Student loans: a burden for graduates and employers alike

Many graduates will have their student loan payments deducted from their salaries for the rest of their working lives.

Since 2000, employers and agents have been collecting repayments for the Student Loan Company from their graduate workforce. This arrangement, however, has become more complicated since different types of student loans, Plan 1 and Plan 2, were introduced as of 6 April 2016.

The threshold of £21,000 for Plan 2 loans was frozen until 2022, which means that those students from England and Wales who took out loans of up to £9,000 from September 2012 will see an unexpected increase in their deductions in real terms. As interest is added each year on a sliding scale as salaries go up, many students will be repaying their loans for the majority of their working lives.

This is also going to be a burden for employers as they will be required to undertake all the work associated with repaying student loans for more and more graduates.
One drawback could be that graduates choose to opt out of auto-enrolment payments, which could be seen as kicking the can down the road: they’ll have more cash in their pockets now, but are likely to regret that decision later in life.

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