Student loan isn’t like another loan, what you have to remember is there’s two separate factors there’s this paper, account of how much you owed.
That’s the $50,000 and totally separately there’s how much you need to repay right and this is the one to worry about everybody focuses on the amount borrowed but for most people what counts is how much of your loan you actually have to repay.
It’s not gonna be difficult you repay 9% of everything you earn above thousand dollars if you earn $22,000 which is $1,000 above $21,000.
How much do you pay if you earn $31,000 which is $10,000 above, how much to repay? So simply what you repay increases as your earnings increase now let’s throw in changing what you’ve borrowed in the first place if your student loan is $20,000 and you earn $31,000 how much do you repair in a year?
If your student loans, $50,000 and you earn $31,000 how much to repay in a year now to prove a point let’s get silly if they put you wish and fees up to a $1,000,000 a year and you owe $3,000,000 and you earn $31,000 how much to repay so again?
You starting to see where I’m going with this unless really ramped it up I’m gonna throw in hideous interest as well if they put the interest rate up to a 100% and tuition fees the $3,000,000 a year and you earn $31,000 how much do you repay the same again?
What you borrowed to go to university and the interest that is added on top for most of you is completely irrelevant because what counts is that 9% of everything you earn above $21,000 – So I get you pay 9% but how long do you have to pay for that?
Well you pay it for years unless you clear what you borrowed plus the interest sooner or if you die because it doesn’t pass on to your estate okay but I’m still confused okay because you’re saying the debt and the interest have no impact.
I’m saying they don’t impact what you pay a year right they do impact the overall cost and the really big effect of debt and interest how much you borrow is whether or not you’re clear what you borrowed within the years before it wipes
Of course with the repayment threshold going up from twenty-one thousand to twenty five thousand people will repay three hundred and sixty pounds a year less than they are doing right now which means fewer people will clear it within the thirty years it’s actually estimated eighty three percent of university leavers will keep paying for the whole thirty years.
Why I say forget concentrating on the debt this works more like an additional tax you pay it through the payroll it doesn’t go on your credit file this is the reality of student finance though this is based on the current year’s tax thresholds you can earn up to 11 and a $500 a year and you don’t pay any tax, same for those who haven’t gone to uni as those who have under the current system.
You start paying basic rate tax to eleven and a half grand total for both now here at the twenty-one thousand pound threshold currently.
Additional 9% tax conceptually is the way to think of the cost of going to uni I’m not saying it’s cheap but I’m saying working out I’ve borrowed. It doesn’t really work like that in practice for most people but is this basically a graduate tax well that’s a politically loaded question I would call it a graduate contribution system because it isn’t technically the same as a graduate tax.
I know some people won’t like what I’m saying because they’re saying I’m softening the system and not this isn’t a call about good or bad this is about how you think about the practical impact on your pocket it isn’t cheap but it’s much more like a tax than a loan no matter we’re being asked by lots of people about this interest.
Should students all their parents be paid off if they’ve got the money. Life is about
swings and roundabouts and he’s done it now so get on with your life and stop worrying that’s true okay the biggest thing you can do to help your son right now is saving a deposit to get a house that’s far more difficult than paying the student loan which should just pay for the taxes.