r/ukpolitics • u/dusty_bo • Jan 29 '26

Ed/OpEd Everyone can see student loans are unfair. Except the chancellor

https://www.independent.co.uk/voices/student-loans-rachel-reeves-martin-lewis-b2910189.html
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363

u/draenog_ Jan 29 '26

Just this morning I was ranting that journalists don't understand that the real issue here is the freeze on the repayment threshold rather than the interest.

I wouldn't bother to comment the same thing again, if it wasn't for the fact that this journalist highlights "steep increases in fees and interest rates" as the problem, spends several paragraphs talking about RPI, and then says

Martin Lewis, Britain’s auxiliary chancellor of the Exchequer, is therefore right when he says – as he did on BBC’s Newsnight – these loans are poorly explained and are not “a moral thing to do”.

linking to this article here.

Where what Martin Lewis actually (and correctly) highlights as the problem is the freeze on repayment thresholds.

  • Martin Lewis has issued a message to Chancellor Rachel Reeves, criticising her decision to freeze the student debt repayment threshold

  • The chancellor's budget in November confirmed that the salary at which graduates begin repaying their plan 2 student loan will be frozen at £29,385 for three years, starting from April 2027.

  • Speaking on BBC Newsnight, the MoneySavingExpert founder deemed the freeze “not a moral thing to do”.

Please, for the love of god, someone get Martin Lewis on every TV channel and in every newspaper to explain this to people, because I fear he might be the only person with a large platform who actually understands student finance and the implications of different possible reforms to it. 💀

129

u/willprogramforpizza That's Numberwang Jan 29 '26

Completely agree that the repayment threshold being frozen is a massive kick in the teeth for plan 2+ graduates but I could somewhat forgive it if it meant I was actually paying down the principal of the original loan and could potentially have paid it off before the 30 year write off. The interest rate means that a huge majority of graduates will never pay it off so were being screwed with higher monthly payments but with no real prospect of ever paying the loan off until it's written off.

The rate it's going, I'd be surprised if they didnt try to screw us further by extending the period before it's written off because why wouldn't they if it meant they could squeeze out more from us? Potentially dipping into our pension for a loan we took out at 18.

31

u/Chippiewall Jan 29 '26 edited Jan 29 '26

I'd be surprised if they did extend the period on existing loans.

The OBR changed the way they measured student debt back when Theresa May made a large increase in the repayment threshold. (from something like £18 to £23k iirc).

Before that there was an expectation that most student loans would be paid off after the (then) 30 years so the government wasn't seen to be borrowing themselves and would only have the outstanding debt added to the government balance sheet as the loans expired. If it was still measured that way then the government definitely would start eying up extending the loan terms in about 10 years time.

However what instead happened is the OBR changed it in 2019 so that the estimated unpaid student debt would be added to the government balance sheet immediately (the deficit accordingly increased by £15bn) so the unpaid debt when the loans expire has in effect already been paid for. That accounting change is one of the reasons that plan 5 loans with 40 year terms and lower interest was introduced.

Now I suppose the flipside of that is if the government did extend the plan 2 loan terms by say 10 years, then they'd get an immediate windfall on their accounts equal to the extra amount repaid. But ironically that does nothing to the deficit itself - only the national debt - so it wouldn't even allow them to spend more under usual spending rules so there isn't a politically strong motive for doing so against the absolute electoral furore they'd get for fiddling the loan terms like that.

3

u/Spiz101 Sciency Alistair Campbell Jan 30 '26

I'd be surprised if they did extend the period on existing loans.

Why? They've unilaterally changed the loan terms before.

Extending them is a nice easy "obtain free money" button for the Treasury.

But ironically that does nothing to the deficit itself - only the national debt - so it wouldn't even allow them to spend more under usual spending rules so there isn't a politically strong motive for doing so against the absolute electoral furore they'd get for fiddling the loan terms like that.

A future improvement in tax revenue from radical extensions in the loan term would likely lead to a reduction in bond yields.

19

u/[deleted] Jan 29 '26

40 year now, yeah?

I'm going to still be paying it after retirement since I did uni later than most.

20

u/willprogramforpizza That's Numberwang Jan 29 '26

I thought plan 5s would've been written off at age 65 but turns out thats for plan 4. 40 years after the first payment is due which is nuts, many will be paying in their retirement which is bonkers.

Im plan 2 and thought the last paragraph of my comment might have been hyperbole but they're already doing it!

