive student funding from the Student Loans Company. Investigative work undertaken by the Student Loans Company suggests organised exploitation both of Romanian students and of the UK taxpayer." https://questions-statements.parliament.uk/written-statements/detail/2025-03-25/hcws547

Other people might never earn much as they work in a family business which keeps pay low but the parents provide a home, car etc so that the child never pays back the loan. Others are in cultures where women don't work and just stay home . in all those cases the loan is a gift from tax payers in effect. Or some people pick careers where they will never earn much - contemplative nun, artist, actress etc.

@AndSoFinally, I think it is worth moaning about it actually.

As an example, Band 7 Clinical Scientists in the NHS have highly specialised roles that they need a degree for, yet the top spine point is only just over £50,000.

Why should some people struggle disproportionately? Why is there so much discrepancy between salaries and actual provided value to the population?

People can and should complain about whatever they want to.

The new loans have a lower interest rate, that is less punishing on higher earners.

Partly due to that low rate more will be able to pay off their loans much quicker- which means even less interest on the loans.

We're talking about plan 2 loans.

But why do you say they’re struggling disproportionately? What job would they be doing in the science field (assuming science was their chosen field) if they didn’t have a degree? Lab tech in a school on minimum wage?

Even with paying back the loan at about £200 a month they’re still about £1,000 a month better off 🤷🏻

Or, another way of looking at it is, the less you earn, the more you will be punished for having done a degree, because those who can least afford to have an extra 9% of their income taken off them will effectively have that taken out of their salary their entire working lives, while very high earners will quickly reap the rewards of their degree. This might be more fair were it not for the fact that not all careers that require degrees actually pay particularly well, and the Government has moved the goalposts over time, so that you can now be earning little more than minimum wage and still lose an extra 9% of your income above £25,000 your entire working life. Around half of degree holders will be caught in this trap for the full 40 years.

Yep they retrospectively changed shit.

I left uni in 2016 with £53k of debt. I have been paying it back since 2018 and now owe £67k 😂 robbing bastards. I have paid back around £9k…

Marking place, my dd is going to uni in sept and im loosing sleep over the loans.

I think employers need to think long and hard about whether the job they are offering does actually ‘require a degree’. If fewer people did degrees, then fewer employers would ask for them, and fewer people would be trapped in a lifetime of debt.

If the job does actually require a degree then fine, but it needs to be reflected in the salary.

We’ve all been shafted by the government. They promised that they wouldn’t increase taxes ‘working people’ and yet here we are with more frozen tax thresholds.

Labour always want to increase benefits for those who don’t work, but it’s never ‘the rich’ who pay. It’s always ordinary people who work hard to improve their lives who get shafted. This is why I don’t vote for them anymore.

@bookmarket The changes to the loan repayments certainly bring into sharp focus about who should pay. We know it’s not been the majority of students. I don’t agree with the changes and feel young people are not being treated fairly when compared to older people. I’m 70 so understand being older. I think most students do understand it’s a tax on earnings but the tax has just increased. Labour lying again I’m afraid.

i can absolutely assure everyone that the birth rate isn’t falling due to student loan repayments! It’s falling because dc find partners later in life, find child care expensive because their salaries are not great and can barely afford their mortgages. The loan repayments are chicken feed by comparison. It’s everything else that’s causing a low birth rate.

Can you show me any other loan company that increases the loan interest purely as you earn more?
That can increase the amount to be borrowed mid way through the term when needed? ie student embarks on 3 year course, tuition fees increase for years 2 and 3...

Loans are not only needed for HE but for FE in colleges too

Graduates will on average, earn more, pay more tax than non graduates, why should they subsidise these people?
They are paying back their education to us all, by a: providing the tax revenues we need for the services we require and b: providing the skills and services we all need in a modern economy.

As many financial experts have pointed out, no FCA regulated company could get away with this, thats why the SLC isn't under FCA rules, nothing to do with it being a Govt scam scheme.

That’s true.

And it’s the case that fewer women than men will ever pay off their student loan.

Because in the society we live in, women tend to be the ones that care for children full time or work part time to fit in around school hours.

Bit rich to blame women for being the care givers.

Interest should not be increased but why not make it compulsory to start paying the student loan back as soon as the university course ends. Treat it like any other loan. Infact reduce the interest rate the more smeone has paid off.

This would certainly shift the focus of who attends university to only those who have a clear career path.

What is so shocking is that there are no other loan providers alternatives. Either bank of family or sign on this dotted line for loan at this plan terms and policy. All this made so complicated for the young students.

Loan at x% to pay off at this level of salary until final amount set in term, like Covid business loan or bank loan. Paying off quicker would reduce final amount.

Young people also paying for HMRC incompetence, HMRC have lost track of £13 billion in student loans owed....

I'm not surprised, my DD was working in Australia, told SLC at every stage, no monies were ever taken, despite earning above the threshold.

In my county there are 2 FE colleges that offer higher education pathways. One offers a handful of degrees affiliated to a fairly decent university. It used to charge £6000 for its fees but recently put them up to the full amount.

Another FE college now offers level 5 HNDs in some subjects, e.g. data science. They charge £6000 per year for that. However if a student then decided they wanted or needed a degree, they'd have to do two years at university to top it up, so they'd be paying even more for their degree.

I am fully supportive of FE colleges offering tertiary education but we shouldn't be mistaken in thinking it's cheaper or students are going to pay less. There's still no 'cheap' option for young people unless they are lucky enough to get an apprenticeship.

Research skills, knowledge and an in depth understanding of a subject are not highly paid skills - have you not noticed how disgruntled university lecturers and researchers are about low pay and job insecurity? How much, eg, archivists get paid after having to do a degree plus postgraduate qualifications? There are a large number of careers that require both graduate and postgraduate qualifications but which will never be particularly lucrative, particularly in comparison to the years of extra study that have to be put into them. Meanwhile, anyone spending years doing all these extra qualifications in the hope, but with no guarantees, of it leading to something beneficial to both themselves and society, is having high interest added to the money they borrow before they even start repaying, let alone also taking into account the multiple further years when they are starting out on the lowest rungs of pay for their professional career. To not start paying back until you have to means that money owed is growing exponentially from day 1, and professional pay has not kept up with the money owing.

The sole benefit to society of people with specialist knowledge and skills is not how much tax they pay, any more than the sole benefit of minimum wage carers and cleaners is not the tax they manage to pay out of their earnings. Imvho, it’s time people stopped pretending there is a direct link between wealth creation and accumulation and value to society, with the least wealthy always being viewed as a drain on everyone else, because all that is doing is giving us leaders like Trump, and unelected people like Musk, telling the world how things should be, and that world view is shite. What someone is worth to society is not the same thing as how much money they can extract from the system.

Why do you think that these skills are not better paid? It’s simple supply and demand. There is a massive oversupply of people wanting to do ‘interesting’ jobs, relative to the boring, but better paid jobs. We also have a huge oversupply of PhDs because universities will happily hand them out to anyone who can pay the fees, rather than selecting those who are the best academically. You can’t demand higher pay when the market is saturated with people with the same qualifications all wanting the same jobs.

There is no benefit to society in having an oversupply of over educated people who can’t find jobs. We need people to look at where the skills shortages are.