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  • FIRST POST
    • MSE Steve
    • By MSE Steve 1st Oct 17, 2:12 AM
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    MSE Steve
    MSE News: PM pledges to raise student loan repayment threshold
    • #1
    • 1st Oct 17, 2:12 AM
    MSE News: PM pledges to raise student loan repayment threshold 1st Oct 17 at 2:12 AM
    Prime Minister Theresa May has said the student loan repayment threshold will be increased from £21,000 to £25,000 as part of a wide-ranging review of student finance...
    Read the full story:
    'Victory for graduates as PM pledges to raise student loan repayment threshold'

    Click reply below to discuss. If you haven’t already, join the forum to reply.
    Last edited by MSE Luke; 02-10-2017 at 12:39 PM.
Page 2
    • Mogley
    • By Mogley 3rd Oct 17, 10:15 AM
    • 218 Posts
    • 181 Thanks
    Mogley
    But it's not a case of earn £25k and you've got to repay the full whack. It's a case of earn over £25k and you contribute 9% of your salary over the threshold. It's a tax cut. Expect the threshold to come down sharpish once a competent government get in as it can't be sustained at these levels of write offs.
    Originally posted by Ed-1

    I think even a competent government will realise the impact on the country will be too far in the future for a 5 year tenure to concern themselves over ruining their popularity. I can see state pensions being wiped in 25 to 30 years time (for the post 2012 era) to pay for the levels of write-off.
    No.25 for 2017 £1070/£4000 saved.
    You should pay attention to the needs of the moment - otherwise there is no future. But to ignore the future is foolish - living solely for the moment leaves nothing for when the next moment arrives.
    • VT82
    • By VT82 3rd Oct 17, 1:06 PM
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    VT82
    Indeed - plus that "23%" is probably way too many now - it was 23% with the £21k threshold so with a higher payment threshold and earnings indexation it'll likely be well under 23%. I'll wait for the IFS to do the maths... Or Martin?
    Originally posted by zagfles
    That's why this is another complete own goal by the government. It's an expensive money loser for them, but is difficult for people to understand why it is such a benefit to those affected. And furthermore, it gives the opposition more ammunition to beat them with - now they can cry '90% of people will never their loans, it's a crisis!' rather than the current 77% figure, completely twisting the logic of how the student finance system is funded, but still making it sound like the government has failed the student AND the taxpayer.

    They'd have been better off cutting fees to £8k (backdated for existing recipients) and making the interest rate RPI flat rather than RPI+3%. Changes that sound more generous, changes that people (think they) understand, but changes that wouldn't affect the student loan recovery amount anywhere near as much.

    I'm a Tory, but like their dementia tax balls up, why do they have to be so bloody daft and naive sometimes???
    • zagfles
    • By zagfles 3rd Oct 17, 10:36 PM
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    zagfles
    That's why this is another complete own goal by the government. It's an expensive money loser for them, but is difficult for people to understand why it is such a benefit to those affected. And furthermore, it gives the opposition more ammunition to beat them with - now they can cry '90% of people will never their loans, it's a crisis!' rather than the current 77% figure, completely twisting the logic of how the student finance system is funded, but still making it sound like the government has failed the student AND the taxpayer.

    They'd have been better off cutting fees to £8k (backdated for existing recipients) and making the interest rate RPI flat rather than RPI+3%. Changes that sound more generous, changes that people (think they) understand, but changes that wouldn't affect the student loan recovery amount anywhere near as much.

    I'm a Tory, but like their dementia tax balls up, why do they have to be so bloody daft and naive sometimes???
    Originally posted by VT82
    Yes I think this is sad but true. People really are that stupid. Policies need to be simple enough to understand to be popular, it's like the benefits cap or the child benefit withdrawal for those on high income. Technically, they're stupid, but politically, they're brilliant because even Sun readers can understand them.

    Lower fees - easy to understand.

    Increase repayment threshold - what does that mean?
    • zagfles
    • By zagfles 3rd Oct 17, 10:39 PM
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    zagfles
    But it's not a case of earn £25k and you've got to repay the full whack. It's a case of earn over £25k and you contribute 9% of your salary over the threshold. It's a tax cut. Expect the threshold to come down sharpish once a competent government get in as it can't be sustained at these levels of write offs.
    Originally posted by Ed-1
    Who do you expect this "competant government" to be?
    • setmefree2
    • By setmefree2 4th Oct 17, 12:45 PM
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    setmefree2
    The changes also give an indication that the pre-2012 group will have their threshold unchanged in the future. Sure they have a much lower total loan (around 20k for those who had tuition fees around 3k, rather than ~40k for those on 9k) but on lower incomes their threshold remaining at 15k for the foreseeable future means they will feel the pinch. I'm reading the message as this group are not as important as the more recent and future students.
    Originally posted by silvercar
    It's interesting isn't it.

