Let's Talk: Student Loans

As Christmas bonuses loom, and the Financial Year End is less than half a year away, lawyers are eagerly waiting to discuss money. January and April are also statistically the most common months for employers to receive pay rise requests.

Student loans are often a ‘blind spot’ in these discussions. They are a living reality for the majority of junior lawyers, but don’t come into conversation all too often. Despite this, the discussions across social media could not be more different - they are loud, angry and filled with uncertainty.

For many junior lawyers, noting that the historic majority of solicitors had to attend University, the difference between gross and real net pay can be substantial. This divergence matters when assessing fairness, and for employers to consider proper financial wellbeing and the concerns that may be impacting young talent. We are not there in terms of transparency or understanding.

Turning to the basics, a junior lawyer with a Plan 2 student loan will repay 9% of their income over £29,385 (2026). Every £1 earned above this income rate, incurs another 9p deduction. This is on top of Income Tax, National Insurance, pension contributions, and any other sacrifice. This is deducted automatically, and cannot be avoided. The difference between junior lawyers who had to opt into student loan, or junior lawyers who either saved on University fees through scholarships or had this funded on their behalf, adds into the hundreds per month.

There is a significant amount of contention about student loans. Young professionals on the whole consider that this is an additional tax, designed to be paid off slowly and with significant interest. High earning junior lawyers may still find that their loan exceeds 20+ years with significant income lost through their career. It is also pertinent (and relevant to financial wellness) that this burden will often lie with the generation of junior lawyers who do not have capital, family funds or alternatives save for opting into a student loan. This is more likely to translate into a burden on young lawyers who are already from a background where worrying about money is commonplace. There is an argument that junior lawyers who should be encouraged to ‘climb the ladder’ and to ensure our profession is diverse and reflective of our population – are at an inherent disadvantage.

Students will gradually begin to see apprenticeship opportunities now widen across England (and Wales hopefully soon enough). The concerns about being chained to a student loan, and becoming the ‘generation of debt’, is a key incentive for apprenticeship schemes. Education is heading in the right direction by providing such an alternative, but it does not resolve the financial burden on the NQ or mid-junior demographic.

Why is this relevant, and what can we do?

Senior colleagues, managing partners and pay-review personnel are often from generations that didn’t need to take out student loans. Sometimes, junior lawyers may find that their firm fail to appreciate the material earnings gap, or the jump from one employee to the next depending on educational background. It may feel that modest pay rises do not make any difference, and it can diminish confidence to take home less pay than colleagues did at your level. We want to ensure that junior lawyers feel heard within the profession, and do not seek to move to a different industry. Real conversations about money and budgeting would make a significant difference to a lot of individuals facing this hardship on their own.

Salary reviews, largely as a result of inflation not being talked about properly, are often benchmarked simply against market rates without reference to real living costs. For junior lawyers carrying debt on top of debt (often being taxed up to 50% of their income despite being under the 45% threshold), there is a real financial squeeze and these reviews become more important than ever.

Over recent months, I have attended conferences and discussions in respect of mental health and wellbeing. The cost of living concerns permeate all generations, but apathy and lack of drive amongst junior professionals, as well as losing talent, remains a problem. There are sometimes arguments that the younger generation may simply demand too much, or do not understand the privileges they may have versus fifty years ago. This rhetoric does not solve the problems that law firms are seeking to address.

A harsh financial reality at the start of a legal career can impact house buying, determine plans for family and children, and negate many juniors’ abilities to plan their futures long-term. Many professionals continue to relocate, chasing financial incentives, and some are concerned about remaining tied to an area they love that may not have the same windfalls (particularly in Wales). Most significantly in recent news, it can be seen that minimum wage is also now taxable as over the basic student loan repayment threshold. For an aspiring solicitor who has undertaken the necessary education, minimum wage is now likely to be more than their take home pay.

In many workplaces, mental health and wellbeing policies focus on work-life balance, stress, and workload. Without open discussions on financial wellness, it is not surprising that firms can be left in the dark when professionals decide they are ’jumping ship’. There are ample amounts of clinics, seminars and workshops. However, very few firms are leading the way in terms of ‘bridging the gap’ and encouraging a real conversation about what troubles juniors the most. The financial landscape always seems to avoid being the forefront of these conversations, despite this being a headline concern for many colleagues alike.

According to the Office for National Statistics, a salary of £50,000 today would have been £122,000 in 1995 terms to maintain equivalent purchasing power. That is absolutely unimaginable for some junior lawyers. Similarly, earning £80,000 now equates to roughly £195,000 in 1995. Despite this, we regularly see practitioners in the news and otherwise, discussing the parity between salaries in the direct opposite way. There is still a stigma in relation to junior lawyers having an easier pathway, and opting to be ungrateful. A common ‘red flag’ is directly comparing a salary 20 years ago, to the same money now – and considering that on balance, the juniors are paid significantly higher. This entirely discounts inflation and tends to end most meaningful discussions about financial wellbeing.

There is a disconnect (largely caused by the drastic changes in the economy) between the junior and senior end of the profession, and we are living in very different worlds at early stages of our careers. It would be encouraging for firms to consider the real economic and fiscal pressures facing junior lawyers, that goes beyond ‘check ins’ and discussions about coping mechanisms. Practitioners are seeking firms who actively empathise and show understanding for their priorities, where they do not feel that a conversation about money is likely to end sour.

Firms offering flexibility such as remote working, flexible hours, or even hardship support can help young professionals manage better. This is not just a matter of personal finance, or young individuals not knowing how to budget. This is intergenerational inequality in net pay with a significant amount of junior practitioners trying to navigate this alone.

As a junior lawyer, it is time for firms to be pushed into broadening their wellbeing agenda. Law firms should be able to discuss and identify these issues, in a non-prejudicial and open environment. Student loan repayments are significant, and should be recognised as such. What is your junior employee actually taking home to enjoy at the end of the month? Is that figure what you would consider sufficient for their level and effort? Or will discussions remain stuck at ‘gross pay’ figures and direct comparators to 30 years ago?

Employers also have the option of considering adjustment of pay or bonuses so those with loans are not penalised. A bold decision, but certainly a decision that would appeal to young talent. Juniors also need financial wellbeing support. Firms should consider in-house or collaborative seminars, access to budgeting advice, and discussions about what the firm can offer you (such as salary sacrifice). There is no clear solution to bridging the difficult questions, if these questions exclude real and genuine insight from juniors.

Regardless of the very different views on student loans, to include the reasons behind acquiring such a loan and the interest measures, it is undoubtedly a ‘hot topic’ currently. At the very least, law firms must ensure that they stay informed and have a genuine open-door policy, or allocated person, to have these difficult discussions with.

NB. this post is not intended to be affiliated with any political stance, and does not represent financial advice!