Can an NHS Consultant Surgeon Pay Off a Student Loan?

There is no more prestigious job title than that of ‘Consultant Surgeon’. The surgeons of tomorrow will endure 15 years of training and at least £63,400 of student debt before they can earn such a title, and the impressive salaries that go with it.

With student loan interest rates set to rise from 4.6% to 6.1%, the mantra is that only high earners will ever pay off their student loan. But is this true? Does a consultant surgeon qualify as a ‘high earner’? We used the calculator to find out if even these bright minds have any hope of paying off their student loan.

surgeon student loan calculator payments table
surgeon student loan calculator payments graph

Graduating at around 23 years of age, a junior doctor will start on a salary of £26,614[1] and train for a further 10 years before becoming a surgeon. Whereas the interest rates of pre-2012 students were frozen at 1.25%, post-2012 student loans incur interest at a whopping RPI plus 3%; that will mean interest rates of 6.1%[2] for those earning over £41,000.

As discussed here, post-2012 students are effectively being levied with a graduate tax disguised as a student loan they can never pay off.



Half a Million More Students, But What Are They Studying?

Subjects within ‘Communication’:

  • Publicity studies
  • Media studies
  • Publishing
  • Journalism
  • Information services

Subjects within ‘Biological Sciences’:

  • Biology
  • Zoology
  • Botany
  • Genetics
  • Sports science
  • Psychology

Data by HESA Students in Higher Education
1994-95 table 1a
1997-98 table 1a
1999-00 table 1a
2001-02 table 1a
2003-04 table 1a
2005-06 table 1a
2007-08 table 1a
2009-10 table 4b
2011-12 table 4b

Attended university since tuition fees were raised? You have a graduate tax in all but name

In 2012 the Lib-Con coalition implemented a fiercely controversial increase to student tuition fees. The two main parties were determined to reform university funding. Labour, under Ed Miliband, proposed the ‘graduate tax’ – a special tax levied exclusively on graduates.  The government fought to raise tuition fees to £9,000 per year, which would be balanced by introducing a ‘fairer’ student loan system. For all the controversy surrounding the rise in fees, the end result was a graduate tax disguised as a student loan.

The new repayment model was touted as a better deal for students because, in the beginning, graduates would pay less than their pre-2012 counterparts with Plan 1 loans. Student loans are paid like income tax, with 9% of a borrower’s earnings above a certain threshold being automatically deducted by HMRC. The new repayment scheme saw that threshold rise from £17,495 to £21,000, meaning your average graduate on a starting salary of £20,000 would now pay nothing, whilst their Plan 1 counterparts would pay 9% on £2,505 of pre tax annual income. This was the government’s big selling point for why the Plan 2 system was fairer. Labour’s graduate tax was rejected as being un-aspirational – a lifetime tax rather than the repayment of a loan.

Therein lies the contradiction. The overwhelming majority of Plan 2 graduates will never repay their student loan for two reasons: the enormity of the debt and, crucially, the above inflation interest rates being applied to that debt. This means they will be saddled with an extra 9% tax for most of their working lives, almost identical to what Labour had proposed.

When Plan 1 loans were introduced the deal was that students would pay for their own tuition but the government would issue low interest rate loans. In other words, nobody would profit from their debts. No such niceties were granted to Plan 2 graduates. In 2016, Plan 1 loans were accumulating interest of 1.25% (now frozen indefinitely) whilst Plan 2 loans were incurring 4.6% interest (RPI + 3%). That is more than 3.5 times more interest! Such large interest rates mean that almost all Plan 2 graduates will be incurring interest faster than they are paying it off. Many – even average earners with small debts – will never make a dent in their student loan debt. The debt will increase until it is written off 30 years down the line.

For pre-2012 students? Earn an average salary and your loan will be paid off. Earn good money and you will be debt free in your thirties. That cannot be said for all but the very highest earning of Plan 2 graduates.

Update May 2018: the interest rate has risen since this article was published just over a year ago. Post-2012 interest rates are now salary dependent, beginning at a minimum of 3.1% and rising to 6.1%. Pre-2012 interest rates have risen more modestly, from 1.25% to 1.5%. More information and an updated version of the graph below is available here.

The chart above shows the repayment schedule for an average earner with a Plan 2 loan. Even after 30 years the debt is still increasing.