The Times: 3000% increase in graduates owing more than 6 figures in student loans

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sumossushibar77_
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#1
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The Times reports that there's been a massive increase in graduates earning over £100 000 in loans. One graduate owes near £180 000. This has been attributed to stagnant wages and high interest rates. Your debt doesn't just sit there unchanged if you don't meet the threshold, it compounds with interest. This can lead to a very unfortunate situation that when you do earn enough, the money you owe is astronomically higher than what you borrowed.

What do people think about this?

Personally, I think that interest rates on student loans is complete usury. They're so stupidly high it's disgusting. I would rather they scrapped the threshold and put interest rates at 0%. In Sweden, you must pay back immediately after you graduate, and they have a 0% interest rate on student loans. I think this is a model which the UK should adopt. It also discourages people from going to university just because, as they face serious ramifications if they can't pay their loans. It's a win/win

Source: https://www.thetimes.co.uk/article/3...debt-k37vvtgsv
Archived (no paywall): https://archive.ph/LxE7b
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ajj2000
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For most graduates it wont make any difference at all. I'm concerned about the multiple posts on different forums which don't understand this. The real question is how you feel about an additional 9% tax above a certain threshold - not whether you 'owe' £60k or £600k.
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sumossushibar77_
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(Original post by ajj2000)
For most graduates it wont make any difference at all. I'm concerned about the multiple posts on different forums which don't understand this. The real question is how you feel about an additional 9% tax above a certain threshold - not whether you 'owe' £60k or £600k.
The 9% repayment (effective graduate tax) is especially punishing now with the cost of living crisis. That's why I think the interest on loans is abhorrent. Forces you to pay for your loan for longer. Made worse by that only those on the highest graduate salaries will ever be able to afford to pay their loans, and even then from how it's looking right now, even they might struggle
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ajj2000
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(Original post by sumossushibar77_)
The 9% repayment (effective graduate tax) is especially punishing now with the cost of living crisis. That's why I think the interest on loans is abhorrent. Forces you to pay for your loan for longer. Made worse by that only those on the highest graduate salaries will ever be able to afford to pay their loans, and even then from how it's looking right now, even they might struggle
The 9% - which is a grad tax to all intents and purposes - is not changed at all by the interest rates. Most grads will never pay off the loans regardless of whether the interest rate is 6% or 12%. I can't say I'm too bothered if wealthier people don't get as much of a break. The 9% repayment is a far bigger issue.
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Admit-One
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I mean, I got my student loan under much more favourable terms a couple of decades back.

There is no chance that I’ll pay back the balance. None. And mine is considerably less than the figures being quoted above.

For me it all just seems a bit silly when the majority aren’t paying back their loans in the first place.
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Little pecker
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The interest rate is a tragic

So many people will be essentially having a 9% default tax added to their income for 30 years without any way around lmao. Imagine making 50ish grand and paying 51-53% in deductions a month.

What does the SLC even do with the money?
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Jpw1097
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(Original post by Little pecker)
The interest rate is a tragic

So many people will be essentially having a 9% default tax added to their income for 30 years without any way around lmao. Imagine making 50ish grand and paying 51-53% in deductions a month.

What does the SLC even do with the money?
Those figures aren’t right. Assuming a salary of £50k and pension contributions of say, 10%, your total deductions are 37.2%.
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Little pecker
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(Original post by Jpw1097)
Those figures aren’t right. Assuming a salary of £50k and pension contributions of say, 10%, your total deductions are 37.2%.
Was referring to the marginal rates should have clarified, which to me is still tragic.
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Jpw1097
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(Original post by Little pecker)
Was referring to the marginal rates should have clarified, which to me is still tragic.
Fair enough. Although I do agree that the interest rate is outrageous.
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Callicious
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Personally I think it's fair- a graduate tax, that is. You pay back something like 10-20% of "excess" income ("excess" being the income beyond which may be needed to live an extremely average life) on some threshold that, I would hope, gradually increases with inflation over time. Obviously it doesn't increase with inflation- but it should imho- other than that, there's no issue with such a system.

Don't want the graduate tax? Go via an alternative route, or pick a profession that doesn't need you to be a graduate.

The graduate tax concept ensures that you pay back for the degree you got- those who earn lots subsidise those who earn less, and so forth. Obviously loans won't be paid back in full in most cases- I'm £100k+ in debt already and will probably only pay back £20-30k after my 30 years are up, but I will pay back to the system by some amount, ensuring the taxpayer isn't 100% shafted by my choice of getting my BSc/MSc/PhD (the PhD next on the agenda.)

