Your Student Loan Could Be More Than A Mortgage — Here’s What You’re Really Paying
Leaving university? Your student loan statement might give you a bit of a shock.
Have you finished a course in England or Wales? You’ll receive a student loan statement at some point, detailing what you’ve taken out, the interest you’ll need to pay on top of your borrowed amount, as well as the final figure.
Student loan statements can be incredibly confusing though. The big numbers can send you into a wave of dread, but there’s more than meets the eye.
Let’s find out what’s going, who needs to pay it back and what can be done to ensure you aren’t paying more than what you originally took out to fund your studies.
Student maintenance loans — at a glance
Unfortunately, you can’t ignore your student maintenance loan. The keyword is loan, after all.
At some point, you’ll have to make the repayments. Particularly if you meet or exceed the salary threshold of £27,295.
But that’s if you started your university course on or before September 2022.
Martin Lewis advised in late January 2023 that another change is yet to come for university students starting in September 2023, which could leave you paying almost double the loans back:
- Those starting in September 2023 are now expected to repay their student loan when they hit £25,000, and repay their loans over the course of 40 years
- Those who started their course on or before September 2022, will repay their loans on a salary of £27,295 over a maximum of 30 years.
What are the maximum maintenance loans?
Based on a video by MoneySavingExpert, at the moment, student loan statistics are as follows:
- The maximum maintenance loan is now £12,667
- The rate of inflation is currently 10% (as at September 2022)
- Due to high inflation, the rate of interest was capped at 6.3% in September 2022 until 30 November 2022 for plan 2 students.
So how much am I really going to pay?
As you can see, the interest rate is currently 6.3% for plan 2 students. And despite hikes in mortgage rates, the student loan interest rate still sits higher than the former. In fact, Unbiased reported that the average two-year fixed-rate deal is now 4.09 per cent, its highest level in eight years.
What does this mean?
Students are accumulating more debt than ever before. According to Study International, the average student loan in 2021/22 was £46,000, consisting of roughly three years of full tuition fees at £9,250 a year and three years of maintenance loans at £6,000 a year.
They uncovered that under the current system, a student earning a starting salary of £40,000 a year with annual pay rises of 2.5% would not pay off this loan. In total, the student would pay £84,000 over the course of 30 years, £54,000 of which was interest, and almost £16,000 left unpaid.
But with the average graduate salary being somewhere between £21,000-£25,000, the chances of ever repaying student loans are non-existent.
That’s ridiculous
Paying to study is a debatable topic in itself, especially when students in Scotland don’t have to pay tuition fees.
With the interest rates as they are, as well as the cost of living crisis, it’s evident that it’s becoming increasingly impossible for students to repay what they borrow in England and Wales. Better yet, why are students having to pay more than what they initially borrowed to pursue their careers?
I agree — so what can I do?
The petition “Ensure ALL students with student loans NEVER pay back more than they borrowed” is currently making the rounds. It aims to bring this topic to debate in parliament so that students never have to pay more than what they initially borrowed.
As the petition states, “The Government should not be making large sums of money out of students trying to build a better life”. Students are already in debt when they leave university, and why is this now worse with rising interest rates that students can’t pay back?
We urge you, as students or taxpayers, to sign the petition, which will massively help reduce a student’s loan debt.