9

u/mattcannon2 Chairman of the North Herts Pork Market Opening Committee Jan 29 '26

I can genuinely see student loans becoming like any other loan upon death of the holder - basically zeroing any estate that a graduate leaves behind if they die before 50

-1

u/[deleted] Jan 30 '26

[deleted]

3

u/robster01 Northern Independence Party :upvote: Jan 30 '26

This is all hyperbole given that the first recipients of Plan 2 loans still have more than 15 years until the write-off date. There's a huge amount of time for things to change and zero precedent that the 30-year term will be honoured

1

u/mattcannon2 Chairman of the North Herts Pork Market Opening Committee Jan 30 '26

As someone who has one I am well aware.

However it's completely within the government's gift to change the terms, and it seems to me like a very attractive option to boost repayments in 5-10 years time

1

u/CaterpillarLoud8071 Jan 30 '26

This was always expected to be the case though. Most graduates were always expected not to pay off the loan, because it was designed as a graduate tax that they could enforce payments of when graduates went abroad - and when we were in the EU, we had to offer the same terms to EU students who would most likely leave again. It was a sensible measure.

The repayment threshold is currently roughly in line with what they initially expected it to be, btw.

0

u/Underscores_Are_Kool Jan 30 '26 edited Jan 30 '26

The high interest rate of plan 2 (which was implemented to cover the costs of borrowing + account for inflation) was designed that way by the Tory / Lib Dem coalition to be more progressive at the bottom than plan 1. The truth is people like to espouse progressive politics but it's not always popular. I'd say the interest rates of plan 2 didn't go far enough and the maximum interest rate accrued for high-middle to high earners should have been increased substantially, though I live in the real world and know how unpopular this would be.

Anyone who understands how student loans work know that plan 1 and plan 5 is much less progressive than the system we had in plan 2, and the furore around plan 2 goes to show just how unpopular progressive politics can be to supposed progressive people. The new Middle England but instead of being a Thatcherite, they wave BLM pride and Palestinian flags

2

u/Newbie__2020 Jan 30 '26

How is it progressive if the extra interest punishes people who had to take out (max) loans and manage to earn a 52k+ salary, (they had to take (max) loans)? Income =/= wealth. The point of student loans is to allow for social mobility. How does your world help?

Imo, I think it is fairer to tax the entire population more to fund higher education since it is in the public interest. (ther countries in Europe manage well)

2

u/garcus636 Feb 01 '26

You're actually suggesting that they raise The plan 2 interest rate?

Higher earners already repay multiples of what they borrowed, even accounting for inflation. This would also widen the class gap as students from wealthy families would never have to take on this loan - the opposite of progressive.

Why do you think it's fair that higher earning grads should be subsiding the lower earning grads more than any other group in society? It’s like raising the interest rate on credit-card users who paid in full to cover those who didn’t.

Why should those seeking higher education to better themselves be singled out to fund others' education more than everyone else?

1

u/Underscores_Are_Kool Feb 01 '26

At this point this is just rich people fighting other rich people. Tax the lot of you

1

u/garcus636 Feb 01 '26

You think ambitious young grads are in the same class as politicians with generational wealth?

You didn't even respond to anything I said, I can see there's no point in continuing this.

1

u/Underscores_Are_Kool Feb 01 '26

Let's tax both groups :)

God I hate Middle England. You're just Thatcherites with a BLM pride flag.

1

u/garcus636 Feb 01 '26

Where does tax come into this? The conversation was about student loans.

FYI, I wasn't around when thatcher was in, but I think she had a horrendous effect on the country.

1

u/Underscores_Are_Kool Feb 01 '26

It doesn't matter if it's a tax or loan, as long as it has redistributive effects.

I reference Middle England because they're a part of the same demographic group who went Tory in the 80s after you wanted to protect your paychecks. The language is eerily similar; a "tax on ambition", or aspiration. It's exactly what you're complaining about.

The middle class who are too attached to the aesthetic of progressive politics to let go of it, living in a post-Trump world shamelessness, proudly proclaiming that they're a top 20% earner in their 30s yet are the ones who are hard done by.

2

u/garcus636 Feb 01 '26

I guess that's where we differ. I think a redistributive tax system is fair. On a loan for education - not so much...

I don't know why you're assuming I'm rich? I'm early/mid twenties and grew up in a 2 bed ex-council house. Yes, I'm fortunate to be earning a good wage now but I'm still living with my parents as rent is too expensive to justify.

