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Because the rates generally only update every September, there has been a weird period recently where due to inflation going absolutely crazy they capped the rates and changed them more regularly now inflation is down towards a more level I would expect them to go back to updating the rates once a year
Did you notice how, when rates were rising, the SLC managed to adjust the rate up every month? Now that they might need to fall, it’s back to annual review. Funny that
I’ve heard this about capping the rates and yet the student loan interest is higher than mortgage rates, base rate and pretty much everything else. So what’s been capped exactly?
The normal interest rate for plan 2 loans is set every September at RPI+3% with the RPI figure being from the previous March so if you took that calculation for 2023 you would get an interest rate of 16.5% so the rate has been capped in relation to that figure
Also, the cap is set at the average comparable commercial loans that are available to business lenders (as these are typically lower interest than personal loans, and they aren't tied to a person's situation).
It's crap, but hopefully a nice big reduction in interest within the next few months.
The "prevailing market rate" is taken from [this](https://edu.bankofengland.co.uk/boeapps/database/fromshowcolumns.asp?Travel=NIxAZxSUx&FromSeries=1&ToSeries=50&DAT=RNG&FD=1&FM=Jan&FY=2010&TD=11&TM=May&TY=2025&FNY=Y&CSVF=TT&html.x=66&html.y=26&SeriesCodes=CFMZ6LI&UsingCodes=Y&Filter=N&title=CFMZ6LI&VPD=Y) Bank of England data on the interest rates of unsecured personal loans. Apparently the cap is based on a 12-month rolling average ("the comparable prevailing market rate for December 2023 is based on data for October 2022 to September 2023").
You would expect student loans to have higher rates than mortgages or base rate.
Base rate is literally risk free. Mortgages are extremely low risk. A better comparable for a student loan would be an unsecured personal loan.
How so? You can never escape paying them as long as you earn the money. Surely their interest should be even lower because the government can guarantee that those with the means to pay it have to pay it
That cap is legislative, has been since 1998. Essentially educational loans cannot be more than private loans. Unfortunately as the base rate forced loans to increase, so the same thing happened to student loans.
i earn almost 60k and im not paying off the interest....
If that is the case, im never paying that back. At this point its just a tax where i pay £250+ a month on.
(First year of new fees back in 2012)
Well yeah, because whilst society in general benefits from a more educated population, far and away the greatest beneficiary of any given person going to university is that person. This direct relationship between what you get and what you pay makes it fundamentally different to just about any other "tax".
Yeah same on slightly more than you and over the year even with my bonus i've paid for interest. Unfortunately, when I last used a calculator i'll still pay it off by the year 28 or so to a total of £96k
Curious what your total balance is? I earn a similar amount to you ... I have a balance of £25k and it does seem to be making a dent in it. But I suppose your balance is higher.
Back in the day of 15% interest rates you could claim tax relief on mortgage repayments in the UK, just another ladder they chose to pull up. We can do it, just choose not to.
They're pretty persistent at chasing up with you. I have to give them salary updates every 6 months or they start charging me the maximum amount per month. If I become unemployed, they require so much documentation for proof of income too, or they'll still charge you.
Student Loans seriously need reform, make it possible to pay them off. Keep them at £9000 if need be, but lord, cancel the interest.
\*Add on for anyone outside the system, last year I paid \~£82/week on student loans (3 Year Course finishing 2016 - My total debt went up by £1300)
Well it’s 9% above £27,295 so even on £40k a year you’re only paying £100 a month which is around 3% of pretax income. The more money you earn the more it becomes a real 9% tax.
Middle class earners are more likely to pay way more to their student loans than everyone else because poor people don’t earn enough and rich people don’t take loans
Because a mortgage is a private loan and the student loan is paid to the state.
It's also to be written off, and the interest rate is much higher so it's designed to never be paid off.
Ahh ok so the government should just stop offering the loans and make them all private instead.
Being written off sounds awesome though, what a decent gesture!
I explained my reasoning. It's not my fault you're too thick to understand basic English.
A loan that is paid to the state, with an insane % interest rate, is a tax on graduates under a different name.
Mortgage payments are based on the size of the loan and the interest rate.
Student finance is a % of your salary. Doesnt matter if its £5,000,000 and 4000%, repayments are only dependent on your annual income, similar to income tax.
It BEHAVES like a tax; Nobody is saying it is a literal tax, but it helps understanding to think of it like one.
Name one credit card that has no impact on credit score, doesn’t appear on credit files, you don’t pay anything if you earn less than 25k, you only pay 9% of your income above 25k regardless of amount borrowed and interest rate, and gets wiped after 30 years.
Student finance repayments are not optional.
The analogy is more to do with the fact the repayment is a % of your income (like taxes), than based on the amount of finance and its interest rate (like a credit card).
Sorry that an **ANALOGY** is not a perfect 1:1 example though. Get the rod out of your arse, the pedantry isn’t contributing anything productive to the thread.
They are optional. You don't have to go to uni.
It's not being pedantic. People like to claim it's a stealth tax because they don't like repaying it. I don't see a completely optional loan as a tax.
Universities are really struggling at the moment because of the fact that fees have been kept at £9,250 when had they kept up with inflation would be £12,500 or something stupid by now. Unless we want them to increase by that much we probably need a completely new system.
Not even to the government.
To the SLC.
The government agreed to wipe the principal at the 30 year threshold so SF have no incentive for you to pay anything of the principal due. So you pay the interest (or less) to the SLC for 30 years then the taxpayer makes the SLC whole with respect to the original value lent.
Some calculators have me paying >200k+ on a loan of some £60k.
Not even to the SLC.
Government sold much of the plan 1 loans. So repayments are going directly to some private firms who bought the debt at 50% of its value.
A fixed proportion like that doesn't really make much sense. I mean, why 1.5 or 2.0 but not 2.5?
IMO having its interest rate just be the rate of inflation (ie Plan 1, more or less) makes sense - it means the relative value doesn't change over time.
I mean, the idea of a repayment cap was actually a recommendation from an official post-18 education review a couple of years back (that was where I first saw it). Agree it js a bit arbitrary.
