Illustration by Khoa Tran

Have you realised that the student finance deal you didn’t think twice about in sixth form may be a far bigger financial burden than you were led to believe? If so, you’re not alone.

The topic of student loans has recently come back into focus following chancellor Rachel Reeves’ announcement to freeze the salary threshold for plan 2 loan repayments last November – meaning that graduates will be paying ‘more on their loans, much sooner’. Unlike normal consumer loans, student loan terms can be changed by the government at any time. Successive governments seem to think that lower voter turnout from young people means that they can lean on us for financial relief. 

Whilst most of the headlines have been about plan 2 graduates, like me, you are probably on plan 5 (you started your course after August 2023). Our repayment threshold starts at a lower £25,000 salary and is written off after 40 years, significantly longer than for plan 2 which is 30 years. In fact, despite a lower interest rate at RPI (Retail Price Index) rather than RPI + 3% for plan 2, we are expected to pay more than previous graduates. And by the way RPI was discredited from being a National Statistic in 2013 and is likely to overestimate inflation according to the Office for National Statistics. If schools like mine advise students to apply for student finance, they should also ensure that they have basic knowledge of how compound interest works.

Those who opt out of university might argue that students are responsible for the education that they pursue and should not rely on taxpayer money. According to the Institute for Fiscal Studies, undergraduate degrees are still worth it overall, but this varies by course and university. Notably, the creative arts are the lowest performing subject, average returns being close to zero for women and negative for men. Using statistics like these discounts the creative sector as one of the UK’s strongest assets. To stop funding creative arts courses, as suggested by the shadow education secretary Laura Trott, may have a large impact on the nation’s economy and influence abroad. Access to the arts would revert to being a commodity for the rich. Speaking of the wealthy, in 2019 it was found that by paying upfront, they get the cheapest deal.

Student loans are said to be more like a graduate tax, as the 9% repayment rate does not change based on how much you owe (until it’s paid off). Subsequently, young people are unable to save and invest money – which is partly why they are unable to break into the housing market. Women suffer the most due to the gender pay gap and interest continuing during maternity leave, allowing men to pay off debts faster!
As a student who applied for student finance at 17, I had little understanding of what it would actually mean for my future finances. When I last checked my account, I had already gained 1k in interest and my course hadn’t even been fully paid for. Recently, politicians from all parties have been criticising the system that they built; however, it often seems that pensions are better protected than our futures.