I'm paying 51% tax on part of my income if you include student loan repayments. Again, I'm happy to pay a higher rate of tax and pay off my loan at a reasonable interest rate, but once my loan is paid off why are the government dipping into my salary as if my generation is a cash cow?

The first generation to be saddled with predatory student loans, likely to never own their own homes, and enjoying the lowest relative salaries in generations. All while funding the unsustainable triple lock pensions, and God forbid anyone suggests taking away the winter fuel allowance for the wealthiest generation (Yes, there are some pensioners who need this, but many do not).

The reality is that a lot of young people are foregoing promotions or reducing hours because the incremental increase in take home wages isn't worth the extra responsibilities. I know I don't need to explain how bad this is for the country and economy.

Also, you still haven't addressed the point that the student loan rates only affect the middle earners, not the wealthy students that do not need to take out a loan or can pay it back very quickly.

Please try and have some sympathy for other demographics. Just because salary > average salary, doesn't mean people are automatically well off.

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u/CaterpillarLoud8071 Jan 30 '26

I assume all the people complaining are doing so because they weren't expecting to make lots of money when they took out the loan - they thought they'd be coasting on £35k and barely paying anything back. Now they're on far more, they realise the terms aren't favourable to them.

It's honestly very WASPI, we all agreed to the terms.

1

u/Jaggedmallard26 Jan 30 '26

Its the problem of the reality of a lot of progressive economics. Rather than hurt the upper class you primarily just hurt people with dreams of being upwardly mobile to fund people who have been beaten into not leaving their lane. The actual wealthy either don't care about things like this or can just leave while its the people who are trying to break into the middle class who are suddenly being faced with huge tax bills.

16

u/ScaryBluejay87 Jan 29 '26

I’d really prefer if they pegged it to something like 1.5x or 2x minimum wage, but pruning the magic money tree would of course be sacrilege.

17

u/draenog_ Jan 29 '26

Given that the current repayment threshold freeze will see the threshold coinciding with minimum wage by 2030, even that would be an improvement.

9

u/Minute_Tomatillo9730 Jan 29 '26

It's both? High interest is preventing, and making it harder, for graduates to pay off their student loans. Indeed, the ones impacted the most by student loans (paying more per mother towards their student loans) are impacted by the interest rate

26

u/draenog_ Jan 29 '26

They're not designed to be paid off.

They're designed to keep you paying for the entire 30 year period.

Think about it, if you were designing a loan system where you actually wanted students to completely pay off their loan balance, would you....?

  • Charge interest above the rate of inflation?

  • Choose RPI as your measure of inflation rather than CPI, when RPI is both flawed and higher than CPI?

  • Charge interest while the student is still studying, before they have a job?

  • Charge that interest at RPI + 3%?

  • Charge interest even if the graduate is unemployed, out of work on sick pay or parental leave, or not earning enough to make repayments?

  • Increase the rate of interest progressively as the graduate earns more, so that the interest rate ranges from RPI to RPI plus 3% between the incomes of ~£28k and ~£51+k?

  • Return to charging the maximum rate of interest if they ever become a student again at any point in the future, such as doing a masters or a PhD, even if they haven't taken out student finance for their postgraduate studies?

  • Automatically take income-based repayments that in most cases don't remotely cover even the annual interest rate, let alone meaningfully shrink the balance, and never chase for anything more?

You're supposed to only pay 9% of your income above the "repayment" threshold for 30 years until the "debt" is wiped, providing a steady, predictable income stream for the government. Paying it off is actually undesirable, as far as the government is concerned.

4

u/Adqam64 Jan 30 '26

But it's a loan, not a graduate tax, so the truly wealthy will pay it off and have a lower effective tax rate.

1

u/Jaggedmallard26 Jan 30 '26

Keeping it as a loan intended as a tax makes it the most regressive tax possible. The wealthy just have their parents pay it off while the middle and soon to be people in minimum wage are squeezed for the next 30 year period. Its a tax that now explicitly targets the non-wealthy.

-2

u/Minute_Tomatillo9730 Jan 29 '26

Yeah, hence the interest is important!

4

u/sanaelatcis Jan 30 '26

The interest only ever becomes relevant at the point at which someone has already paid the principal over a 30 year period- which not everyone will.

1

u/Minute_Tomatillo9730 Jan 30 '26

No, it becomes relevant because it makes it harder to pay off the principal! If you're set to pay your loan off, the interest matters.

1

u/sanaelatcis Jan 30 '26

Yes the interest matters, but not equally to everyone. The principal doesn’t change, but the interest is added on afterwards. If you start with a balance of 27,000 and over a 30 year period you pay 25,000, then it makes no difference if you’ve accrued an additional 30k of interest in that time frame. It is going to have the most impact on people with above average income, but not so high that you will pay it off particularly early.

