I pay more to student finance loans than my mortgage - and I'm still not covering the interest!

Brone11

I'm a millennial and in the unlucky position of having to repay student loans (a plan 2 (3yrs undergrad) & post graduate loan supporting living costs (originally £6600)). So far I've worked extremely hard and am fairly successful in my career (miles away from a 6 figure salary but "good" for someone under 30 living in the north of England). I currently pay £630 per month to student finance - which is more than my contribution to our mortgage! (a 3 bed semi fixer-upper).

I'm finding that even paying this I'm still not covering the interest payments on my Plan 2 loan and don't understand why the country / government thinks this is fair - especially since all of this student finance money could be going towards stimulating the economy rather than into a loan black hole.

Is there anyway that awareness can be raised to highlight the unfairness of hard working people being shafted by student loan repayments with eye-watering interest rates.  

     
         

HampshireH

I struggle with this a bit as I feel if you have borrowed you should pay it back.

That's from someone who has paid back their loan over many many years and was forced to clear it in full before being granted a mortgage, but it was the original 9k for 3 years plus interest. Post grad being paid separately to a student loan.

Your salary must be pretty decent to be paying back £630 a month. And if your mortgage payments are less than this you are very lucky. Repayment rates above threshold are 9% and 6.5%.

I personally feel repayments should reflect income and if you are lucky enough to be able to afford a mortgage and have it at a lower cost each month you're doing really well.

Brone11

Am I lucky or have I just worked hard? I'm from a working class background where neither of my parents went to university - so I think the latter. Like I said that's my contribution to our mortgage our household mortgage is alot higher but then again my partner also pays his student loan. 

If I was in a position to pay off my student loan in full that would be great since I'd only pay the 65k but as it stands I'll probably be paying close to 100k or more given the threshold isn't changing.
We've put off starting a family but once you add in childcare costs and the forever hike in everything - it makes me wonder where is this all heading. 

TheAble

I always felt the downsides of student loans were not really appreciated. "It gets written off after 30 years and you don't pay interest in real terms" - so that's alright then. But the size of the loans combined with a high inflation rate and here you are paying back a fortune.

It does seem strange that we're happy to pay for people's education up to A-Levels and then give them a good shafting when they go to uni.

enthusiasticsaver

The interest rate at the moment is 6.3% on a  plan 2 student loan but is due to rise due to inflation as linked to RPI so I am assuming your loan is quite high if that £630 a month is not even covering your interest? If the loan is £65k then the interest over the year should be around £4k so I am not sure where you get that it is not covering it?  Is the balance decreasing year on year? 

It is supposed to be affordable so an additional 9% on top of your tax rate so I can appreciate that you feel hard done by and I have some sympathy and think that university funding is a bit of a mess.  As others have said though I assume your salary must be fairly high to be repaying that much each month.  

Rob5342

The old fashioned grants seemed fairer to me. I got my tuition fees paid for with a grant, but having the degree means I've got a job where I pay £18,000 a year in tax.

WYSPECIAL

Brone11 said:

I'm a millennial and in the unlucky position of having to repay student loans (a plan 2 (3yrs undergrad) & post graduate loan supporting living costs (originally £6600)). So far I've worked extremely hard and am fairly successful in my career (miles away from a 6 figure salary but "good" for someone under 30 living in the north of England). I currently pay £630 per month to student finance - which is more than my contribution to our mortgage! (a 3 bed semi fixer-upper).

I'm finding that even paying this I'm still not covering the interest payments on my Plan 2 loan and don't understand why the country / government thinks this is fair - especially since all of this student finance money could be going towards stimulating the economy rather than into a loan black hole.

Is there anyway that awareness can be raised to highlight the unfairness of hard working people being shafted by student loan repayments with eye-watering interest rates.  

     
         

Would you have been as successful and got to where you are if you hadn’t hadn’t had the educational opportunities you did without having to pay anything at the time? 

A lot of people argue that student loans are really just a deferred tax liability. You choose to take them knowing you will repay nothing, some or all of it depending on your future earnings.

When Student loans first started there were loads of demonstrations about the unfairness of them but they are still with us and it doesn’t look as if they will go away any time soon.

grumiofoundation

Brone11 said:

I'm a millennial and in the unlucky position of having to repay student loans (a plan 2 (3yrs undergrad) & post graduate loan supporting living costs (originally £6600)). So far I've worked extremely hard and am fairly successful in my career (miles away from a 6 figure salary but "good" for someone under 30 living in the north of England). I currently pay £630 per month to student finance - which is more than my contribution to our mortgage! (a 3 bed semi fixer-upper).

