Many parents appear too casual about letting their children accrue substantial student debts, not realising the long-term implications. Relying on earning below the £25,000 repayment threshold to avoid loan repayments is fool’s gold.
My son assumes he’s going to university in 2025 yet lacks clarity on what he wants to study and why. He has no idea what jobs there are in the real world. He goes to a selective grammar and they are fed the believe they’ll get an “good job with high earning capacity.” There is little instruction on what this job might be or the entry level salary expectations should be. Not £100,000, I can tell you and we live in London!
The potential £50,000 to £60,000 student loan debt is troubling, especially with the prevailing attitude that it's a negligible "graduate tax." It’s not, it’s a financial burden that’s growing and not going away for 40 years for most people.
My university education was largely free. Have I used my degree in practice? No. Would I want to be paying off my three years jolly now? No! I’ve been able to save and invest my “graduate tax” and this year at 55 will start winding down to retirement, debt and mortgage free. Im a single parent and solely financially responsible for my son. I didn’t plan to marry a man who would financially abuse his child, but I did. It’s these unknowns that make the additional debt burden do concerning. I’ve had to earn high because only I’ve been paying the bills for the past 17 years.
It's challenging to see this young person’s debt trivialised for what might merely be a costly three-year jolly. Too many parents are blinkered to the reality. I can only assume they didn’t go to uni or look at the stats for the number of students dropping out. They might drop out but the debt doesn’t.
Oh, snd then there’s the parent’s’ obsession with Russell Group universities. These are not the bee all and end all. In fact, many of the degrees that are more applicable to the modern workplace and skills needed for the future of work aren’t offered at these. The old polys are a much better bet.
Despite many parents' fixation on Russell Group universities for prestige, my hiring experience tells me that a university's name and the degree matter less than the candidate's fit and personal traits. When I’m hiring or on a selection panel, I prioritise applicable skills and character over academic “pedigree.”
So back to the “great graduate tax”….
With a £25,001 salary, the net monthly income after tax and National Insurance is about £1,700, decreasing slightly to £1,670 after student loan repayments, making the annual take-home pay around £20,000.
At a £40,000 salary, the take-home pay is £31,771, reducing to £30,420.64 after student loan deductions. Monthly, this translates to £2,535.05, or £601.63 weekly. Considering a 40-hour workweek, the hourly rate is nearly £15, not significantly above the National Living Wage.
Thus, a £40,000 annual salary may not stretch far, especially when factoring in expenses like mortgage or rent, insurances, pension contributions, car costs, utilities, and essentials like food and clothing, not to mention potential costs for a wedding, childcare, or maternity leave.
Given these financial pressures, the prospect of a £50,000 or £60,000 student loan debt seems daunting, particularly when many graduates find their university education doesn't directly apply to their jobs.
As someone reflecting 30+ years post-graduation, I'm relieved to have avoided such a debt and openly question the real value and applicability of most current university education to the needs of the modern workforce.
I really don’t think my son has thought long and hard about what it’s like to pay tax. He currently works 16 hours a week in a supermarket. He’s at school and so doesn’t pay tax. He will hate handing over large chunks of his money in tax. To hand over even more to pay for a three years jolly a decade or two before might pain him more when he’s trying to feed his family and pay a mortgage.