Student loan - where is the transparency?

[peepsypops]

Full disclosure - I was a silly student who very much believed the "it's not a loan in the normal sense" and "it's more like a tax" so I took what I was eligible for back in 2004-2008.

Since then, I've worked consistently however my salary was not excessive ever (cabin crew) and I then moved out of the country for 5 years. I returned to the UK in 2022 working in an office role so I recommenced paying back the student loan aside from a mat leave I had which removed me from repaying again.

I have checked my balance and I can't believe how little I have actually paid off in that time (2008-2016) and I have been repaying for let's say 18 months now since moving home.

I checked the statements I can see and the interest is mental - 4.3%. According to the rules I will be paying this back until I'm 65 whereas if I started uni two years later it would be scrapped after 25 years? Why the difference? In real terms I get an approx £150 deduction per month and the balance is just never going to go down in any real way. I do have the funds to clear it however this is really set out of a bigger house deposit to upsize/general rainy day fund/life savings.

Should I just suck it up and accept this coming out of my wages every month?

How has the interest changed SO much?! If my mortgage rate did that I would be notified at the very least and I have never been?

Also on the SLC page, I can only see evidence of statements in 2016 and later - where can one access data pre-2016?

FWIW I am more than prepared to repay obviously BUT it's not even making a dent in it! It just seems like a con as this is not what I signed up for initially?!

Of course family money will always impact, but there must be a better way than the current system which so starkly penalises the poorer kids - for their entire working lives! They could be in the same job and effectively earning hundreds of pounds less than a colleague, to pay off a lifetime loan at an extortionate interest rate (thinking of the newer loans here). Its outrageous, the poor are being used as cash cows while the rich get yet another leg up. The gap between rich and poor can never close if we are beating down on the ones who are trying their best to climb out of the pit that they are only in due to bad luck.
Make all graduates pay the 'tax'. Or offer more scholarships etc. I don't know the answer but the current system is not it.

Just to add sorry I got mine wrong. I didn't realise there was a system pre Plan 1 (which is what my first loan is), also that Plan 1 is written off in 25 years. I'd wrongly assumed Plan 1 is paid off after 65 and Plan 2 was after 25 years. Weren't the pre 2006 loans substantially less? Thinking about it, I'm sure my neighbour paid something stupid like £1500 for a year's tuition fee whereas now it's £9k so actually I do think you're being a bit unreasonable as surely you'll have paid it off well before you're 65? And if you think you'll pay it off before 65, you'd definitely be better off paying it upfront as you'll save on the interest.

I just don't see a way around it though.
If fees were reduced or stopped then people getting financial help from family would still be given the same money in most cases.
The money would just go on the children in a different way and still ultimately lead to more disposable income per month through lower mortgage payments etc.

Making graduates pay tax on money they are no longer borrowing couldn't be justified as a primary reason for tax is to keep the loan in line with inflation. It would also remove any incentive to pay more than the minimum amount and then result in issues of low funding.
The people paying off early effectively allow others to pay off over years, if noone was paying more than the minimum off they would have to increase minimum payments to have enough finances to run.

If university funds are reduced too much then it would then likely need to become at least partially state funded, which would be extremely unfair as people not benefitting from them would then be paying for them instead.

Thats ridiculous

Those who paid the fees themselves have already paid!

I'd try to lose that chip on your shoulder.

But in any event it isn't a graduate tax! Its a debt!! Its a long term loan with compound interest and rates set above inflation.

I think it was transparent, all the info was out there.

The issue is lack of choice. If you want a degree, which is very much sold as a 'must have' for most bright kids these days, you have little choice but to get the loan, regardless of the plan terms. It's hard to choose not to be educated to degree level because you don't want a loan and there are no other funding options open to most young people.
(Yes, degree apprenticeships exist but not in great numbers and not ideal for those who don't have a vocation).

It's a tax on graduates who were not fortunate enough to have a rich mummy and daddy pay their fees for them

I'm not sure what % of parents can afford to pay the fees. I think it's likely to be super wealthy or those getting grandparents support. I don't think you can expect to equalise everyone as there will always be wealthier individuals and they are likely to already pay more tax than others.

Op, do you think University was beneficial to you? Could you have got jobs without a degree? If the answer is - it was a wonderful experience and invaluable then consider it a good use of money and pay it down. MSE says to pay off high interest debts first.

Dc has recently gone to Uni but I researched the costs extensively because Plan5 will end up with a large debt so I wanted to make sure it was worth it..e.g were there suitable apprenticeship routes, was a degree necessary, what could be done to reduce costs/increase student income so that debt was minimised. Deferring for a year and working should be more common as that would allow for some savings to be built up.

I think students need to adjust to the new reality. The taxpayers can't afford to fund post 18 education and fees levels are already placing some Universities in financial difficulties so costs will only continue to increase.

What do you mean? Not sure why you have quoted me.

It was to the OP - you noted she'd gone abroad and not paid anything!