I'm finding that even paying this I'm still not covering the interest payments on my Plan 2 loan and don't understand why the country / government thinks this is fair - especially since all of this student finance money could be going towards stimulating the economy rather than into a loan black hole.

Is there anyway that awareness can be raised to highlight the unfairness of hard working people being shafted by student loan repayments with eye-watering interest rates.  

     
         

The reason it is 'fair' is because a) you got free education b) the odds are you would not be paid as much without having got said education. Obviously one alternative would have been pay up front (yes not the only alternative) which would have presumably meant you, and thousands of others, could not have gone to university.

Are you sure you aren't paying off the principal? That would imply you owe around 135k (= (730*12)/0.065). 

You say your salary is miles away from 6 figures but if you are repaying £630 a month (6% postgrad >21000 and 9% plan 2 >27,295) then I would estimate your salary is around 75k (depending on pension situation). 

So take home well over 3.5k, after mortgage of <630 thats around 3k. I would suggest not many people would describe your overall situation as one that can be described as shafted...

EssexHebridean

Brone11 said:

Am I lucky or have I just worked hard? I'm from a working class background where neither of my parents went to university - so I think the latter. Like I said that's my contribution to our mortgage our household mortgage is alot higher but then again my partner also pays his student loan. 

If I was in a position to pay off my student loan in full that would be great since I'd only pay the 65k but as it stands I'll probably be paying close to 100k or more given the threshold isn't changing.
We've put off starting a family but once you add in childcare costs and the forever hike in everything - it makes me wonder where is this all heading. 

You are fortunate to be working in an environment which pays well, perhaps? Many people “work hard” all their lives but not in areas where near-six-figure incomes will ever be a thing. I view myself as “fortunate” to not currently be laying off a mortgage - but we too got that way through hard work, effort, and going without. We are lucky - yes, even though we made our own luck. IMO privilege - no matter how it was arrived at - should be acknowledged.

Have you checked that the deductions for your student loans are being made correctly as it’s not unheard of for mistakes to be made. 

The system is, as I understand it, designed to mean that paying back the finance is based on ability to pay back the finance. Presumably it was going to university that enabled you to now be earning the income you are? If you were earning less, you’d potentially pay back less - but I can’t really see that a system which says those who benefit more from it pay more back is “unfair” as such? 

MattMattMattUK

Brone11 said:

Am I lucky or have I just worked hard? I'm from a working class background where neither of my parents went to university - so I think the latter. 

Lucky combined with working hard, the reality is that one alone is rarely enough, be that parents encouraged you, winning enough at the genetic lottery to mean that you have the intellectual capacity to study at that level, or the luck of being healthy. I have built a successful business, that has involved a lot of hard work, but there is also luck in there as well.

Brone11 said:

Like I said that's my contribution to our mortgage our household mortgage is alot higher but then again my partner also pays his student loan. 

If I was in a position to pay off my student loan in full that would be great since I'd only pay the 65k but as it stands I'll probably be paying close to 100k or more given the threshold isn't changing.

Are you overpaying your student loan because to get to £650 pcm in repayments you need to be earning nearly £120k pa based on standard repayments (9% on earnings over £27,295 pa)? But if you are earning that level then you could afford to pay off the £65k in a few years and a mortgage of less than £650 pcm would be very low for that kind of income. 

Brone11 said:

We've put off starting a family but once you add in childcare costs and the forever hike in everything - it makes me wonder where is this all heading. 

It is not really heading anywhere. Responsible people have always had to delay having children until they are financially in the right place, inflation has always been a factor, these things need to be factored in to one's financial planning.

gingerdad

Brone11 said:

I'm a millennial and in the unlucky position of having to repay student loans (a plan 2 (3yrs undergrad) & post graduate loan supporting living costs (originally £6600)). So far I've worked extremely hard and am fairly successful in my career (miles away from a 6 figure salary but "good" for someone under 30 living in the north of England). I currently pay £630 per month to student finance - which is more than my contribution to our mortgage! (a 3 bed semi fixer-upper).

I'm finding that even paying this I'm still not covering the interest payments on my Plan 2 loan and don't understand why the country / government thinks this is fair - especially since all of this student finance money could be going towards stimulating the economy rather than into a loan black hole.

Is there anyway that awareness can be raised to highlight the unfairness of hard working people being shafted by student loan repayments with eye-watering interest rates.  

     
         

Unless you're a very high earner, ignore the balance and ignore the interest rates. it's irrelevant - all you pay is 9% over £27k for 30 years - just bin the statements 

And don't overpay it unless you're a very high earner otherwise you're just giving the government free money -