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0 pointsjdietrich9y ago0 comments

The British student loan system is essentially a graduate tax in disguise. You only repay 9% of your income over £21,000, deducted automatically from your wages in the same way as income tax. The loan is cancelled after 30 years, regardless of how much you have repaid. Young people understand that it's not a "debt" in the conventional sense of the word.

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8 comments · 3 top-level

Marazan9y ago· 3 in thread

Except it counts against you for mortgage applications so in one very important way it is exactly like a debt.

jdietrichOP9y ago

That's not entirely true. Your student loan repayments are deducted from your net income when calculating affordability, for very obvious reasons. The amount of debt isn't a factor and student loans aren't recorded with credit reference agencies. Student loans don't significantly affect the affordability of housing. If you're on a salary of £30,000, your student loan repayments will reduce your net income by less than 4%.

http://www.moneysavingexpert.com/students/student-loans-tuit...

sveiss9y ago

It only counts against you for mortgage applications because it reduces your net income, just like any tax does. A rise in general Income Tax rates would have a similar impact.

It doesn't show up on your credit report, you can't miss a payment and damage your future creditworthiness, and lenders don't include the value of the loan when calculating your total indebtedness.

It's much closer to a graduate tax than a personal loan for mortgage purposes.

Broken_Hippo9y ago

But this is fairly practical and honest: I'd want to know if the person had student loans taken out of their paycheck before giving a mortgage. It might make a difference on how much I loan the person: They obviously don't have the disposable income as another person making the same wages yet not having a loan taken out.

pjc509y ago· 2 in thread

And yet if they'd proposed putting a 9% rate of income tax above £21000 there would have been riots in the Tory party. It's a tax on people born after 1980 who want to have professional jobs, not all graduates. Ironically, this hugely favours immigrants from EU countries with free or cheap education systems.

And I do think some people are put off by the debt-ness of it, but that's very tricky to measure.

ginko9y ago

>Ironically, this hugely favours immigrants from EU countries with free or cheap education systems.

You do know that there's (currently) literally nothing stopping you from getting your degree in those EU countries, right?

pjc509y ago

Well, I already have one - I was in the last generation to get an actual student grant and no tuition fees - but I suspect the main obstacle people will face is language skills and the difficulty of a course not taught in one's first language.

Then there's the plausible scenario of having to apply for a visa in a hurry if the Brexit balloon goes up.

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YeGoblynQueenne9y ago

Two points about this.

One, why tax graduates? In other EU countries, free is free as in beer and you never need to pay anyone anything, for higher education.

Two, why double-tax the future workforce? I mean, they'll pay taxes once they start working anyway. And obviously, those who do go into higher education will end up making more money, and therefore pay more taxes. The state will get back its penny'orth alright, so what's the point of adding a cherry on top?

Full disclosure- I'm from Greece originally but graduated from a UK university, and am repaying a tuition free loan, to which I was entitled as an EU citizen; so personally I benefit from the system (because I'd probably not be eligible for free education anyway). It still doesn't make sense to me.

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