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    • MSE Callum
    • By MSE Callum 7th Mar 18, 5:29 PM
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    MSE Callum
    MSE News: Student loan repayment rules to change..
    • #1
    • 7th Mar 18, 5:29 PM
    MSE News: Student loan repayment rules to change.. 7th Mar 18 at 5:29 PM
    A new regulation which will see the student loan repayment threshold raised to £25,000/yr and then increase annually in line with changes to average earnings will come into force next month...
    Read the full story:
    'Student loan repayment rules to change next month - what you need to know'

    Click reply below to discuss. If you haven’t already, join the forum to reply.
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Page 1
    • rtho782
    • By rtho782 7th Mar 18, 6:39 PM
    • 1,098 Posts
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    rtho782
    • #2
    • 7th Mar 18, 6:39 PM
    • #2
    • 7th Mar 18, 6:39 PM
    Aaand them finally fixing this goes to show that the best... or at least, least worst, tory government is one on a knife edge desperate to cling to power.
    Deposit Saved since 01/12/15: £13,000 / £15,000 House Bought!

    Debt Cleared since 01/12/15: £6,000 / £7,500
    • HornetSaver
    • By HornetSaver 7th Mar 18, 10:14 PM
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    HornetSaver
    • #3
    • 7th Mar 18, 10:14 PM
    • #3
    • 7th Mar 18, 10:14 PM
    So from April we'll be in a situation where your earnings start to be taken into account just above the minimum wage threshold if you're Plan 1, and where you basically need to be earning an average salary to pay back a penny if you're Plan 2.

    And now that the movement, of which MSE is a huge part, have achieved what they've achieved with Plan 2, with maximum of tub-thumping in the process, it seems more unlikely than ever that the mess of Plan 1 will ever be fixed.
    I'm standing by my pre-referendum prediction: "Brexit will lead to a recession"

    forums.moneysavingexpert.com/showthread.php?p=70662330
    • Ed-1
    • By Ed-1 7th Mar 18, 10:23 PM
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    Ed-1
    • #4
    • 7th Mar 18, 10:23 PM
    • #4
    • 7th Mar 18, 10:23 PM
    So from April we'll be in a situation where your earnings start to be taken into account just above the minimum wage threshold if you're Plan 1, and where you basically need to be earning an average salary to pay back a penny if you're Plan 2.

    And now that the movement, of which MSE is a huge part, have achieved what they've achieved with Plan 2, with maximum of tub-thumping in the process, it seems more unlikely than ever that the mess of Plan 1 will ever be fixed.
    Originally posted by HornetSaver
    Indeed. It's all political. The Tories can say Plan 1 has nothing to do with them as it was "Labour's scheme" (despite the recommendation in 2010 that they were presented with reading "as the threshold has not been increased since 2005, there will be a one-off increase from £15,000 to £21,000").

    It would have all been very different had Labour been in power from 2010 as there wouldn't have been political leverage over the threshold. Labour would simply have raised the £15,000 threshold to £21,000 for everyone (as they did in 2005 when they raised the threshold from £10,000 to £15,000 for everyone).
    • HornetSaver
    • By HornetSaver 7th Mar 18, 10:57 PM
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    HornetSaver
    • #5
    • 7th Mar 18, 10:57 PM
    • #5
    • 7th Mar 18, 10:57 PM
    Indeed. It's all political. The Tories can say Plan 1 has nothing to do with them as it was "Labour's scheme" (despite the recommendation in 2010 that they were presented with reading "as the threshold has not been increased since 2005, there will be a one-off increase from £15,000 to £21,000").
    Originally posted by Ed-1
    The demise of the Lib Dems being exacerbated by tuition fees, combined with UKIP's demise due to the thing they existed for happening, means that this is more true than it's ever been. In 2010 and 2015 there was a degree of incentive for the big two parties to sort each other's messes out, because the more they bickered among themselves without doing anything, the greater the chance of a third party's support swelling. Now there is relatively little chance of that happening, the frequency of this behavior has gone through the roof.

    From the Government's point of view it's a matter of balancing costs and political priorities, of which Plan 1 scores poorly on both measures. I'm perhaps more surprised that MSE are being so dogged on Plan 2 and doing so little about Plan 1.

    Plan 1 was and remains the best deal out of all systems for people who have done well out of a degree. It is an aggressive rate of tax on those for whom university was a big mistake due to the credit crash and to the benefits of a degree being miss-sold.