Now, to those complaining about losing an excessive amount of their income to this graduate tax- if you earn 30k, and the threshold is 27k, you only pay back an extra £300 a year to this tax. Only those who earn much more than you will pay much more on this tax, and frankly I don't see a problem with that.

The fact someone on the average salary can't life a comfortable life, get a nice house, and go on a vacation a year, frankly has nothing to do with graduate taxes. Don't get stuck in the ludicrous battle against a graduate tax (just another distraction that catches the weak-minded and detracts from the real problems facing this country.) Instead, you should fight for higher salaries, fairer taxation (see: the fact that you can loop sales through Northern Island, offshore tax havens which our government supports), and so forth.

All these people whining about student loans & graduate taxes should realize that our system is quite good for the average domestic student, and in reality provides a much cleaner safety net than most of the systems in Europe (which as far as I am aware, in many cases i.e. Portugal/Poland, put more of the onus on the parents to support the child, or require more effort on the childs part in part-time work/etc.) Start fighting for things that matter.

Now, obviously not perfect...
- Multiple kids, minimum loan amount? Hah, parents can't afford that. But then you shouldn't have had so many kids.
- Tuition can't cover moving away? Part-time work not paying enough? Minimum wage here is not a true living wage- but then again, is it anywhere? You could live at home, but in any case this isn't ideal.
- I expect there are more problems

But many of these issues are mirrored elsewhere (or worse elsewhere) so it's a moot point, really.
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londonmyst
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#11
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It's a grossly inefficient and unsustainable student finance system where the majority of graduates will never even start repaying all of their maintainence loan components.
Mass taxpayer funded wipeoffs at the end of the contract term, significant resale of loans at very low prices within 5-10 years of graduating and huge annual administrative costs. :facepalm:
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TheMcSame
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*Shurg*

You borrowed money. If you racked up these figures from a normal loan or a credit card you'd be expected to pay them back, including interest, regardless of the state of the economy. It's a risk you take with loans like this. Student loans should be no exception, you're still borrowing money.

Quite frankly, I believe student loans should be treated like any other loan. No silly 'oh you only start paying back after earning so much'. You should have minimum repayments you absolutely must make and failure to make them should go against your credit file. Perhaps then people would reconsider just going to uni because it is just the next step and instead go because it's what they desire to do and shop around to avoid, or at least reduce the extortionate fees they have to pay.

Don't see why my tax money should go towards writing off your loans if they're so ridiculous when said money could be put towards something far more likely to contribute to society, like the NHS. Any other time, you'd avoid loans that are just as ridiculous...
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Joinedup
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(Original post by TheMcSame)
*Shurg*

You borrowed money. If you racked up these figures from a normal loan or a credit card you'd be expected to pay them back, including interest, regardless of the state of the economy. It's a risk you take with loans like this. Student loans should be no exception, you're still borrowing money.

Quite frankly, I believe student loans should be treated like any other loan. No silly 'oh you only start paying back after earning so much'. You should have minimum repayments you absolutely must make and failure to make them should go against your credit file. Perhaps then people would reconsider just going to uni because it is just the next step and instead go because it's what they desire to do and shop around to avoid, or at least reduce the extortionate fees they have to pay.

Don't see why my tax money should go towards writing off your loans if they're so ridiculous when said money could be put towards something far more likely to contribute to society, like the NHS. Any other time, you'd avoid loans that are just as ridiculous...
That's a heck of a millstone to be expecting 18 year olds to make a sensible decision about.

Taking on a 'hard' loan is a high stakes gamble at different odds for students with differing levels of social capital. Carrie Johnson wasn't going to end up in a wage cage at the Amazon fulfilment centre whether or not she got a degree in art history from Warwick.
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TheMcSame
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(Original post by Joinedup)
That's a heck of a millstone to be expecting 18 year olds to make a sensible decision about.

Taking on a 'hard' loan is a high stakes gamble at different odds for students with differing levels of social capital. Carrie Johnson wasn't going to end up in a wage cage at the Amazon fulfilment centre whether or not she got a degree in art history from Warwick.
University is for people of all ages. Can't make a sensible decision or can't afford Uni/the loan repayments? Don't go until you can. If you can't afford a car yet live in an area where having a car would massively benefit you in terms of job prospects, you don't get a cushy loan you could theoretically not pay a penny towards. You just don't have a car.

At a push, people should only be able to avoid repayments if they're under the threshold and have it written off if unpaid after 30 years as long as they're proving they are making use of their newfound qualification. If they aren't making use of it, they should be made to pay and face the consequences if they don't.