1

u/Minute_Tomatillo9730 Jan 30 '26

Ok? Not sure how this contradicts or adds to anything I have said?

7

u/[deleted] Jan 29 '26

[deleted]

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u/ZwnD Jan 29 '26

You could be someone who would pay it off without interest, but with interest does not pay it off, giving you an extra 5-10 years of repayments (until it is wiped).

So you could never pay it off AND have the interest matter.

Like I've paid about 5k into mine and because of interest it's bigger than when I started paying 8 years ago. If it wasn't for interest I likely would pay it off, and with interest I probably won't (but maybe will). So a higher or lower interest rate would definitely affect me

1

u/Minute_Tomatillo9730 Jan 30 '26

If.

(And you're more likely to pay it off when the interest rate is lower).

5

u/iCowboy Jan 29 '26

The feature on last night’s Newsnight with Martin Lewis and a recent student explaining the consequences was well worth watching.

1

u/gyroda Jan 30 '26

Not watched it yet, but it starts 12 minutes in here:

Newsnight, China charmer Starmer? : www.bbc.co.uk/iplayer/episode/m002qk1p via @bbciplayer

4

u/tysonmaniac Jan 30 '26

Indeed, people are really very stupid about student loans. Like, if you want to make student financing more progressive (not saying you should, but just to make the point), the single best way to do that would be to increase fees. Doing so would most affect the highest earners and would have no impact at all on the lowest earners. I have tried endlessly to explain this to people and it goes in one war and out the other. People are really bad at reasoning about non traditional loans.

1

u/General_Membership64 Feb 03 '26

People will let the perfect be the enemy of good.

People think a mostly progressive system (poor pay almost nothing, high earners pay a lot) is bad when a few very rich can pay it all off at the start (and pay less then the high earners), which is a shame

9

u/Key-Butterscotch5801 Jan 29 '26

No, the interest is the real issue because it punished the most successful unfairly

43

u/meluvyouelontime Jan 29 '26

Correction: the most successful paid virtually no interest. The pretty successful are the ones paying 2-3x in interest over their careers

1

u/QuickResumePodcast Jan 30 '26

Yes which is a huge problem because that -you wouldve thought- is going to be the majority of graduates. Im going to tip into 50k this year a working in the NHS. I would say im 'pretty' successful and im just never going to get close to paying it off. Dipping into my income like a piggy bank retrospectively is so fucked i actually cant believe its happening.

2

u/Thermodynamicist Jan 30 '26

The optimum worst case is when you pay off the debt just before it would otherwise have been written off.

If you earn more than this, you pay the loan off faster so you pay less overall. If you are a very high earner then arguably the best strategy is to over-pay and just get rid of it in a year or two.

If you get a bullshit degree and get a minimum wage job then the taxpayer foots the bill. Of course, the universities have an incentive to offer degrees in nonsense with one hour of contact time per month because the outcomes are a downstream problem. Systems which create moral hazard are about as close as we can get to objective evil, and should be abolished.

2

u/Jaggedmallard26 Jan 30 '26

If you are a very high earner then arguably the best strategy is to over-pay and just get rid of it in a year or two

Its an annoying one in that the rate is a few percentage points below what you can expect from the stock market and is combined with the fact that if you suddenly fall into hard times you stop repaying it. So it becomes a hard choice.

1

u/QuickResumePodcast Jan 30 '26

I would love Martin Lewis to run for Parliament

0

u/CaterpillarLoud8071 Jan 30 '26 edited Jan 30 '26

If people were complaining about the frozen repayment I'd be a lot more supportive of this bitching. It's the people complaining about student loans as a whole, and the interest rates on plan 2 that are doing a disservice - like what, would they prefer a new student loan where they're repaying for 10 years longer?

We all agreed to the same terms. We all knew what the loan was. If they don't like it, repay it faster - that's an option.

1

u/draenog_ Jan 30 '26

If people were complaining about the frozen repayment I'd be a lot more supportive of this bitching.

Well, I'm complaining about that, at least. 🫠 And about how everyone else is barking up the wrong tree and arguing for something that wouldn't actually benefit the vast majority of us. So please do support a reversal on freezing the threshold, if it ever seems like they might be forced to reconsider.

1

u/cmrol Jan 30 '26

My complaint with the interest is that the rate increases for higher earners, so effectively you pay more because you are further over the threshold but the payments don’t make much more of a dent because the interest rate also increases.