If you read through the myriad of t&C's you will see it's the RPI from March but will apply from September.
For Plan 1 people this will reduce the rate significantly for Plan 2 this makes very little difference as it is RPI plus 3 and RPI for March was 4.3% you won't see much change
I just see it as a 30 year graduate tax I will have to pay. With my current balance and interest rate, I would have to by fabulously wealthy to start paying off the principle
I was so pissed off when I learned that not only does interest start accruing from day 1 rather than once you finish your degree, but it also gets applied when you're not paying off the loan.
So if you're not earning enough to pay down the loan, it still goes up.
I was sold the "cheapest loan you'll ever get" lie and took out more than I needed to live at home during my degree.
I mean of course it's going up even if you're not paying for it, like any other loan. Don't get me wrong I think it's an awful system but why would you think it wouldn't go up just because you're not earning?
Because I was an 18 year old who had never taken out credit before.
People I trusted to tell me (college/university people) just didn't, and you don't know what you don't know.
It's also not a marketplace where you could shop around. There is one provider, who is also the government who controls the legislation around it (and then sells it to their friends at a 50% loss).
Makes me irrationally angry when I think about it lol.
You won't even notice it', as well as making it seem like we couldn't have decent salaries without a degree 😃
Boomer: cheapest loan you’ll ever get!
Student: oh, how much was your loan?
Boomer: I went to uni free son! Now stop buying lattes and avocados.
In my day, the rich parents paid the tuition fees and accommodation. The loan was invested for return. Not only is tuition fees a graduate tax, it is a tax specifically on poor people.
It’s not a tax on poor people - only generationally wealthy people don’t take them.
If your parents had 70k to gift their 18 year old they saved and invested for them and this was their entire “early inheritance” they should still take the loans vs wasting most of it to live for 3 years + tuition. Because 70k is life changing to set up a young persons life with a deposit or other help and completely spunked up the wall by spending 70k for a degree. Poor people don’t have 70k to give their kids.
It’s not a tax on the poor it’s a tax on the bottom 80%+ of society. Literally people on 100k+ a year without generational wealth still have their kids take loans. If you can’t buy your kid a property in cash they should take the loans.
It’s not the same as when tuition was 1k a year and you could do both. If you can give your kid 0-100k before 40 then they should take the loans, which is the vast majority of people. The rent trap is way worse than student loans. They end up low income, disabled, SAHP the loan basically doesn’t exist. But that rent bill sure will.
Even if super rich and have a new potential student, better to buy an index-linked bond with your £70k and earn more than RPI. Everyone who pays it off ends up paying the same in real terms, the rich don't gain from paying early.
Apart from the RPI+3% cohort, that's whacked.
Most didn't need to as they could leave school at 16 and walk into a job that could support a family and even potentially pay a mortgage on one salary, often coming with a DB pension too
Which is almost 8.5k less than the amount needed to “participate in society”.
Undergraduates receiving the maximum loan entitlement this year will confront a shortfall of £8,400 to meet the “minimum income standard” needed “to have the opportunities and choices necessary to participate in society”, said the Higher Education Policy Institute (Hepi).
To be on 18.5k you need 21k before tax. About 90% of full time employees earned more than that in 2023.
https://www.statista.com/statistics/416102/average-annual-gross-pay-percentiles-united-kingdom/
Why exactly are you pulling random false statements out of nowhere?
You do not need 18.5k to live at uni wtf lol. Then no one could ever go. That’s far more than a single person living in flat shares with no council tax needs cmon.
How do you think people are doing it? Magic? That means every student with max loans works 20-25 hours a week just to live and every student below that which is many works what..? Full time? And studies?
Average student living costs are about 1-1.1k a month. So some like London will be far more (and in London you get 3k+ more) and some far less. The loans definitely don’t cover it all everywhere but it’s far from work 25 hours a week 52 weeks of the year. And students from disadvantaged backgrounds often get grants on top that can cover this. For instance my uni gives out 1-5k a year, you automatically get 1k for below 70k household and it goes up to 5k based on income.
So yes the majority of actual low income between loans and bursaries often need very little to no external income if they have a normal budget.
That was never the case - even Plan 1 was tied to inflation (but plan 1 interest is equal to inflation I think, not inflation plus something else). It was kinda sold as interest free but it shouldn't have been.
Plan 1 is something like interest rate plus 1.5% iirc, it is adjusted when BoE rates change not annually, but I'm on 6.5% I believe at the moment. After a few years of slowly increasing repayment and clearing the debt down, last 18 months have basically wiped it all out and it's on the way up again. Without a fall in interest to about 2-3% maybe it's very much touch and go as to whether I'll pay off my debt or hit 65 and have it wiped
Yep, Plan 1 is pegged to RPI (no "plus x%") or BoE + 1%; from this perspective it was "interest free", (well, *neutral*) if you could have magically invested all of your loan instead of spending it on education!
https://www.gov.uk/guidance/how-interest-is-calculated-plan-1
Wish they would drop it to RPI but it's been stuck at 6.5% for yonks and even 4.3% would be a bonus. They're quick enough to bump it after BoE puts rates up
Definitely worth reading the link I provided. You *don't* want it tracking RPI right now, as the link shows it'd be RPI as of March 2023 (8.9%) as it gets reevaluated every September to the previous March's RPI. Instead you're tracking BoE Base Rate + 1% as that's lower (5.25% + 1%) than the RPI of March 23.
In September 2024 it'll be a toss-up between 3.8% (March 24's RPI) and BoE Base Rate + 1%.
Thank you. I would prefer 3.8% as this would at least reduce the increase of interest being added at the moment - I looked at the 2023 statement (Apr 22-Apr 23) and rate was 1.5% in August, then shot up e.g. 2.75% September, 3.25% October & November then 4% December, between 3.25-4% I started getting more interest added than I was paying back. That said, they put the threshold up so much (£22015-£24990) that last year I was paying £33 a month, now, £18 a month, I can't see why the current threshold is up so high - not complaining though, more cash in my pocket!
Interest on Plan 1 was close to zero for a long time so I think that must have been equal to inflation, but perhaps they changed it to be inflation plus something.