Simply existing doesn't entitle you to university in the same way it doesn't entitle you to a car or your own house.
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artful_lounger
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As above, the chances the majority of students will pay back all or even most of their loan is negligible. It's functionally become a graduate tax, they may as well just make it one and that would remove a lot of misconceptions and worries students have - which especially concern students from less affluent backgrounds who already face barriers to entering higher education and are underrepresented in HE.

Spoiler:
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(this also gives the government more leeway in getting people to do degrees in shortage areas e.g. teaching or allied healthcare professions by offering incentives via graduate tax breaks for those who do )
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Joinedup
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(Original post by TheMcSame)
University is for people of all ages. Can't make a sensible decision or can't afford Uni/the loan repayments? Don't go until you can. If you can't afford a car yet live in an area where having a car would massively benefit you in terms of job prospects, you don't get a cushy loan you could theoretically not pay a penny towards. You just don't have a car.
Can you spot the problem with telling people who arent equipped to make good decisions to decide to wait until they are.

Lots of people on low pay either have jobs that require them to drive around in their own cars or they're trying to cobble a living together out of being able to get to short term agency gigs at short notice.
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Little pecker
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Yeh, no thanks. A permanent tax for being a graduate is worse than what currently exists.

Heaven forbid someone actually pays it back.



(Original post by artful_lounger)
As above, the chances the majority of students will pay back all or even most of their loan is negligible. It's functionally become a graduate tax, they may as well just make it one and that would remove a lot of misconceptions and worries students have - which especially concern students from less affluent backgrounds who already face barriers to entering higher education and are underrepresented in HE.

Spoiler:
Show
(this also gives the government more leeway in getting people to do degrees in shortage areas e.g. teaching or allied healthcare professions by offering incentives via graduate tax breaks for those who do )
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Callicious
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(Original post by Little pecker)
Yeh, no thanks. A permanent tax for being a graduate is worse than what currently exists.

Heaven forbid someone actually pays it back.
Why though? It seems fair that those who do not attend Uni do not pay for it at all, while those that do should pay for it. That leaves the options of either paying back the cost (which can be a lot of money and bring up a lot of misconceptions, worries about interest, and so forth- see the current systems around the world for how messy they are) or simply contending with a graduate tax for a few decades, which is much easier to understand and frankly, much fairer. No one has said it would be permanent- I would think keeping the 30 year limit would be fair... anything beyond that wouldn't be fair, given that newer students would be disadvantaged against the older ones even more than those who got Uni free a decade+ ago.

Unlike the NHS, roads, and most other public infrastructure, Uni education directly benefits only those who get it- I don't think it should be entirely subsidised by the general population- graduates should contribute more than the average person to it (i.e. an extra tax on top of the general taxes people pay.) Now you can debate the rate of the tax/etc- 10% over a threshold seems fair- but there should be some way for a graduate to pay back, and currently it is a tax effectively.
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artful_lounger
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(Original post by Little pecker)
Yeh, no thanks. A permanent tax for being a graduate is worse than what currently exists.

Heaven forbid someone actually pays it back.
For anyone except the highest earners (which are a tiny proportion of UK grads) they will not pay it back and so it will functionally be a permanent tax until they retire for most. It's not that people don't WANT to pay it back, it's that the majority of grads just won't be able to.
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Little pecker
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(Original post by Callicious)
Why though? It seems fair that those who do not attend Uni do not pay for it at all, while those that do should pay for it. That leaves the options of either paying back the cost (which can be a lot of money and bring up a lot of misconceptions, worries about interest, and so forth- see the current systems around the world for how messy they are) or simply contending with a graduate tax for a few decades, which is much easier to understand and frankly, much fairer. No one has said it would be permanent- I would think keeping the 30 year limit would be fair... anything beyond that wouldn't be fair, given that newer students would be disadvantaged against the older ones even more than those who got Uni free a decade+ ago.

Unlike the NHS, roads, and most other public infrastructure, Uni education directly benefits only those who get it- I don't think it should be entirely subsidised by the general population- graduates should contribute more than the average person to it (i.e. an extra tax on top of the general taxes people pay.) Now you can debate the rate of the tax/etc- 10% over a threshold seems fair- but there should be some way for a graduate to pay back, and currently it is a tax effectively.
I would find that worse than the current system, yeh most will never pay it back but a substantial minority will and this would just burden them with a 30 year additional tax rate no matter how much they make. It doesn’t seem fair to me.

It would have put me off uni for sure (unless it was like 1% which wouldn’t help tax payers anyway). I’m far happier my tax money is subsiding this than putting an absolute 30 year tax requirement on anyone.

artful_lounger - you are discounting ‘high earners’ as if they don’t matter in this context when they do given they still make up 25%ish of grads. More importantly they principally have no opportunity to get rid of the tax even if they can pay back which for me is fundamentally ridiculous.
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