I was agreeing and pointing out with a 'normal' loan you can't just do that.

Ah! Well the thing is that you can’t do with with a student loan either. You have to declare you’ve gone abroad, send copies of your contract, and make repayments. It’s very curious…

It is like a tax though, and if you still viewed it as such you’d be content to keep paying it. You expected to lose 9% of your wage over a certain threshold, you are doing and you will continue to.

It’s up to you if you want to repay earlier - I didn’t as I figured if I lost my job I’d still need to pay my mortgage and student loan would wait, so the money was better in savings/paid against my mortgage than anything else. At 4.3% you should be able to match/beat that with an interest bearing bank account and so there’s little benefit to paying it off. Most mortgages will be around/higher than that at the moment too.

I did end up paying mine off in my 30s anyway just from salary deductions, but if you continue with your original view of it being akin to a graduate tax, you won’t be far wrong.

Actually those with rich mummies and daddies probably lost out on more, as presumably the fees would have otherwise been invested in the stock market and would now be worth much more than many will have paid in student loan repayments. And given it then probably came from their inheritance, there’s a cogent argument that if you calculate the investment opportunity cost that paying up front is much more expensive.

I know many people who could’ve afforded to pay upfront who didn’t for that reason - it was (on Plan 1 certainly) cheap financing that cost less than the market was returning.

I suppose the question that I think a PP has touched on is, would you have actually done anything differently if you'd known? Whilst hindsight is wonderful, I couldn't possibly have known at 18 that I wouldn't stick out my chosen career path and that university probably wasn't necessary. I think sometimes for your own sanity you're better off viewing it as a kind of graduate tax that just gets paid for what feels like all eternity. I know it's not exactly a tax and paying a lot of money can grate but ultimately we are where we are now because of the experiences we've had in the past. Even if university didn't directly contribute to that, it probably did indirectly and despite the high interest rates, you are probably in a better situation than someone on a new plan starting university for the first time now.

It’s not like a tax though, I don’t know why people keep repeating that. The only way that it’s like a tax is that SLC have access to HMRC and automatically take the money. It might be government backed therefore you don’t repay on low incomes it when you aren’t working but those of average wages will pay significantly more over the lifetime of they loan compared to those on higher incomes or who paid off the balance in a lump sum.
Someone on 40k with the newest loan plan will own 10s of thousands more than someone who hit 80k earlier in their career.
If it was a tax and fair across the income bracket then it would be a set percentage over a set period of time.

You pay tax on savings interest

@Completelyjo it also gets referred to as a tax because unlike most other debt it is less burdensome, if you become unemployed you stop paying and there is a correlation between earnings and the amount you pay, no other debt is like that really. No it's not really a tax, but it's not like a lot of other debt either, I think Martin Lewis has tried to reframe it as a tax to try and avoid those from lower socioeconomic backgrounds from avoiding it comparing it to other "bad" debt if they would be cutting off their nose to spite their face. Of course there is an argument it has gone too far the other way, but that's another debate for another thread.

That only when you hit approximately £20K in savings and then you can avoid tax by putting it into an ISA or buy 20,000 premium bonds.

I have a loan from 2014 but didn't make it beyond the first year due to significant health issues. I am still eligible to repay the full loan.

However, more by accident than design, because I pay into a workplace pension using salary sacrifice, this brings me under the limit for repayments, despite my salary being a little above the threshold. I didn't realise this was a thing until I querried it with payroll. I've repaid about 12 quid so far, I imagine I owe 20k at least.

It’s like a tax in that you pay in direct relation to what you earn. No pay, no repayment. Much more like a tax than a loan in that regard.

It was 8% this summer.
My DD will be paying it back for up to 40 years now.
Why not pay back as much as you can now?

@mondaytosunday Because in the case of the OP, she’s not a high earner and I get the impression she doesn’t have a huge amount of savings, so she would be crazy to pay off the £11K debt now with her savings and leave herself with fewer options.

Not on be first £1,000 or in an ISA (where I accept rates will be harder to achieve)… admittedly I don’t know how much OP has saved or left on her student loan, but I doubt it’s much more than £20,000 assuming loans in the region of £7k each year of a 3 year course less some repayments.

This. It’s a loan where the amount you repay is divorced from the amount you actually borrowed.

It’s like a tax in many ways - whether you make repayments depends on your earnings, it’s a percentage of your earnings, it’s deducted from your salary where relevant.

It’s not like a tax as there is an end point (either when it gets written off, or when you have repaid it) - but it’s much more like a tax than a debt.

Most people won’t repay their total loan and will just make monthly contributions until it’s written off so the amount they repay has little bearing on what they borrowed and much more bearing on what the earn. The same way tax is paid regardless of your use of public services and derived as a percentage of your income instead.

By matter of fact it’s not a tax, but it is like a tax.

You should only have the full loan for one year though. So £9k plus any maintenance loan you actually received.