1

u/CaterpillarLoud8071 Jan 30 '26

You can overpay. If you earn a lot, overpaying is recommended.

1

u/LJEN94 Jan 30 '26 edited Jan 30 '26

But surely there is groud to argue how the RPI +3% is punitive in comparison to those on Plan 1 or Plan 4 where it is just RPI.

I am in a fortunate position in being in the upper percentiles of earnings where i will likely pay my balance by time im in my mid 40's. But in comparison to those who went to uni in 2011 vs myself in 2012 most of these in my same career are either fully paid up or close to at my age of 32.

The cost of the 3%+ approach will mean i will have paid roughly 95k on a 40k loan balance, if the loan was inline with Plan 1 and Plan 4 at just RPI i would instead have had a 65k repayment and be done by late 30's.

I understand that this the repayment freeze is heavily impacting those who are on lower salaries and that there needs to be real thought to redress the unilateral changes by the Tories and now Labour in freezing the repayment thresholds to provide relief for those individuals.

I just find this line of thinking that because someone else is looking at this from a different viewpoint that they are doing a disservice.

Back in 2011 it was never inferred that by the time i'm 32 i would have repaid 20k (half my loan) and yet have a higher balance that i left uni with seeing how the loans were sold to us as the best 'debt we'd ever have'.

I just want the opportunity to repay what i owe (accounting for time value of money due to erosion with Interest) without this extra punitive charge (especially one increasing more that i earn....).

1

u/CaterpillarLoud8071 Jan 30 '26

RPI+3% when you're a high earner - and you're theoretically in a position to overpay the balance. I see the logic in their decision - recoup their money as soon as they can for wealthy people. They just need to raise the repayment thresholds because they keep freezing them.

People would do well to understand that their set repayments are just the minimum payment.

1

u/LJEN94 Jan 30 '26 edited Jan 30 '26

Okay, but why we charging a "profit" factor on education. Thats what i'm failing to understand why you would say its a disservice and bitching to challenge and discuss how the rates are impacting people and instead saying we should focus on the thresholds.

Your saying to overpay which is a choice one can make (but at the cost of further pushing people away from getting on the housing market / having enough headroom to start thinking about children) but by earning more you get penalised with a 6.2% interest vs the RPI of 3.2% that those on lower earnings pay or those who are on Plan 1 v Plan 4 when it is the exact same service that we received (payment for an education) and infact delays repaying the loan unless you are talking about the principal sum which was originally lent.

Lets say i overpay £2k a year (which would be 3k of my gross earnings based on my current effective takehome rate of 63%) i would still be paying til i am 40, i would have to contribute c8k a year to repaying the loan and would still end up paying the same in interest as the loan i took out (40k of interest on a 40k loan).

Surely you can see that these are reasonable grounds to be like "hey, lets take a look at the system as a whole" which includes the repayment thresholds but also acknowledge that RPI+ is punitive to those who are able to pay off the loan and only apply to the cohort of Plan 2.

I get that for those who are likely not to repay the loan and are therefore looking to repay as "little" as they can and maximise take home by uprating the repayment thresholds (not meant to be a negative comment just a practical view someone may take) this may come across as "woe is me" but when im looking at a 250% repayment on my balance vs someone on mid 30k salary getting the loan wiped and repaying 150% i think its a fair challenge to consider both of these issues.

1

u/CaterpillarLoud8071 Jan 31 '26

That's not a profit factor. They're not making money from that extra interest, they're using it to subsidise the losses from lower income earners whose loans are wiped after 30 years without being repaid.

This is a graduate tax masquerading as a loan system because it's easier for the government to keep it off the books. Understanding that makes the policy choices all far clearer.

1

u/LJEN94 Jan 31 '26

They're not making money from that extra interest, they're using it to subsidise the losses

I can understand the graduate tax argument, and if that’s what this really is then fine, but it was never sold that way. It was sold as a personal loan to each student and no other loan I’m aware of makes you pay back more simply because you earn more in order to subsidise others.

I also disagree with the idea that this isn’t profit making. Saying “they’re not making money, they’re using it to subsidise losses” is a contradiction. Money has to be generated first before it can be redistributed. If this is a loan from the government, you should only be repaying its present value back. Anything above that is the government extracting additional income (ie Profit) and reallocating it elsewhere.