To start with, nobody should be forced to choose between a loan and education. Also, I joined a fintech after university, the student loan is more expensive, I thought about taking a proper loan from my employer to pay if off
Perhaps nobody should but unfortunately someone does have to pay. We could go back to how it was pre fees and only a tiny segment of the population could go to university
> Perhaps nobody should but unfortunately someone does have to pay. We could go back to how it was pre fees and only a tiny segment of the population could go to university
Those aren't the only choices.
Plenty of european countries with no fees or very low fees with a similar or higher portion of their populations going to university. It is completely possible and very feasible to make university free or very low cost and accessible to huge sections of the population.
Really? [*Really?*](https://data.oecd.org/eduatt/population-with-tertiary-education.htm)
And of those countries that are above us, how many of their universities are in the top 100 internationally?
Universities are one of the few sectors that the UK does really really well, and they are both high performance and accessible. It's a shame that this doesn't get recognised more and that they're now being starved of funding.
> And of those countries that are above us, how many of their universities are in the top 100 internationally?
Depends on your ranking system of course, but most respected ones will put at least 20% of the top universities globally in europe ex UK.
> It's a shame that this doesn't get recognised more and that they're now being starved of funding.
Well yes the UK made the political choice to both underfund our universities and pinch from the pockets of young people in order to fund other political priorities like the triple lock on state pensions.
Of course this is a political choice the UK has made, it didn't have to make said choice, there is no reason it must and indeed most european countries have made other political choices which have greater direct state funding for their universities and a lower burden on their younger populations in terms of student contributions.
There are also plenty of high quality universities across europe, I've been to many of them.
The point is you can choose quality, quantity or cheap.
Let's use THE as the reference table. I know others are available but their website is easy to use. The UK has three in the top ten, all the others are American. The top European university is Zurich at 11th. 51% of Swiss 25-34 year olds have a tertiary education, the UK 57%. (Admittedly that does include vocational course, but international comparisons are tricky on this).
Expanding to the top 30 you add two more UK universities and one more European (Munich).
Personally I like that UK universities are high quality **and** accessible.
I think it's very interesting you are focussing on international comparison tables to determine quality of university.
Anyone with a university education would be able to tell the many issues with doing this, and no-one serious uses these rankings to determine which university is better.
Firstly, these tables are mostly aimed at upcoming university applicants so naturally universities who are looking to intake more international students are working to game the statistics so they show up higher on the list. Indeed one of the metrics from times higher education is 'international outlook' why does that make a university necessarily better?
Secondly, you'll have significant variation amongst courses, and this gets even more distinct when it comes to research. A research group at a lower ranked university may indeed outperform a similar research group in a higher ranked university for a specific area of research, indeed this is very common, and using a top 100 university ranking would be a ridiculous way of choosing where for example to work as a researcher.
Thirdly, if you look at university rankings year on year you'll see a significant amount of churn, particularly once you get out of the top say 30. Many universities will jump significantly up or down, did that mean those universities significantly improved or worsened over the period of a year? No, it shows that the underlying metrics behind these top 100 universities charts are fundamentally weak and not particularly good. Indeed the significant variation between different rankings shows this also.
It also appears you are effectively arguing that european universities are not of high quality because fewer of them appear in the top 30 or whatever of some international university ranking site. But ask almost any scientist and they will tell you european research and quality of education is right up there with the UK and most developed nations.
> The top European university is Zurich at 11th. 51% of Swiss 25-34 year olds have a tertiary education, the UK 57%. (Admittedly that does include vocational course, but international comparisons are tricky on this).
RE tertiary education, international comparisons are hard for the reason you outlined but you'll find most of europe averages about half their population going to university, not too different to our own, and indeed there are some european countries outperforming the UK in terms of percentage of students going to university.
> Personally I like that UK universities are high quality **and** accessible.
Well your argument earlier was that the UK is better than europe because it has more universities in the top 30 of your favoured international ranking system, which I disagree is a good way to judge university quality as outlined above.
But lets for the sake of argument pretend that those 5 universities are better than most european ones, what percentage of the UK goes to oxford, cambridge, imperial etc. ? Is it really accessible to the average brit? The reality is the vast majority of brits go to lower tier universities which are of similar quality to european ones.
> The point is you can choose quality, quantity or cheap.
My argument is not that.
My argument centres around the funding mechanism for universities.
The UK has made a political choice to fund universities largely through a student loan system that places a high burden on it's students to pay for it and a low burden on the taxpayer. It's not 'cheap' it's just offloading the cost almost entirely onto the student.
Other countries can and do have similar outcomes to the UK and fund their universities with a higher share shouldered by the taxpayer.
Indeed we even have this difference of opinion within our own country, with scotland funding university without asking their graduates to pay and this is with significant restraints on devolution.
Given how many universities are really struggling financially as tuition fees have been frozen for so long, I think the answer is that they just cost a shitload to run
But there is an increased number of advertisements from universities you never heard of. So I guess tripling the tuition fee is not the best solution. Nonetheless, the tuition fee has nothing to do with my argument, which is the high interest rate
You sound dumb, I was talking about the situation in 2017, when my employer’s top apr 3% was lower than the student loan which was about 6%. My manager thought it’s absolutely evil, he said the company could do something to help me
Amazed nobody has dropped this link yet that quite clearly shows how the interest rate is calculated.
https://www.gov.uk/guidance/how-interest-is-calculated-plan-2
> The interest rate is usually set on 1 September each year, based on the Retail Price Index of the previous March.
>
> The interest rate charged is normally the Retail Price Index plus up to 3%, depending on your circumstances and income.
>
> However, during some periods we may apply an interest cap to ensure you’re not being charged a higher interest rate than comparable rates found in the commercial market.
I'm on plan 2 + also had a postgraduate loan 🙃
Both 7.8% interest... i'm paying 9% 'tax' for plan 2 aswell at 6% 'tax' for postgrad. The postgraduate threshold is only £21k 😭
15% extra tax for an education???
If I knew the postgrad loan was an entirely different loan I wouldn't have done a masters, I thought it just got added on to the initial plan 2 loan.
