J ([info]mchicago) wrote,
@ 2009-03-19 21:58:00
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Student Loans
Its ridiculous. I was in full time employment BEFORE I graduated from University. I've not had a day of unemployment during that time. I've been in work for longer then I was at uni, and for all but 6 months of that time, I have been earning more then the minimum repayment levels.So when, on the 4th of April this tax year comes to an end, FIVE YEARS LATER how come that it is that I still owe six grand?

This is ridiculous (not to mention the fact that the SLC lost more then £800 of my repayments in the previous tax year that they then had to find.

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[info]sunflowerinrain
2009-03-19 10:58 pm UTC (link)
The interest rate on student loans is supposed to be low. It doesn't look low to me. I didn't even take the full loan, but the debt increased by huge amounts every month.

It's a con!

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[info]mchicago
2009-03-20 11:10 am UTC (link)
Its stupid for lots of reasons - the system is supposed to work like pensions or something where the money being paid in now covers the students of now. But its blatently unfair when theres people like Karen who are never going to pay back their entire loan - they just won't be working for long enough (lets take a sexist example: Kaz will work for another 1/2 years then have kids. Then if she goes back to work she will probably be part time or not earning enough to pay back the loan).

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[info]bassistofjeff
2009-03-20 03:23 pm UTC (link)
The interest rate is supposed to be linked to inflation in some way. I don't think I've had a year yet that I've paid off more than the amount of interest I have accrued

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[info]mchicago
2009-03-20 03:52 pm UTC (link)
So yours is just going up?

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[info]bassistofjeff
2009-03-20 03:53 pm UTC (link)
Yep. I just ignore it, it's not real debt, it'll go away one day.

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[info]dj_stillborn
2009-03-20 08:54 pm UTC (link)
Exactly how I think of it.

I'll probably never pay it back, but I've never had the money, so I don't miss it.

Not worth worrying about.

You pay 9% of everything over £15K, so that's £7.50 a month for every £1000 over that you earn. Just not worth worrying about in the slightest.

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[info]tetsuko_
2009-03-20 08:57 pm UTC (link)
I have only ever heard one person that has ever paid off their student loan and that was only because they had a small-ish one (they pulled out of thier degree early) and one of their parents just paid it all off for them.

I'm pretty much convinced I will never be able to pay mine off, short of a premium bond win. I'm going to request my that my balance is buried with me lol xD

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The ridiculous student loan
[info]hippygeek
2009-03-21 11:55 am UTC (link)
If you only owe £6000 at this point, you're in a very good position.

I'm going to owe in the region on £20,000 when I graduate in July at the end of my four year degree. I think my brother is going to owe around the same for his three year degree on the new loan system.

I accepted long ago that I will never pay off my student loan and I just see it as an extra income tax that I only have to pay for the next 25 years.

So what about someone with a more normal level of student debt on the old system? Let's say you owe £12,000 and in these hard times you get a graduate job for £16,000 a year.

OK, the interest rate for student loans is currently 3.8% per year - that's £456 a year for £12,000.

The repayment rate is 9% of everything you earn over £1,250/month - that's about £90 a year for £16,000.

So, looking at those figures - if you're only earning £16,000 your loan is getting bigger over time rather than smaller. By my calculation, you'd have to be earning about £21,000 a year to actually be paying off your loan - and if you were it would take you 142 years to pay it off, if it wasn't for the fact that they write it off after 25 years. If you were earning £30,000 you would pay it off in about 13 years.

However!

There's something missing in all of this. Because the interest is only in line with inflation, in real terms it's not actually getting bigger. It might be 3.8% more in numbers than it was the previous year, but it would still buy you the same amount of shopping because the cost of food rises with inflation too - the government isn't actually making any money from your debt.

http://www.moneysavingexpert.com/loans/student-loans-repay

The key point is that wages also go up with inflation. So whilst it may be true that if you were earning £21,000 a year it would take you 142 years to pay off the loan, actually your wages aren't going to be the same, they're going to go up, so it will be much faster than that. Even if you didn't have a single pay rise except for inflation, you'd pay it off in 22 years, with pay rises it would be quicker. If you were earning £30,000 with no pay rises, it would take 9 years.

In conclusion, yes your loan would be getting bigger if you were earning £16,000, sort of, though it doesn't really make any difference because it's still worth the same in terms of food and it doesn't affect your credit rating. If you earned £21,000 for the next 22 years with no pay rises and made the minimum repayments you'd just manage to pay it off before they wiped the slate clean. You may as well carry on earning £16,000 and let them pay it off for you in 25 years!

Points to ponder:
* Think of your student loan as income tax rather than debt, it's not like any other debt because it doesn't get worse.
* Income tax is usually for life, your "student loan" tax will disappear before you retire.
* There is no point in paying off your loan faster than the bare minimum repayments because you won't be any better off.
* Amusingly, if inflation becomes zero (hey, we're living in hard times), the amount you owe actually goes down!
* If you only owe £6000 then you're very lucky!
* Capitalism is f*cked anyway, soon we will all be reverting back to subsistence farming and fighting each other off with sticks.

This is why the loan system is a farce and the government should just go back to giving grants. If they know they're never going to get the money back in most cases, why call it a loan?

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Re: The ridiculous student loan
[info]hippygeek
2009-03-21 11:58 am UTC (link)
Correction: I meant that if inflation becomes *negative* the amount you owe goes down.

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Re: The ridiculous student loan
[info]mchicago
2009-03-21 04:41 pm UTC (link)
yes, I am well off, but thats WHY its rediculous - I earn a reasonably good salary and have never done any time on the dole, and I started with not a stupid amount of debt, so to be still in this much is the real joke. If I'm this far behind, then everyone else must be fucked.

p.s. I think your maths might be wrong on how fast you pay it back for the values you specified, plus lots of other minor things in your comment, but they detract from the main point im trying to make.

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Re: The ridiculous student loan
[info]dj_stillborn
2009-03-21 11:53 pm UTC (link)
But that's because the repayment level is so low so it's no real impact on anyone. If you felt the need to pay off more than they ask for and clearing the debt there's nothing stopping anyone. But most people are happy just plodding along paying the 9% and never really worrying about it.

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[info]dj_stillborn
2009-03-24 11:24 pm UTC (link)
I hate the Student Loan Company, the bastards have just taken £243 from me. *humph*

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[info]mchicago
2009-03-25 09:56 am UTC (link)
Meanwhile, some where in a computer in the SLC:

Money-Monester@SLC > Mmmm Bonuses Nom Nom Nom

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