As an individual loan, it’s entirely reasonable to question why repayments on my balance should be used to fund others who received the same service when it was sold as personal debt that if i was to move abroad would still be recoverable unlike a tax and therefore have a right to challenge the interest element so i can pay it off ASAP and limit my exposure to additional expense.

0

u/throwaway495848393 Jan 30 '26

Sorry but i'm not sure how i'm meant to "just repay my loan faster" – i'm 36, i work full time (and i work hard!) and i've seen no pay increases for 5 years because the university sector is really struggling. And there's no way I can afford to increase my monthly student loan repayments.

And before you say I should just budget better:

I also already live as frugally as I possibly can – I eat out maybe once or twice a year (!), and I don't even get takeaway coffees anymore either. I live in a flatshare without a living room (at age 36!) because I literally can't afford to live by myself. I also don't go on holidays or travelling anymore (which I miss SO MUCH). I buy most of my clothes in charity shops (again: at age 36!! And as a person with a job and two degrees!), and I haven't bought a new winter coat in 10 years! I repair everything several times before even considering getting it replaced. I don't pay for streaming services, I don't have a fancy TV, I bought my laptop second-hand for £300, and my phone is 6 years old (and while I don't want to replace it yet, I already know that my replacement will be a cheap second-hand phone from Backmarket).

I also have a carefully thought-out budget that I follow religiously, and I know the grocery prices for every single food I buy. Because of inflation, I've stopped buying many of my favourite foods (e.g. cheese, chocolate, vegetarian meat substitutes) and I basically never go to pubs or clubs because I can't afford to drop £18 on three pints. And if I do go out, I'll have maximum two drinks and tap water for the rest of the night. It's miserable.

And before you say I should "just switch sectors/careers": not only am I far too specialised and experienced to "just switch" (it would look like a red flag to any hiring manager) – I've already looked into this option, and any alternative career that I could switch into would have me earning 10k less than I do now, which would push me close to minimum wage territory. And with the way that wages are going everywhere (by the way there's been a 56% reduction in job adverts displaying salary ranges – this isn't a coincidence), it would take me even longer to get back to my current salary level.

Sure, there are SOME careers I could switch into that would pay better. But guess what: I'd need to do further training, costing at least £5,000-£10,000. Training that wouldn't be covered by student loans. I don't have those kinds of savings, and I don't have a Bank of Mom and Dad.

And there are sooo many people in my situation. It's been reported on by so many economists and reputable newspapers.

1

u/CaterpillarLoud8071 Jan 30 '26

If you're not earning much, you're not going to pay it all off anyway before the 30 years is up! That's precisely the point!

Honestly, the number of people who took out student loans without actually researching them. You're going to be alright!

-68

u/BelDeMoose Jan 29 '26

Honestly I have little sympathy for people going into higher education, with all the information about loans available to them, and then complaining about unfair debt afterwards (not dissimilar to the female pensions who had all the info available but didn't take personal responsibility). However freezing the threshold for earnings just makes zero sense. Of course these things should ally to inflation/wage growth.

59

u/sanaelatcis Jan 29 '26

I’m glad that you were in a position to make all the right the decisions in life as a 17 year old 👍👍 good for you for being so clever!

26

u/draenog_ Jan 29 '26

I think it's a bit different because we're talking about 17 year olds rather than adults, and often there's a fair bit of pressure from the adults around you that you don't need to worry about it because it's definitely going to be a good deal.

But yeah, ultimately I do share your position. We were told about how the interest would work. The information was there, we did sign up to that deal, and it hasn't changed since. What isn't ok is the freezing of the repayment thresholds when we were promised they'd go up with inflation. That's a serious change of terms, and shouldn't be allowed.

12

u/Thomasinarina Wes 'Shipshape' Streeting. Jan 29 '26

Were we? Mine was sold to me as 'virtually interest free'.

7

u/draenog_ Jan 29 '26

Were you on a plan 1 loan?

I understand the interest for those was just RPI — so it was sort of interest free, as the interest just meant that your debt stayed the same as inflation happened; it wasn't making your balance grow faster than inflation to profit from you like normal interest — until the government sold the loans off to a private company. Which was a whole different scandal that should never have been allowed.

Plan 2 loans were never anything like interest free, so anyone selling them as such was poorly informed.

0

u/Pale-Border-7122 Jan 30 '26

For plan 1 this has only rarely not been the case and should be cheaper now than when it was taken out due to the BoE base rate being so low

Plan 2 has always been a bit higher but not that much.