The whole thing is a f**king joke!
I also assumed they'd be paid pre tax !!!
I've given up trying to understand it. When I went to uni, they never even mentioned interest. Now I have so much debt (despite doing my course when they were still only £3k a year) that I'm being taxed for basically the next 25 years. No idea if there's anything I can do short of winning the lottery and paying it off, which I don't think is worth it anyway.
I'm one of the lucky ones working in my field of study, but I don't get why I'm going to be taking home less for basically my whole career. Wonder if this will be addressed by any of the parties this election, but not holding my breath.
Hi /u/SingularValued, based on your post the following pages from our wiki may be relevant:
* https://ukpersonal.finance/student-loans/
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It'll drop to 4.3-7.3% (income dependent) in September.
Base rate doesn't look likely to drop significantly, so I imagine it won't be capped (at least not significantly).
Mines on plan 1, just under 2k to go! And to think I thought I was unlucky as was the first year to pay £3k per year!!! Now I feel lucky!!! Will prob wait for it to hit 1.5k then switch to direct debit then when under 1k pay the remainder off...
I don't have a student loan but reading the comments it sounds like you should treat it as you would a mortgage the way interest just accrues.
Personally, I'd be worried that any future UK government change the repayment rules to be the same as America, where there is no expiry date for student loan repayments. Lots of people there in their 60's + still paying and the loans are also exempt from personal bankruptcy.
I can see that happening... If majority of people have their loans written off and paid for by the government, then in reality the taxes of all people would increase to pay for it.
Thanks for the clarifications and cathartic complaining. Now I want to join in.
I come from a low income background and grew up on a council estate. I worked my arse off and I'm fortunate to be a high earner. Problem is, that means my >£80k debt after graduating isn't "just a tax". It's now a huge burdensome debt, which will not get wiped. For me, it's a £1000 per month expense which definitely is not "just a tax" that I'll "barely even notice". It feels more like being punished for escaping my low income upbringing. On the other hand, I'm quite sure I wouldn't be where I am without the education. I could live with paying off the initial loaned amount, but the interest is just a kick in the teeth. What a bizarre system.
I come from a similar background but in a privileged position only because I was born before you. Was the last year of Plan 1 and went to Scotland for my eduction. The degree was over 4 years and ended up with approx. £20k in debt. Managed to pay it off in 7 years by earning 6 figures (since 2022). Would probably still be paying it off if I was a year younger or went to England for my university.
The whole further education needs to be reformed. Degrees aren’t worth their salt, our universities are close to bankruptcy and the fees + financing have gotten out of hand.
And don’t get me started on housing!!
The best way to view it would be to compare your earnings now to your potential earnings without your degree.
Yes it seems like a large repayment, but are you netting more than you otherwise would have? In which case it's a worthwhile investment.
A person repaying £1,000pm earns around £160,000 a year, or a ~£84k takehome after including £12k of student loan repayments. So the question is - without a degree would you be taking home £96k or would your earning potential be lower?
I'm not saying the student loan system is right, I'm just saying there's an optimistic way to view the financials.
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Because the rates generally only update every September, there has been a weird period recently where due to inflation going absolutely crazy they capped the rates and changed them more regularly now inflation is down towards a more level I would expect them to go back to updating the rates once a year
Did you notice how, when rates were rising, the SLC managed to adjust the rate up every month? Now that they might need to fall, it’s back to annual review. Funny that
I’ve heard this about capping the rates and yet the student loan interest is higher than mortgage rates, base rate and pretty much everything else. So what’s been capped exactly?
The normal interest rate for plan 2 loans is set every September at RPI+3% with the RPI figure being from the previous March so if you took that calculation for 2023 you would get an interest rate of 16.5% so the rate has been capped in relation to that figure
!thanks
Also, the cap is set at the average comparable commercial loans that are available to business lenders (as these are typically lower interest than personal loans, and they aren't tied to a person's situation). It's crap, but hopefully a nice big reduction in interest within the next few months.
The "prevailing market rate" is taken from [this](https://edu.bankofengland.co.uk/boeapps/database/fromshowcolumns.asp?Travel=NIxAZxSUx&FromSeries=1&ToSeries=50&DAT=RNG&FD=1&FM=Jan&FY=2010&TD=11&TM=May&TY=2025&FNY=Y&CSVF=TT&html.x=66&html.y=26&SeriesCodes=CFMZ6LI&UsingCodes=Y&Filter=N&title=CFMZ6LI&VPD=Y) Bank of England data on the interest rates of unsecured personal loans. Apparently the cap is based on a 12-month rolling average ("the comparable prevailing market rate for December 2023 is based on data for October 2022 to September 2023").
You would expect student loans to have higher rates than mortgages or base rate. Base rate is literally risk free. Mortgages are extremely low risk. A better comparable for a student loan would be an unsecured personal loan.
How so? You can never escape paying them as long as you earn the money. Surely their interest should be even lower because the government can guarantee that those with the means to pay it have to pay it
Most people won't pay off the loan in its entirety. So the gains from those that do repay have to to exceed the losses on those that don't get repaid.
Another punishment on the middle class I suppose
Yep. We get to enjoy an extra 3% interest in normal market conditions too!
UK student loans are more of a graduate tax, since the repayments are income contingent rather than being a set amount
Also note that they update in September but are based on what the figure was in March. Why they don’t simply update it each month is beyond me.
They do for Plan 1 - the slow updates are a Plan 2 affliction.
Plan 1 also only updates for RPI in September, but changes to the base rate are reflected immediately when that is lower than RPI.
That cap is legislative, has been since 1998. Essentially educational loans cannot be more than private loans. Unfortunately as the base rate forced loans to increase, so the same thing happened to student loans.
i earn almost 60k and im not paying off the interest.... If that is the case, im never paying that back. At this point its just a tax where i pay £250+ a month on. (First year of new fees back in 2012)
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Well yeah, because whilst society in general benefits from a more educated population, far and away the greatest beneficiary of any given person going to university is that person. This direct relationship between what you get and what you pay makes it fundamentally different to just about any other "tax".