    Plan 2 was and has become even more of a good deal for those who would have been smarter not to have not gone to university in the first place (my differing tone here is that in 2012 it was more obvious that a degree was not the automatic choice, given the huge rise in people going to university under Plan 1 and the indifferent outcomes for those who had, combined with the credit crunch and the coalition's emphasis on the value and availability of non-degree routes). These changes mean that those who have made the greatest financial use of their degree by being in a position of paying the entire lot off, will end up paying more for it due to the high interest rate.
    I'm standing by my pre-referendum prediction: "Brexit will lead to a recession"

    forums.moneysavingexpert.com/showthread.php?p=70662330
    • silvercar
    • By silvercar 8th Mar 18, 9:09 AM
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    silvercar
    • #6
    • 8th Mar 18, 9:09 AM
    • #6
    • 8th Mar 18, 9:09 AM
    Plan 2 repayments are for those who were in general paying £9,000 a year in tuition fees, that is the point where many from poorer backgrounds were being put off going to university. That is where the MSE work on highlighting that the loans should be considered good debt etc was aimed.

    Plan 1 repayments cover those with a much lower total loan and therefore they are more likely to repay all the loan. There is a logic that with the high interest rates, these loans are better being paid off as early as possible, precisely because more people will end up repaying them in full.
    • Ed-1
    • By Ed-1 8th Mar 18, 9:45 AM
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    Ed-1
    • #7
    • 8th Mar 18, 9:45 AM
    • #7
    • 8th Mar 18, 9:45 AM
    Plan 2 repayments are for those who were in general paying £9,000 a year in tuition fees, that is the point where many from poorer backgrounds were being put off going to university. That is where the MSE work on highlighting that the loans should be considered good debt etc was aimed.

    Plan 1 repayments cover those with a much lower total loan and therefore they are more likely to repay all the loan. There is a logic that with the high interest rates, these loans are better being paid off as early as possible, precisely because more people will end up repaying them in full.
    Originally posted by silvercar
    Plan 1 loans don't have high interest rates.

    There is a problem with how the plan 1 threshold applies even if you have a high debt level. For instance if you studied on more than one course. One under £3k fees and one under £9k fees.

    Plan 2 only: high debt, low repayments
    Plan 1 only: lowish debt, high repayments
    Plan 1 and 2: high debt, high repayments
    • HornetSaver
    • By HornetSaver 8th Mar 18, 2:03 PM
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    HornetSaver
    • #8
    • 8th Mar 18, 2:03 PM
    • #8
    • 8th Mar 18, 2:03 PM
    Plan 1 repayments cover those with a much lower total loan and therefore they are more likely to repay all the loan. There is a logic that with the high interest rates, these loans are better being paid off as early as possible, precisely because more people will end up repaying them in full.
    Originally posted by silvercar
    First sentence correct, second sentence completely backwards.

    On Plan 1, the interest rate is real terms because there is an expectation that most people will pay it off, and therefore it is not supposed to function as a form of progressive taxation.

    On Plan 2, the interest rate is high because there is an expectation that most people will not pay it off, therefore it is supposed to function as a form of progressive taxation against those whose earnings are high enough that they might actually pay it off.

    For me a more logical resolution of this imbalance is that both plans should have the same starting threshold for repayment (because if you're below £25k per year you're not currently on course to do more than tickle the interest anyway), but Plan 1 should repay a higher % of earnings above that threshold.
    I'm standing by my pre-referendum prediction: "Brexit will lead to a recession"

    forums.moneysavingexpert.com/showthread.php?p=70662330
    • silvercar
    • By silvercar 8th Mar 18, 5:54 PM
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    silvercar
    • #9
    • 8th Mar 18, 5:54 PM
    • #9
    • 8th Mar 18, 5:54 PM
    Plan 2 only: high debt, low repayments
    Plan 1 only: lowish debt, high repayments
    Plan 1 and 2: high debt, high repayments
    Plan 1 only: lowish debt, high repayments short term, followed by no repayments long term as debt is cleared.
    • Ed-1
    • By Ed-1 8th Mar 18, 6:27 PM
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    Ed-1
    Plan 1 only: lowish debt, high repayments short term, followed by no repayments long term as debt is cleared.
    Originally posted by silvercar
    That's in the simplistic (albeit fairly common) case of a 3 year degree. It was perfectly possible to rack up £50k debt on plan 1 for e.g. a 5 year medicine degree and a PGCE etc. Those who have part of their plan 1 debt taken before 2006 and then borrowed under the £3k top-up fees or the plan 2 fees have their repayments extended to age 65 while all the time paying above the lower threshold (despite having high debt).

    The system needs to be flexible enough to accommodate multiple courses of study without creating unfairness (which it isn't which has a lot to do with the decline of part-time lifelong learning).
    Last edited by Ed-1; 08-03-2018 at 6:29 PM.
    • silvercar
    • By silvercar 8th Mar 18, 10:13 PM
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    silvercar
    That's in the simplistic (albeit fairly common) case of a 3 year degree. It was perfectly possible to rack up £50k debt on plan 1 for e.g. a 5 year medicine degree and a PGCE etc. Those who have part of their plan 1 debt taken before 2006 and then borrowed under the £3k top-up fees or the plan 2 fees have their repayments extended to age 65 while all the time paying above the lower threshold (despite having high debt).

