UK Student Loans

The right wing press and political parties contrive hyperbolic levels of alarm over accrued interest on

Student loan debt - often, as Reform does, by deliberately misleading the public into thinking that

repayment is linked directly to interest rates and that debt has to be fully paid off, like a mortgage.

They represent the interests of the high income graduate, for whom interest accruing on debt is a concern.

FACT:  Payback is “Income contingent” and not related to level of debt

FACT:  All debt is written off after the end of the loan period

FACT:   Unlike thresholds, where graduates have been cheated, the interest rate terms of Plan 2 and Plan 5 have always been honoured. In fact in times of high inflation, governments have intervened to cap the interest rate.

....to distract us from the fact that, without interest accrual,

the  high earning graduate pays less in proportion of their

total income over the loan period than the mid earner, and

only slightly more than the low income graduate.

For many low income graduates, who will never pay back their debt even if it were interest free, the rate of interest accruing on their debt is a complete irrelevance, as they will simply pay back 9% on income over threshold for the full loan period, whatever the rate of interest.

(Every case in red underneath the white boundary )

At a very modest  2% interest rate on debt, this becomes true for the majority of graduates with typical initial debt on graduation of £45+K - i.e. they would pay back the same amount  for the same time if the interest rate were 2%, 8%, or 100%

(Every case in red and blue)

The right wing press and right wing politicians want to scare us with “debt mountains” and “ever mounting debt” ....