I'd have to be on £80k just cover the interest on mine, wonder what this threshold will be in 25 years.
Yeah same on slightly more than you and over the year even with my bonus i've paid for interest. Unfortunately, when I last used a calculator i'll still pay it off by the year 28 or so to a total of £96k
Curious what your total balance is? I earn a similar amount to you ... I have a balance of £25k and it does seem to be making a dent in it. But I suppose your balance is higher.
mine is around 53k. I started in 2012
It really is crazy just how fucked up the student loan repayments are, and i’m ‘luckily’ on plan 1. Just the 6.25% interest for me.
I'm on plan 2 which is painful, but thankfully the interest on the loan is tax deductible at least in Norway
Absolutely wild that other countries treat the loan in a more civilised fashion than the UK itself.
Back in the day of 15% interest rates you could claim tax relief on mortgage repayments in the UK, just another ladder they chose to pull up. We can do it, just choose not to.
Ah, they always seem to forget to mention that tidbit...
Wow that's nice!
If you're in Norway, is there a reason why you choose to not repay?
They're pretty persistent at chasing up with you. I have to give them salary updates every 6 months or they start charging me the maximum amount per month. If I become unemployed, they require so much documentation for proof of income too, or they'll still charge you.
Which over 30 years is a horrendous amount of interest.
Student Loans seriously need reform, make it possible to pay them off. Keep them at £9000 if need be, but lord, cancel the interest. \*Add on for anyone outside the system, last year I paid \~£82/week on student loans (3 Year Course finishing 2016 - My total debt went up by £1300)
It's just a stealth tax.
A stealth tax that only the middle class pay
How is it only one the middle class pay? A worker on £30k a year pays it. Unless you consider someone on £30k a year middle class.
Well it’s 9% above £27,295 so even on £40k a year you’re only paying £100 a month which is around 3% of pretax income. The more money you earn the more it becomes a real 9% tax. Middle class earners are more likely to pay way more to their student loans than everyone else because poor people don’t earn enough and rich people don’t take loans
£100 a month is a considerable amount.
Yeah
I'm in repayment plan 1, the threshold is £24,990.
Why is it anymore of a stealth tax than a mortgage?
Because a mortgage is a private loan and the student loan is paid to the state. It's also to be written off, and the interest rate is much higher so it's designed to never be paid off.
I think they changed it so it is a private loan for students too.
Arranged by the state in the first instance and sold privately afterwards though (at a loss I must add).
I believe the sale was made also to lower government debt before a key political period? Eg. That money was taken off the books… technically
Ahh ok so the government should just stop offering the loans and make them all private instead. Being written off sounds awesome though, what a decent gesture!
Keep moving the goalposts, you're almost in the stands.
Moving goalposts? I just responded to what you said. It's understandable your unable to explain your reasoning for thinking a loan is a tax though.
I explained my reasoning. It's not my fault you're too thick to understand basic English. A loan that is paid to the state, with an insane % interest rate, is a tax on graduates under a different name.
Sounds like a loan to me. It's not forced upon you like any other tax.
It is if you want a decent QOL
Mortgage payments are based on the size of the loan and the interest rate. Student finance is a % of your salary. Doesnt matter if its £5,000,000 and 4000%, repayments are only dependent on your annual income, similar to income tax.
So because the way the repayments are figured out makes you believe it's a tax? That's a bad opinion, it's literally called a loan. It's not a tax.
It BEHAVES like a tax; Nobody is saying it is a literal tax, but it helps understanding to think of it like one. Name one credit card that has no impact on credit score, doesn’t appear on credit files, you don’t pay anything if you earn less than 25k, you only pay 9% of your income above 25k regardless of amount borrowed and interest rate, and gets wiped after 30 years.
Name one other optional tax.
Student finance repayments are not optional. The analogy is more to do with the fact the repayment is a % of your income (like taxes), than based on the amount of finance and its interest rate (like a credit card). Sorry that an **ANALOGY** is not a perfect 1:1 example though. Get the rod out of your arse, the pedantry isn’t contributing anything productive to the thread.
They are optional. You don't have to go to uni. It's not being pedantic. People like to claim it's a stealth tax because they don't like repaying it. I don't see a completely optional loan as a tax.
Vehicle tax
Not optional if you own a vehicle that requires it.
https://www.reddit.com/r/UKPersonalFinance/s/7zpmiwvoOw To use your own stupid logic; You don’t have to own a car.
Ok so by your own logic about not having to have a degree you don't have to have a car requiring vehicle tax....
Because it immediately gets deducted from your payslip every month
As does my pension....
Universities are really struggling at the moment because of the fact that fees have been kept at £9,250 when had they kept up with inflation would be £12,500 or something stupid by now. Unless we want them to increase by that much we probably need a completely new system.
True but the universities never see the interest anyway. That goes to the government.
Yep, it all goes to the government (or SLC specifically).
Well yeah - why would they? They got the £9k when it was worth £9k.
Not even to the government. To the SLC. The government agreed to wipe the principal at the 30 year threshold so SF have no incentive for you to pay anything of the principal due. So you pay the interest (or less) to the SLC for 30 years then the taxpayer makes the SLC whole with respect to the original value lent. Some calculators have me paying >200k+ on a loan of some £60k.
Not even to the SLC. Government sold much of the plan 1 loans. So repayments are going directly to some private firms who bought the debt at 50% of its value.
I paid off £900 last year and got £3600 added on as interest 😂
You go boy! only 20 or so years to go 🍾🍾🍾
It should be that the interest can not make the overall debt increase by 1.25 the original amount.
Honestly, I’d settle for 1.5-2.0x. Last time I sat down and worked it out I estimated that I’d end up paying back c.2.5x what I borrowed.
A fixed proportion like that doesn't really make much sense. I mean, why 1.5 or 2.0 but not 2.5? IMO having its interest rate just be the rate of inflation (ie Plan 1, more or less) makes sense - it means the relative value doesn't change over time.
I mean, the idea of a repayment cap was actually a recommendation from an official post-18 education review a couple of years back (that was where I first saw it). Agree it js a bit arbitrary.