    The system needs to be flexible enough to accommodate multiple courses of study without creating unfairness (which it isn't which has a lot to do with the decline of part-time lifelong learning).
    Originally posted by Ed-1
    I accept I am being simplistic in assuming that most people just did a 3 year degree. But that is the most common option. With tuition fees held at a max of £3k, most loans would be ~ £20k.

    Your example is extreme, I can't see any logic in doing a PGCE to be a qualified teacher after 5 years at Med School.
    • Ed-1
    • By Ed-1 8th Mar 18, 10:50 PM
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    Ed-1
    I accept I am being simplistic in assuming that most people just did a 3 year degree. But that is the most common option. With tuition fees held at a max of £3k, most loans would be ~ £20k.

    Your example is extreme, I can't see any logic in doing a PGCE to be a qualified teacher after 5 years at Med School.
    Originally posted by silvercar
    I'm not suggesting the 2 were done together, but 5 years of study under plan 1 in total was perfectly possible. e.g. a 4 year integrated masters, PGCE; or 5 year medicine.

    2006-11 start fees ended up at £3.5k.

    But even with the most common level of plan 1 debt (say it is around £20k), the problem with the division of repayment between plan 1 and plan 2 for those on both is clear. As it prioritises neither loan, it makes it extremely onerous and practically impossible to pay off either before write off:
    plan 1 repayments are capped at £600 (9% of the difference between the thresholds) and £600 x 25 = £15,000 (at 25 years plan 1 is written off for post-2006 loans) so repayments don't cover the original borrowing let alone the interest. Meanwhile the interest continues to rack up on plan 2 which gets much less of the repayment now the threshold has substantially increased and so repayments continue on that after plan 1 gets written off.
    • silvercar
    • By silvercar 9th Mar 18, 8:44 AM
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    silvercar
    I'm not suggesting the 2 were done together, but 5 years of study under plan 1 in total was perfectly possible. e.g. a 4 year integrated masters, PGCE; or 5 year medicine.

    2006-11 start fees ended up at £3.5k.

    But even with the most common level of plan 1 debt (say it is around £20k), the problem with the division of repayment between plan 1 and plan 2 for those on both is clear. As it prioritises neither loan, it makes it extremely onerous and practically impossible to pay off either before write off:
    plan 1 repayments are capped at £600 (9% of the difference between the thresholds) and £600 x 25 = £15,000 (at 25 years plan 1 is written off for post-2006 loans) so repayments don't cover the original borrowing let alone the interest. Meanwhile the interest continues to rack up on plan 2 which gets much less of the repayment now the threshold has substantially increased and so repayments continue on that after plan 1 gets written off.
    Originally posted by Ed-1
    According to the figures 83% of people aren't going to clear their plan 2 loans. So it doesn't matter if it isn't written off just because more of the repayment goes to plan 1, as it was continuing til write-off anyway.

    The vast majority of those with Plan 1 loans, will only have plan 1 loans. They will either be paid off in full (due partly to the lower threshold) or written off after 25 years.

    If you want to compare those with just plan 1 with those with plan 2 as well as plan 1, they will both be making identical payments of 9% of everything over £18,330. So that is "fair".

    The only case for "unfairness" is when you compare those with plan 2 and plan 1 against those with just plan 2, as the latter have the higher threshold. But the first group are older (started uni 2011 or earlier) and had much lower tuition fees.
    • Ed-1
    • By Ed-1 9th Mar 18, 1:24 PM
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    Ed-1
    According to the figures 83% of people aren't going to clear their plan 2 loans. So it doesn't matter if it isn't written off just because more of the repayment goes to plan 1, as it was continuing til write-off anyway.
    Originally posted by silvercar
    But those figures assume people have taken a 3 year degree. Those who've taken a first degree on plan 1 and then a short course on plan 2 have a very different complexion.

    My plan 2 balance (from a PGCE) is £12k. My plan 1 balance is £28k.

    With the plan 2 threshold frozen at £21k I'd have paid off my plan 2 loan before my plan 1 gets written off, so I'd have 9% deductions above the plan 1 threshold for 25 years and then they'd stop.

    That's now not the case as after 25 years I'll then continue repayments on my plan 2 loan (until that gets written off 30 years after the April following that course), when otherwise I'd have had no further repayments to make.

    So as my plan 2 loan didn't enter repayment until April 2016 (despite finishing that course in 2013), my plan 2 loan doesn't get written off until 2046. Which is 8 years more repayments then if I'd been able to clear it earlier. My plan 1 loan gets written off 25 years after April 2013 (i.e. 2038).

