Turn on thread page Beta

Philosophy of paying off student loans- overthinking mind loop! watch

    • Thread Starter
    Offline

    2
    ReputationRep:
    So with student loan tution fee increases, it seems that most people will be stuck in tution fee debt. A lot of folk, have said to think of it like a graduate tax , which is kind of more comforting that a debt and it's good to pay back into the system!

    However student loans have in the past had retroactivly applied rule changes, and student loans are now being sold off as a kind of bond (so the government gets the money quick) .

    Doesn't this now change the student loan repayments essence from a graduate tax to bank rolling private capital?
    I personally also think it's possibly a way to bring the UK, gradually into a more American loan system...Also there is no option, to personally veto unethical companies getting involved (many people do look into ethical investment for personal banking).

    All the advice online (Moneyexpert etc) seems to say don't pay it off....

    But, if you could should you?
    What do you recon?

    This is more of a general moral ethical post, why I don't think it should go in SFE section!
    • TSR Support Team
    • Very Important Poster
    • Peer Support Volunteers
    • PS Reviewer
    Offline

    21
    ReputationRep:
    TSR Support Team
    Very Important Poster
    Peer Support Volunteers
    PS Reviewer
    I personally don't like the idea of thinking of it as a 'graduate tax'; I don't think that's what it is, and I also don't think you should be taxed for being a graduate in the first place. In my view I'd rather actually look at it as paying back my degree, as I don't particularly object to the notion.

    I do see what you're saying to a degree though, that changes to how it's implemented throw a bit of a spanner in the works in regards to the graduate tax theory. I'm not sure what the solution is there, though in principle it could continue to be viewed in the same way still.
    • Thread Starter
    Offline

    2
    ReputationRep:
    No, I agree it isn't a tax. Using the telegraph calculator, it seems those that pay it off quickly / strategically pay less into the pot, in the long run. Low salaries almost get free tution (fantastic), middle/ slow rising earners pay the most - so a not quite progressive tax! A flat graduate tax might put people off courses with low expected salaries - ''return on investment'' should not really go into picking a subject.
    Most of my friends on the same course will not have to pay* any back as it is a predominantly scottish course, so thanks for thinking about it.

    *Apart from general taxes
    Offline

    18
    ReputationRep:
    (Original post by CatQueenie)
    So with student loan tution fee increases, it seems that most people will be stuck in tution fee debt. A lot of folk, have said to think of it like a graduate tax , which is kind of more comforting that a debt and it's good to pay back into the system!

    However student loans have in the past had retroactivly applied rule changes, and student loans are now being sold off as a kind of bond (so the government gets the money quick) .

    Doesn't this now change the student loan repayments essence from a graduate tax to bank rolling private capital?
    I personally also think it's possibly a way to bring the UK, gradually into a more American loan system...Also there is no option, to personally veto unethical companies getting involved (many people do look into ethical investment for personal banking).

    All the advice online (Moneyexpert etc) seems to say don't pay it off....

    But, if you could should you?
    What do you recon?

    This is more of a general moral ethical post, why I don't think it should go in SFE section!
    There's no real rush to pay it off and it's conditioned by how much you earn unless you're self-employed and therefore can control the pace at which you draw out funds/self-assess.

    Do you think any of these companies are going to be more unethical than the government? In which case, have you looked at some of the activities it involves itself in?

    The loans - much like the US version - remain taxpayer subsidised, else those rates would be much, much higher to reflect the credit risk involved.

    I wouldn't pay it off unless there's rumours of a big spike in interest rates, perhaps resulting from an end of their tax subsidisation, which I see as unlikely and cannot be passed with immediate effect usually.

    On the one hand, I do think these degrees are heavily subsidised, but on the other I don't blame graduates for not rushing to repay them, particularly because past governments and to a degree the present have been very heavily pushing wider degree completion as an ideal, and made it harder (but not impossible) to get a good job without one. You will be whacked with a number of taxes once you become employed and independent, anyway, which will quickly erode your income.
    Offline

    18
    ReputationRep:
    (Original post by CatQueenie)
    No, I agree it isn't a tax. Using the telegraph calculator, it seems those that pay it off quickly / strategically pay less into the pot, in the long run. Low salaries almost get free tution (fantastic), middle/ slow rising earners pay the most - so a not quite progressive tax! A flat graduate tax might put people off courses with low expected salaries - ''return on investment'' should not really go into picking a subject.
    Well, it's more that ROI should be realistically viewed in terms of what your subject might qualify you to do and how in-demand such a skillset is. Also, it's undeniable that many graduates are doing degrees precisely to ready themselves for a future career, so I don't see how ROI can be removed from the equation.
    • Thread Starter
    Offline

    2
    ReputationRep:
    Thanks, my career plan has a shortage but is way below the threshold for paying it back and a lot of people are self employed but not on a lot. I am doinging the degree solely on the love of it - if I went into academia I might be able to earn 3x the top of the orginal career, which I am getting tempted to do. Yes, true the future career was the pull of the degree (it's vocational).

    'Do you think any of these companies are going to be more unethical than the government?' NOOOOPPEsandwich they are all unethical!
    But that's part the problem, I am kind of supporting a government style bond which could be invested in the militery and neoliberalisation of education.