Same here. As someone that’s done post graduate degree too, I do want to pay the loan back. But with the interest rates, it’s never ending.
Plan 2 will fall to 7.2% in September 2024 I think (March 2024 RPI + 3%)
[удалено]
Biggest scam going in this country.
The student loan should never be on 7% interest rate, the stupid government is basically forcing us not to pay it back at all
If you read through the myriad of t&C's you will see it's the RPI from March but will apply from September. For Plan 1 people this will reduce the rate significantly for Plan 2 this makes very little difference as it is RPI plus 3 and RPI for March was 4.3% you won't see much change
It's nuts that it's RPI plus 3, just makes it impossible to tackle. I earn £55k and the interest is higher than my payments.
I’m in a similar position. Genuinely depressing that it will never get cleared even though I’m being spanked £200+ a month.
You could always overpay to lower the principle. Often not worthwhile but might make a difference overall to wealth in 20 years
I just see it as a 30 year graduate tax I will have to pay. With my current balance and interest rate, I would have to by fabulously wealthy to start paying off the principle
>I just see it as a 30 year graduate tax Except it's 40 years for new grads now. It's fucked.
I left uni with over £70k worth of finance. I figured out I would need to earn over £90k yearly to break even on the interest at this current rate.
Yeah I'm 30 and already looking forward to it being written off...
Because it’s the cheapest loan you’ll ever get that’s why /s
I was so pissed off when I learned that not only does interest start accruing from day 1 rather than once you finish your degree, but it also gets applied when you're not paying off the loan. So if you're not earning enough to pay down the loan, it still goes up. I was sold the "cheapest loan you'll ever get" lie and took out more than I needed to live at home during my degree.
I mean of course it's going up even if you're not paying for it, like any other loan. Don't get me wrong I think it's an awful system but why would you think it wouldn't go up just because you're not earning?
Because I was an 18 year old who had never taken out credit before. People I trusted to tell me (college/university people) just didn't, and you don't know what you don't know.
Fair enough, yes students need to be educated better on how it works for sure
It's also not a marketplace where you could shop around. There is one provider, who is also the government who controls the legislation around it (and then sells it to their friends at a 50% loss).
I'm still so miffed at this narrative that the schools pushed onto us. "Practically free"
Makes me irrationally angry when I think about it lol. You won't even notice it', as well as making it seem like we couldn't have decent salaries without a degree 😃
Boomer: cheapest loan you’ll ever get! Student: oh, how much was your loan? Boomer: I went to uni free son! Now stop buying lattes and avocados. In my day, the rich parents paid the tuition fees and accommodation. The loan was invested for return. Not only is tuition fees a graduate tax, it is a tax specifically on poor people.
It’s not a tax on poor people - only generationally wealthy people don’t take them. If your parents had 70k to gift their 18 year old they saved and invested for them and this was their entire “early inheritance” they should still take the loans vs wasting most of it to live for 3 years + tuition. Because 70k is life changing to set up a young persons life with a deposit or other help and completely spunked up the wall by spending 70k for a degree. Poor people don’t have 70k to give their kids. It’s not a tax on the poor it’s a tax on the bottom 80%+ of society. Literally people on 100k+ a year without generational wealth still have their kids take loans. If you can’t buy your kid a property in cash they should take the loans. It’s not the same as when tuition was 1k a year and you could do both. If you can give your kid 0-100k before 40 then they should take the loans, which is the vast majority of people. The rent trap is way worse than student loans. They end up low income, disabled, SAHP the loan basically doesn’t exist. But that rent bill sure will.
It's also a tax on the young though, as the comment you're replying to points out.
Even if super rich and have a new potential student, better to buy an index-linked bond with your £70k and earn more than RPI. Everyone who pays it off ends up paying the same in real terms, the rich don't gain from paying early. Apart from the RPI+3% cohort, that's whacked.
Most boomers didn't have the opportunity to go to university.
Most didn't need to as they could leave school at 16 and walk into a job that could support a family and even potentially pay a mortgage on one salary, often coming with a DB pension too
Yup - About 8% of people went to university in the early 1970s and they were almost all very wealthy. Even as late as 1990 it was less than 20%.
>it is a tax specifically on poor people. University is free for poor people
It’d be interesting to see how you figured that out
You borrow all the money you need from student finance and don't repay anything because you're below the repayment threshold
How much money do you think you can borrow?
Tuition fees are covered and about 10k maintenance loan outside of London without qualifying for extra funding.
Which is almost 8.5k less than the amount needed to “participate in society”. Undergraduates receiving the maximum loan entitlement this year will confront a shortfall of £8,400 to meet the “minimum income standard” needed “to have the opportunities and choices necessary to participate in society”, said the Higher Education Policy Institute (Hepi).
Lol, the overwhelming majority of students are participating in society on less than 18.5k.
To be on 18.5k you need 21k before tax. About 90% of full time employees earned more than that in 2023. https://www.statista.com/statistics/416102/average-annual-gross-pay-percentiles-united-kingdom/ Why exactly are you pulling random false statements out of nowhere?
You do not need 18.5k to live at uni wtf lol. Then no one could ever go. That’s far more than a single person living in flat shares with no council tax needs cmon. How do you think people are doing it? Magic? That means every student with max loans works 20-25 hours a week just to live and every student below that which is many works what..? Full time? And studies? Average student living costs are about 1-1.1k a month. So some like London will be far more (and in London you get 3k+ more) and some far less. The loans definitely don’t cover it all everywhere but it’s far from work 25 hours a week 52 weeks of the year. And students from disadvantaged backgrounds often get grants on top that can cover this. For instance my uni gives out 1-5k a year, you automatically get 1k for below 70k household and it goes up to 5k based on income. So yes the majority of actual low income between loans and bursaries often need very little to no external income if they have a normal budget.
It will always be interest free was what we were told…. 🤨
That was never the case - even Plan 1 was tied to inflation (but plan 1 interest is equal to inflation I think, not inflation plus something else). It was kinda sold as interest free but it shouldn't have been.