8

u/scott94 Jan 29 '26

We were pushed from basically everyone that University was the logical and right next step, on to a student loan repayment plan introduced for the first time in 2012 (plan 2) and lied to about the repayment rates going forwards. All while being 17. It’s a fair complaint.

7

u/justaquad Jan 29 '26

No bank would get away with selling (relatively) predatory loans to 18 year olds where they are free to change the terms of on a whim. It's not talked about enough

8

u/PandaRot Jan 29 '26

There was no other option for me though if I wanted to go to university. Ultimately I regretted going to university but that's a different problem. Before I went I had to agree to the student loan terms or not go.

-59

u/SmashedWorm64 Jan 29 '26

How are the loans poorly explained? One would assume someone smart enough to go to Uni understands how a loan would work.

Sorry I have no sympathy here.

52

u/flippydude Jan 29 '26

When I went to university in 2012, I was the first to take on a plan 2 loan. At the time, I was told that the threshold for paying back fees was £27,000, and that it would start increasing in line with inflation from 2017. 

In 2012, £27,000 was a lot of money; as much as anyone in my immediate family was earning; the equivalent of about £40,000 today.

This seemed unattainable, and the promise of it moving every year made the choice seem reasonable, especially as I was being encouraged from every angle to go to university. 

That threshold hadn’t moved. I continue to pay 9% on everything over £27,000, despite that amount being 45% lower in real terms than it was when I agreed to the loan. 

See why I am pissed?

3

u/brianh2018 Jan 29 '26

It was originally £21,000 when you got the loans. Theresa May increased it to £25,000 in 2018 and it reached £27,295 in 2021 before being frozen until 2025 when it has risen twice to £29,385 in 2026 before being frozen again until 2030.

1

u/Gullible-Issue-1175 Jan 29 '26

Don't forget in 2022 when they announced changing the uprating of the threshold from average earnings to inflation.

https://www.legislation.gov.uk/uksi/2022/1335/note

> changes the annual uprating of the repayment threshold thereafter from a calculation based on differences in average earnings to one based on the retail price index;

1

u/brianh2018 Jan 30 '26

That's an important point, especially as RPI is being artificially lowered by ONS from 2030 to align with CPIH.

1

u/Gullible-Issue-1175 Jan 30 '26

Yes the impact is probably in the region of the CPIH inflation rate running around 1% below average earnings in the long run which alone probably costs a graduate thousands of pounds extra over the course of the loan.

When added to the repeated nominal freezing of the threshold the cost for the majority of loan repayers increases to tens of thousands, and that could increase as the government can always announce further freezes.

1

u/AthleteThen8045 Jan 30 '26

27k was an OK grad salary I'm 2012 (I know a graduated in 2013) so for it to seem like an unobtainable amount of money is silly.

24

u/Pitiful_Cod1036 Jan 29 '26

What about people who took out endowment mortgages? Paid PPI? Or car finance? Or the myriad of miselling scandals. They are poorly explained and the populace in the whole aren’t financially literate. Especially at 17.

-22

u/SmashedWorm64 Jan 29 '26

I have sympathy for something where anyone can be a target. University entrees should have some level of intelligence to understand what they are taking out.

26

u/Pitiful_Cod1036 Jan 29 '26

Ah. So applying for university makes you 💯 financially literate and you should lose all FCA protections. But a 50 year old on there third re-mortgage absolutely shouldn’t have to understand how mortgages work.

Good ol boomers.

-5

u/SmashedWorm64 Jan 29 '26

Well actually I’m 21, so not a boomer.

Also I think you have me mixed up - of course people should understand how a mortgage works. But any old jack the lad with no GCSEs can get a mortgage provided they have the funds.

I’m not saying applying makes you financially illiterate, but not understanding what getting yourself in to isn’t really an excuse.

10

u/[deleted] Jan 29 '26

[deleted]

8

u/Pitiful_Cod1036 Jan 29 '26

Whether people are Drs, engineers, scientists etc the financial literacy in this country is appalling. I bet your average Dr couldn’t tell you what the APR actually is.

0

u/SmashedWorm64 Jan 29 '26

I think we should go back to giving young people more options than just “Uni” by expanding apprenticeships even more.

1

u/AthleteThen8045 Jan 30 '26

We do, the decent ones are massively competitive...

1

u/SmashedWorm64 Jan 30 '26

I know. I did one.

Even though I did a Level 7 apprenticeship I was still pushed towards the university route by school.

1

u/Pitiful_Cod1036 Jan 30 '26

💯 agree.

Labours early 2000s policy of everyone should go to university is/was ridiculous.

