Thursday, 16 February 2012

Student loan ridiculousness (again)

Student loan early repayment penalty proposal' abandoned.

As far as I can tell, pretty much everyone is on the wrong about this one.

Student loans, from what I can tell, are created and administered by people who generally don't have a student loan to pay off themselves because they were students back in the days of things like grants. This was not financially sound as a system. Fine. This is not the argument I am here to have today.

I owe the government tens of thousands of pounds, and I pay back £13 a month at the moment. I don't think I'm ever going to eligible for any theoretical early repayment penalty, or if I am it won't be for a long time which rather takes away the 'early repayment' option. Most students are the same.

Fun story: I know people who got a student loan, put it into a high-interest savings account (this was in 2005 – remember high interest savings?) and then paid the lot back promptly upon graduation, and have used the interest on the loan to have a nest-egg to buy a house. Instinctively, I feel this is wrong and that's with a lot of love and respect to and for the people involved. However, these are the risks taken with the system, and at least they've paid back their loans. It's a lot more than most people manage to do, and at least the money is 'back in the pot', as it were, for future students.

This is a small minority of people. However, a much larger majority of graduates desperately want to pay their loans off. I hate being in debt. Hate it, hate it, hate it. I grew up in a house where Debt Was Bad, and I say this as someone currently surfing the wave of the graduate overdraft so possibly a little hypocritically. If I won the lottery, or managed to get a high-paying job, I would love to pay my loan off quicker.

There are those that will take advantage of the system, and they will end up paying less than less well-off students. The simple – and sad – fact is that richer students will find many things easier in university whilst we live in an unfair society. They just won't take the loan, if they have parents that can support them, which is of course essentially what paying off the loan early is.

Penalising early repayment discourages ambition. That's the simple end of it. “It's to protect lower-income students,” they say. This is bollocks. It says that lower-income students can just stay where they are, on low incomes. If they really wanted to help low-income students, fees would be lower or there would be no loans at all. Don't take away people's pride in being able to pay back debt sooner, and I'm talking to you, Liberal Democrats and National Union of Students.

The system is what's unfair, and faffing about with early and late repayment is just stupid. (And yes, 'faffing about' is a technical term.)

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