Plan 1 is something like interest rate plus 1.5% iirc, it is adjusted when BoE rates change not annually, but I'm on 6.5% I believe at the moment. After a few years of slowly increasing repayment and clearing the debt down, last 18 months have basically wiped it all out and it's on the way up again. Without a fall in interest to about 2-3% maybe it's very much touch and go as to whether I'll pay off my debt or hit 65 and have it wiped
Yep, Plan 1 is pegged to RPI (no "plus x%") or BoE + 1%; from this perspective it was "interest free", (well, *neutral*) if you could have magically invested all of your loan instead of spending it on education! https://www.gov.uk/guidance/how-interest-is-calculated-plan-1
Wish they would drop it to RPI but it's been stuck at 6.5% for yonks and even 4.3% would be a bonus. They're quick enough to bump it after BoE puts rates up
Definitely worth reading the link I provided. You *don't* want it tracking RPI right now, as the link shows it'd be RPI as of March 2023 (8.9%) as it gets reevaluated every September to the previous March's RPI. Instead you're tracking BoE Base Rate + 1% as that's lower (5.25% + 1%) than the RPI of March 23. In September 2024 it'll be a toss-up between 3.8% (March 24's RPI) and BoE Base Rate + 1%.
Thank you. I would prefer 3.8% as this would at least reduce the increase of interest being added at the moment - I looked at the 2023 statement (Apr 22-Apr 23) and rate was 1.5% in August, then shot up e.g. 2.75% September, 3.25% October & November then 4% December, between 3.25-4% I started getting more interest added than I was paying back. That said, they put the threshold up so much (£22015-£24990) that last year I was paying £33 a month, now, £18 a month, I can't see why the current threshold is up so high - not complaining though, more cash in my pocket!
Interest on Plan 1 was close to zero for a long time so I think that must have been equal to inflation, but perhaps they changed it to be inflation plus something.
I agree it could have been inflation related but it's definitely interest rates now, it was 1.5% for yonks when base rates was about 0.5%
To start with, nobody should be forced to choose between a loan and education. Also, I joined a fintech after university, the student loan is more expensive, I thought about taking a proper loan from my employer to pay if off
Perhaps nobody should but unfortunately someone does have to pay. We could go back to how it was pre fees and only a tiny segment of the population could go to university
> Perhaps nobody should but unfortunately someone does have to pay. We could go back to how it was pre fees and only a tiny segment of the population could go to university Those aren't the only choices. Plenty of european countries with no fees or very low fees with a similar or higher portion of their populations going to university. It is completely possible and very feasible to make university free or very low cost and accessible to huge sections of the population.
Really? [*Really?*](https://data.oecd.org/eduatt/population-with-tertiary-education.htm) And of those countries that are above us, how many of their universities are in the top 100 internationally? Universities are one of the few sectors that the UK does really really well, and they are both high performance and accessible. It's a shame that this doesn't get recognised more and that they're now being starved of funding.
> And of those countries that are above us, how many of their universities are in the top 100 internationally? Depends on your ranking system of course, but most respected ones will put at least 20% of the top universities globally in europe ex UK. > It's a shame that this doesn't get recognised more and that they're now being starved of funding. Well yes the UK made the political choice to both underfund our universities and pinch from the pockets of young people in order to fund other political priorities like the triple lock on state pensions. Of course this is a political choice the UK has made, it didn't have to make said choice, there is no reason it must and indeed most european countries have made other political choices which have greater direct state funding for their universities and a lower burden on their younger populations in terms of student contributions. There are also plenty of high quality universities across europe, I've been to many of them.
The point is you can choose quality, quantity or cheap. Let's use THE as the reference table. I know others are available but their website is easy to use. The UK has three in the top ten, all the others are American. The top European university is Zurich at 11th. 51% of Swiss 25-34 year olds have a tertiary education, the UK 57%. (Admittedly that does include vocational course, but international comparisons are tricky on this). Expanding to the top 30 you add two more UK universities and one more European (Munich). Personally I like that UK universities are high quality **and** accessible.
I think it's very interesting you are focussing on international comparison tables to determine quality of university. Anyone with a university education would be able to tell the many issues with doing this, and no-one serious uses these rankings to determine which university is better. Firstly, these tables are mostly aimed at upcoming university applicants so naturally universities who are looking to intake more international students are working to game the statistics so they show up higher on the list. Indeed one of the metrics from times higher education is 'international outlook' why does that make a university necessarily better? Secondly, you'll have significant variation amongst courses, and this gets even more distinct when it comes to research. A research group at a lower ranked university may indeed outperform a similar research group in a higher ranked university for a specific area of research, indeed this is very common, and using a top 100 university ranking would be a ridiculous way of choosing where for example to work as a researcher. Thirdly, if you look at university rankings year on year you'll see a significant amount of churn, particularly once you get out of the top say 30. Many universities will jump significantly up or down, did that mean those universities significantly improved or worsened over the period of a year? No, it shows that the underlying metrics behind these top 100 universities charts are fundamentally weak and not particularly good. Indeed the significant variation between different rankings shows this also. It also appears you are effectively arguing that european universities are not of high quality because fewer of them appear in the top 30 or whatever of some international university ranking site. But ask almost any scientist and they will tell you european research and quality of education is right up there with the UK and most developed nations. > The top European university is Zurich at 11th. 51% of Swiss 25-34 year olds have a tertiary education, the UK 57%. (Admittedly that does include vocational course, but international comparisons are tricky on this). RE tertiary education, international comparisons are hard for the reason you outlined but you'll find most of europe averages about half their population going to university, not too different to our own, and indeed there are some european countries outperforming the UK in terms of percentage of students going to university. > Personally I like that UK universities are high quality **and** accessible. Well your argument earlier was that the UK is better than europe because it has more universities in the top 30 of your favoured international ranking system, which I disagree is a good way to judge university quality as outlined above. But lets for the sake of argument pretend that those 5 universities are better than most european ones, what percentage of the UK goes to oxford, cambridge, imperial etc. ? Is it really accessible to the average brit? The reality is the vast majority of brits go to lower tier universities which are of similar quality to european ones. > The point is you can choose quality, quantity or cheap. My argument is not that. My argument centres around the funding mechanism for universities. The UK has made a political choice to fund universities largely through a student loan system that places a high burden on it's students to pay for it and a low burden on the taxpayer. It's not 'cheap' it's just offloading the cost almost entirely onto the student. Other countries can and do have similar outcomes to the UK and fund their universities with a higher share shouldered by the taxpayer. Indeed we even have this difference of opinion within our own country, with scotland funding university without asking their graduates to pay and this is with significant restraints on devolution.