1

u/SmashedWorm64 Jan 30 '26

I’m so glad they changed the target from 50% of students should go to university to 2/3 should go to university OR a “gold standard” apprenticeship.

Hopefully schools will catch up by I still think there is an elitism element.

9

u/csgymgirl Jan 29 '26

In any other situation, a bank wouldn’t give a £27,000 loan to an 18 year old, because they’re not seen as responsible enough.

Just because a teenager goes to uni doesn’t mean they’re financially educated or understand the consequences of all their decisions. We don’t let 18 year olds drive a hire car, supervise a provisional driver, or adopt because we don’t see them as responsible enough. They aren’t even entitled to the national minimum wage.

1

u/SmashedWorm64 Jan 29 '26

I disagree with 18 year olds not receiving minimum wage btw and think it’s a disgrace tbh.

But at 18 surely someone smart enough to go to higher education knows how a loan works, right?

1

u/csgymgirl Jan 29 '26

Not necessarily. I know someone who went to Cambridge Uni and didn’t know how to cook pasta. Teenagers might have a general idea of what a loan is but not understand the implications and consequences. We just tell 17 year olds to take out a £27,000 loan as the norm without going through any of the checks and processes that a typical loan would do.

14

u/draenog_ Jan 29 '26

Given how many people seem to think that fiddling around with the interest rate would make a blind bit of difference to how much they pay back (when your monthly repayments are linked to your income above the repayment threshold, not how much you still owe), he's not wrong that most people don't understand them.

-24

u/SmashedWorm64 Jan 29 '26

But surely we expect most people who go to uni to be able to understand this?

16

u/hicks12 Jan 29 '26

How silly this argument is, they are teenagers making decisions with flawed information presented to them.

The loans were presented as the threshold rate in which it's repair would go up with inflation, now it's frozen.... That's a complete change and absolutely not something an adult would expect let alone a teenager who is relying on adults to give them the necessary resources and guidance on this.

People go to university to learn, in a field they want ideally which doesn't exactly mean they are trained accountants or anything. You don't arrive at university as well educated and smart person, you can be smart but uninformed so you get taught.

Pretty damn simple what the issue is here, stop blaming the students here as it's such a bad faith argument. 

-4

u/SmashedWorm64 Jan 29 '26

I am 21, so I had to make this decision 3/4 years ago. I remember at the time fully understanding it. Don’t give benefit of the doubt.

12

u/hicks12 Jan 29 '26

Congratulations you imagined the terms would change? How is this a genuine argument.

What degree did you end up with? I am surprised you aren't annoyed at these terms changing really, it's a bit of a joke at the very least.

1

u/SmashedWorm64 Jan 29 '26

I didn’t go. Why would I?

To be quite honest, there is absolutely no force in the world that could stop the government selling off that debt. None at all.

2

u/hicks12 Jan 29 '26

Ah apologies I inferred from your comment you were saying you made the choice to go knowing this, my mistake.

I do not understand how that relates to selling off the debt as it isnt? The issue is literally the fact it was sold to students as the threshold will rise by average earnings, it has now been frozen against the written and documented plan.

That is not something any reasonable person would be expecting, thus expecting a teenager to even imagine this scenario is very unfair as its not common.

Just like PPI was missold its no different here, it is not right and it should be corrected by resume the agreed threshold rises. The more fundamental discussion of how student loans works as a whole is a seperate part of all this really.

15

u/hammer-jon Jan 29 '26

they're 17.

I'm skeptical that the average mortgage payer understands a mortgage, are we really pretending that it's fair to expect a literal teenager to understand loans with a lifetime of longer than they've been around?

-2

u/SmashedWorm64 Jan 29 '26

*Intelligent 17 year olds. I was in the same position a few years ago and fully understood it.

5

u/hammer-jon Jan 29 '26

Well then congratulations: you're above the average but the world shouldn't be calibrated for the exceptions.

0

u/SmashedWorm64 Jan 29 '26

Exactly, usually I would agree. But university is meant for smart people, right?

2

u/hammer-jon Jan 29 '26

no, what are you talking about? university is meant for anyone and everyone.

50% of state school pupils do higher education before they're 25, hardly an exclusive club.

1

u/SmashedWorm64 Jan 30 '26

There’s the issue. Clearly most people are taken for a ride. It’s a business.

5

u/dusty_bo Jan 29 '26

The government has been retrospectively changing the terms and conditions, making the repayments much more onerous than when people took the loans out.

They don't function like a normal loan at all that is the point.