    Yeah, it's mostly a philosphical thinking exercise... but it is sort of possible on 4 years of solid 14k earnings, being veggie and low expediture based.
    Offline

    18
    ReputationRep:
    I wouldn't really worry too much about repaying it for the time being. It was offered to you on the basis that it will be recovered through future earnings, so you may as well repay it on that basis.
    • Thread Starter
    Offline

    2
    ReputationRep:
    Thanks, that's probably how I will do it.
    Offline

    18
    ReputationRep:
    My main focus if I were you would be growing my earnings and making sure you have enough to comfortably retire on, because government pensions aren't going to be of much use. Even if you're not particularly money motivated, you should give thought to what kind of lifestyle you want to sustain and how much that will require; paying off a student loan should only factor in to that to the extent that it facilitates it. The ethics of it IMO should be an ancillary concern, I think it should only really bother those who messed around with these degrees and saw them as a joke/3 year party excuse, because that is in effect a waste of funds provided by others (underwritten by the taxpayer) that they may never end up repaying. However, I doubt that's something you did.
    Offline

    17
    ReputationRep:
    It all depends on career trajectory, amount of loan and interest rate. If you are one of those who is eventually going to pay it all back (plus interest) over the bulk of your career there is an argument to pay it back ASAP. If you are more likely to never repay a substantial part there is an argument to not , and given you are in this position there is a good chance you actually cannot afford to clear it faster out of earnings anyway.

    As an example my son only had about £11,000 loan (Scotland), he graduated in May 2013, his loan will likely be cleared by April 2019 (just five years of repayment). From April 2014 to May 2017 modest repayments with limited repayment of capital, earnings above repayment threshold but not significantly, over (about £1,000 pa repayment ,covers interest with some erosion of capital) but from May 17 to date very high earnings as a contractor (Software Developer) that will really eat into the debt so that by April 2019 it will pretty much all be repaid.

    Whilst he is not finding it fantastic the debt will be repaid that quickly (I think house purchase beckons) I pointed out to him that at least if at April 2019, age 28, the whole lot is cleared it is not the end of the world, it stops being a marginal 9% drag on take home pay over most of the rest of his working life and given the low initial loan and his career it was always on the cards he would repay the entire loan, so maybe better just to get it done.

    I believe there can be no hard and fast rule re repayment, each case will rest on its own particulars, quantum of loan, likely earnings etc
    • Thread Starter
    Offline

    2
    ReputationRep:
    Hmm, yes I am a bit concerned about my career (the future) as the top of the tree is less than 20k and it's very physical - there's a kind of footballer age retirement threshold depending on joints. Mine are already a bit messed up. I normally work/ cycle between gardens in summer, so all good on the not having money front, until the winters. Could go full migratory, but I like a bit of security and friends to party with. Going all the way through to a full degree, rather than HND is already an insurence to switch careers if necessary, (to be a biology teacher). Going into academia (more money and security, and less backache) would probably mean futher study in Germany, aber ich bin langsammer...

    Oh real world, oh the system...Thanks for helping me think about it.
    Offline

    18
    ReputationRep:
    Indeed, contracting is exactly what I meant in terms of controlling the amount you can take out, particularly with the repayment threshold being higher than it used to be. Repaying it in one shot vs not doing so is all conditional on how much that lump sum can gain you in alternative uses; the repayments only scale based on earnings and you ultimately don't have to repay the full amount ever, as you would with a mortgage, so it does involve some weighing up from a personal finance perspective.
    Offline

    17
    ReputationRep:
    (Original post by TCA2b)
    Indeed, contracting is exactly what I meant in terms of controlling the amount you can take out, particularly with the repayment threshold being higher than it used to be. Repaying it in one shot vs not doing so is all conditional on how much that lump sum can gain you in alternative uses; the repayments only scale based on earnings and you ultimately don't have to repay the full amount ever, as you would with a mortgage, so it does involve some weighing up from a personal finance perspective.
    Not all contractors can control earnings, those not using corporate entities (my son was a self employed contractor in Frankfurt for 10 months so not within a company- they have a word for it which is about 50 letters long) and of course if the contract falls into IR35 there can also be little control over taxable earnings.
    • Thread Starter
    Offline

    2
    ReputationRep:
    Ah very well done on your son! Especially as the loan interest is so high. (Mine is 1k each year depending on inflation)

    I think mine is possible, as I am very frugal.... if I got a stable job with a set contract, which is quite unlikley in the jobs market. Yes you are right with the no set rules to repayment, although the interest is so steep; early would be the best strategy.
    Unfortuntely It is incredibly hard to plan earnings with zero hours contracts/ seasonal work. So paying back is probably pointless on a personal level if I stay as a gardener; but less pointless if I went into something else....
    Offline

    18
    ReputationRep:
    Yeah, I'm referring to the outside, UK version. Of course, it just means you can control when the earnings are disbursed, which can help for efficient tax planning, but at the expense of taking out less each year.

    and of course if the contract falls into IR35 there can also be little control over taxable earnings.
    It has significant disadvantages to it, yes. Unless the rate is increased to compensate, but then you're in the same position as a salaried employee anyway.
    • Section Leader
    Offline

    21
    ReputationRep:
    Section Leader
    (Original post by CatQueenie)
    However student loans have in the past had retroactivly applied rule changes, and student loans are now being sold off as a kind of bond (so the government gets the money quick) .
    Such as?

    Also, the fact that parts of the loanbook are sold off to the private sector doesn't affect your student loan. The repayment terms for you remain the same.
 
 
 

1,994

students online now

800,000+

Exam discussions

Find your exam discussion here

Poll
Should predicted grades be removed from the uni application process
Useful resources
Uni match

Applying to uni?

Our tool will help you find the perfect course

Articles:

Debate and current affairs guidelinesDebate and current affairs wiki

Quick link:

Educational debate unanswered threads

Groups associated with this forum:

View associated groups

The Student Room, Get Revising and Marked by Teachers are trading names of The Student Room Group Ltd.

Register Number: 04666380 (England and Wales), VAT No. 806 8067 22 Registered Office: International House, Queens Road, Brighton, BN1 3XE

Write a reply...
Reply
Hide
Reputation gems: You get these gems as you gain rep from other members for making good contributions and giving helpful advice.