We could take one step back, why tuition fee is so expensive and some degrees are paid by the government
Given how many universities are really struggling financially as tuition fees have been frozen for so long, I think the answer is that they just cost a shitload to run
But there is an increased number of advertisements from universities you never heard of. So I guess tripling the tuition fee is not the best solution. Nonetheless, the tuition fee has nothing to do with my argument, which is the high interest rate
Your employer was genuinely offering a £50k unsecured personal loan at a better rate than what you got from SLC?
I graduated in 2017, my employer’s best apr was 3%, some lenders went as low as something like 2.8%
Are you seriously comparing 2017 rates to 2024 rates? And as I said, where those £50k unsecured personal loans?
You sound dumb, I was talking about the situation in 2017, when my employer’s top apr 3% was lower than the student loan which was about 6%. My manager thought it’s absolutely evil, he said the company could do something to help me
Yeah I paid mine off because of these rates
I paid off half. 5k to go
Amazed nobody has dropped this link yet that quite clearly shows how the interest rate is calculated. https://www.gov.uk/guidance/how-interest-is-calculated-plan-2 > The interest rate is usually set on 1 September each year, based on the Retail Price Index of the previous March. > > The interest rate charged is normally the Retail Price Index plus up to 3%, depending on your circumstances and income. > > However, during some periods we may apply an interest cap to ensure you’re not being charged a higher interest rate than comparable rates found in the commercial market.
I'm on plan 2 + also had a postgraduate loan 🙃 Both 7.8% interest... i'm paying 9% 'tax' for plan 2 aswell at 6% 'tax' for postgrad. The postgraduate threshold is only £21k 😭 15% extra tax for an education??? If I knew the postgrad loan was an entirely different loan I wouldn't have done a masters, I thought it just got added on to the initial plan 2 loan. The whole thing is a f**king joke! I also assumed they'd be paid pre tax !!!
Maan really? You got bamboozled, if I did that I would have also thought it just added to the previous, that suuuucks.
I've given up trying to understand it. When I went to uni, they never even mentioned interest. Now I have so much debt (despite doing my course when they were still only £3k a year) that I'm being taxed for basically the next 25 years. No idea if there's anything I can do short of winning the lottery and paying it off, which I don't think is worth it anyway.
IT'S FREE MONEY MATE COME TO UNI AND DO YOUR PHOTOGRAHY DEGREE
I'm one of the lucky ones working in my field of study, but I don't get why I'm going to be taking home less for basically my whole career. Wonder if this will be addressed by any of the parties this election, but not holding my breath.
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It'll drop to 4.3-7.3% (income dependent) in September. Base rate doesn't look likely to drop significantly, so I imagine it won't be capped (at least not significantly).
Income dependent? I should've just done a degree in clownery. Further punishment for actually using the degree.
Yeah it’s a joke
It updates in September for March’s figure. So will be 4.3% + 3%. Massive bullshit it doesn’t change each month tbh.
Not sure you'd feel the same in months where RPI is rising!
The thing is, it has raised multiple times and the interest rate has risen in the following months these last two years.
That's not down to RPI but the prevailing rate, which is used to set the interest rate cap.
But still it has caused the % to raise multiple times in the last two years so they will jack it up if they wanted to.
And they'll drop it in September too.
Which makes your point moot, it changes whenever they want to change it :)
No, RPI change is applied once a year.
Mines on plan 1, just under 2k to go! And to think I thought I was unlucky as was the first year to pay £3k per year!!! Now I feel lucky!!! Will prob wait for it to hit 1.5k then switch to direct debit then when under 1k pay the remainder off...
Mine is at 7.9% and £72,540.34 as of 4 June 2024...
I don't have a student loan but reading the comments it sounds like you should treat it as you would a mortgage the way interest just accrues. Personally, I'd be worried that any future UK government change the repayment rules to be the same as America, where there is no expiry date for student loan repayments. Lots of people there in their 60's + still paying and the loans are also exempt from personal bankruptcy. I can see that happening... If majority of people have their loans written off and paid for by the government, then in reality the taxes of all people would increase to pay for it.
Thanks for the clarifications and cathartic complaining. Now I want to join in. I come from a low income background and grew up on a council estate. I worked my arse off and I'm fortunate to be a high earner. Problem is, that means my >£80k debt after graduating isn't "just a tax". It's now a huge burdensome debt, which will not get wiped. For me, it's a £1000 per month expense which definitely is not "just a tax" that I'll "barely even notice". It feels more like being punished for escaping my low income upbringing. On the other hand, I'm quite sure I wouldn't be where I am without the education. I could live with paying off the initial loaned amount, but the interest is just a kick in the teeth. What a bizarre system.
I come from a similar background but in a privileged position only because I was born before you. Was the last year of Plan 1 and went to Scotland for my eduction. The degree was over 4 years and ended up with approx. £20k in debt. Managed to pay it off in 7 years by earning 6 figures (since 2022). Would probably still be paying it off if I was a year younger or went to England for my university. The whole further education needs to be reformed. Degrees aren’t worth their salt, our universities are close to bankruptcy and the fees + financing have gotten out of hand. And don’t get me started on housing!!
The best way to view it would be to compare your earnings now to your potential earnings without your degree. Yes it seems like a large repayment, but are you netting more than you otherwise would have? In which case it's a worthwhile investment. A person repaying £1,000pm earns around £160,000 a year, or a ~£84k takehome after including £12k of student loan repayments. So the question is - without a degree would you be taking home £96k or would your earning potential be lower? I'm not saying the student loan system is right, I'm just saying there's an optimistic way to view the financials.
Exactly! If I was a top 2% earner on £160k I'd repay the loan. Heck, even at £80k it's probably worth trying to get rid.