    If you want to compare those with just plan 1 with those with plan 2 as well as plan 1, they will both be making identical payments of 9% of everything over £18,330. So that is "fair".

    The only case for "unfairness" is when you compare those with plan 2 and plan 1 against those with just plan 2, as the latter have the higher threshold. But the first group are older (started uni 2011 or earlier) and had much lower tuition fees.
    Originally posted by silvercar
    But plan 1 repayments are higher because it's assumed the won't last as long. If you add plan 2 to it, they'll continue until either plan 2 is paid off or written off (and that's another 30 years).

    Loans for different courses are written off at different times.
    Last edited by Ed-1; 09-03-2018 at 2:30 PM.
    • silvercar
    • By silvercar 9th Mar 18, 6:35 PM
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    silvercar
    Ed-1, you must be in a very small cohort..

    Those that have a plan 1 loan and then went on to have a plan 2 loan for only a short course.

    Given that masters funding didn't start until September 2016, the majority of those getting masters funding would have started 3 or 4 yr courses in Sept 2012 or 2013 and would therefore have all their loans on Plan 2.

    It will only have been those that did a pgce starting in Sept 2012 to 2015 that obtained that funding and were on plan 1 loans for initial degrees starting 2011 or earlier. Everyone else will have been on plan 2 for everything or plan 1 for everything. I suspect it is a small number of people.

    You need to do a calculation, estimating whether it is worth repaying your short course early to avoid a large amount of interest building up and 8 further years of payments.
    • Ed-1
    • By Ed-1 9th Mar 18, 6:46 PM
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    Ed-1
    Ed-1, you must be in a very small cohort..

    Those that have a plan 1 loan and then went on to have a plan 2 loan for only a short course.

    Given that masters funding didn't start until September 2016, the majority of those getting masters funding would have started 3 or 4 yr courses in Sept 2012 or 2013 and would therefore have all their loans on Plan 2.

    It will only have been those that did a pgce starting in Sept 2012 to 2015 that obtained that funding and were on plan 1 loans for initial degrees starting 2011 or earlier. Everyone else will have been on plan 2 for everything or plan 1 for everything. I suspect it is a small number of people.

    You need to do a calculation, estimating whether it is worth repaying your short course early to avoid a large amount of interest building up and 8 further years of payments.
    Originally posted by silvercar
    There are over 200,000 borrowers with a plan 1 and a plan 2 loan according to figures from the SLC:

    https://www.whatdotheyknow.com/request/borrowers_holding_both_pre_2012#incoming-883165

    PGCE funding is not classed as master's funding. Postgraduate loans are repaid under "plan 3" (6% above £21,000). PGCE loans are repaid under plan 1/2:

    http://media.slc.co.uk/sfe/1819/ft/sfe_terms_and_conditions_guide_1819_o.pdf

    But all this is besides the point: it is unfair to change terms retrospectively to the detriment of any borrower without mitigating it, regardless of how many it affects.

    And for the record I did that calculation when I took (some of) the loan for my PGCE expecting the threshold to be frozen until at least 2021, as announced in 2015:

    https://www.gov.uk/government/consultations/freezing-the-student-loan-repayment-threshold
    • Oasis1
    • By Oasis1 12th Mar 18, 4:05 PM
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    Oasis1
    Am I correct that none of these changes effect those on plan 1? I couldn't glean from the article whether thresholds for interest were changing only for plan 2.

    • Ed-1
    • By Ed-1 12th Mar 18, 4:07 PM
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    Ed-1
    Am I correct that none of these changes effect those on plan 1? I couldn't glean from the article whether thresholds for interest were changing only for plan 2.
    Originally posted by Oasis1
    There aren't any thresholds for interest on plan 1. The rate's 1.5% for everyone.

    It only affects those on plan 1 if they also hold or take out a plan 2 loan (in which case their repayments will go on for longer as it makes it rather impossible to clear the plan 2 loan which lasts for up to 30 years, while repayments continue to be larger due to the lower threshold on plan 1).
    • james.parsons
    • By james.parsons 16th Mar 18, 11:26 AM
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    james.parsons
    Please can some explain why the retrospective change does not benefit those on plan 1? There is so much talk about how detrimental the debt is to those on plan 2. Yet over the course of our lives, those on plan 1 are actually paying more and thus will suffer more.
    • Ed-1
    • By Ed-1 16th Mar 18, 12:50 PM
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    Ed-1
    Please can some explain why the retrospective change does not benefit those on plan 1? There is so much talk about how detrimental the debt is to those on plan 2. Yet over the course of our lives, those on plan 1 are actually paying more and thus will suffer more.
    Originally posted by james.parsons
    Because the Government refuse to change plan 1 loans as they see it as "Labour's scheme" and also because they're selling off these loans (and so would have to pay compensation to the loan purchasers to cover loss of repayments).
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