    For example, if there are two siblings one with pre-2012 and one with post-2012 SLs, both earning £25k, the pre-2012 will be paying £650 student contribution annually, the post 2012 sibling nothing.

    If they both stayed earning equivalent sorts of amounts the pre-2012 would end up contributing £16,250 in 25 years and the post-2012 student zero in 30 years.

    Could it be that some people are now significantly better off under the post-2012 system? And these people would be those on medium sized incomes?
    Last edited by setmefree2; 04-10-2017 at 1:01 PM.

    • setmefree2
    • By setmefree2 4th Oct 17, 1:08 PM
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    setmefree2
    The pre-2012 threshold increases with RPI, not earnings.
    Originally posted by Ed-1
    Whilst ML's article says "After that increase it will then be uprated annually "in line with the annual average earnings growth"."

    Darn it. Why do they have to make everything so complicated. It should be the same under both systems.

    It's as if they want to make it as complicated as possible so nobody has any idea wth is going on.

    • setmefree2
    • By setmefree2 4th Oct 17, 1:14 PM
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    setmefree2
    Obviously if you're a pre-2012 graduate the government thinks you have less need of money compared to a post-2012 graduate on the same salary as you!
    Originally posted by Merlin's Beard
    It's because most people don't understand the SL system and all the uproar is around the post-2012 system....I even heard Jeremy Corbyn say that he would help students by extending the amount of time students have to repay ! WTH that would cost students more.

    Yes, there is a block of those that currently have a massive debt, and I’m looking at ways that we could reduce that, ameliorate that, lengthen the period of paying it off, or some other means of reducing that debt burden.”
    Read more at http://www.nme.com/news/jeremy-corbyn-will-deal-already-burdened-student-debt-2082478#WIaV5wFHpZsXiZfQ.99

    • setmefree2
    • By setmefree2 4th Oct 17, 1:26 PM
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    setmefree2
    Pre-2012 students are more likely to be able to clear all their loan as their loans were for a far lower amount. Therefore the calculation is different as interest added will make a significant element of the loan. So lower initial repayments, by raising thresholds, will actually cost them more in greater interest that will be repaid.
    Originally posted by silvercar
    41% of pre-2012 students won't pay of their loans.

    Under the new system, 77.4 per cent of graduates will never fully repay their debts, compared to 41.5 per cent of graduates under the previous system, according to the IFS.
    http://www.telegraph.co.uk/education/2017/07/05/almost-eight-ten-graduates-will-never-pay-back-full-student1/

    If you never pay off your loan - surely you are better off under post-2012 system?

    • setmefree2
    • By setmefree2 4th Oct 17, 1:29 PM
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    setmefree2
    But it's not a case of earn £25k and you've got to repay the full whack. It's a case of earn over £25k and you contribute 9% of your salary over the threshold. It's a tax cut. Expect the threshold to come down sharpish once a competent government get in as it can't be sustained at these levels of write offs.
    Originally posted by Ed-1
    From a tax receiving pov - wouldn't the government have got more if they had just kept to the old system with the lower thresholds?

    Granted - they got to reduce the deficit by pretending they would get the money back and universities consequently weren't subjected to austerity....

    • setmefree2
    • By setmefree2 4th Oct 17, 1:31 PM
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    setmefree2
    That's why this is another complete own goal by the government. It's an expensive money loser for them, but is difficult for people to understand why it is such a benefit to those affected. And furthermore, it gives the opposition more ammunition to beat them with - now they can cry '90% of people will never their loans, it's a crisis!' rather than the current 77% figure, completely twisting the logic of how the student finance system is funded, but still making it sound like the government has failed the student AND the taxpayer.

    They'd have been better off cutting fees to £8k (backdated for existing recipients) and making the interest rate RPI flat rather than RPI+3%. Changes that sound more generous, changes that people (think they) understand, but changes that wouldn't affect the student loan recovery amount anywhere near as much.

    I'm a Tory, but like their dementia tax balls up, why do they have to be so bloody daft and naive sometimes???
    Originally posted by VT82
    Too many people don't understand the SL system, for that reason they should probably move to a graduate tax.

    • Ed-1
    • By Ed-1 4th Oct 17, 3:44 PM
    • 2,006 Posts
    • 1,084 Thanks
    Ed-1
    It's interesting isn't it.

    For example, if there are two siblings one with pre-2012 and one with post-2012 SLs, both earning £25k, the pre-2012 will be paying £650 student contribution annually, the post 2012 sibling nothing.

    If they both stayed earning equivalent sorts of amounts the pre-2012 would end up contributing £16,250 in 25 years and the post-2012 student zero in 30 years.

    Could it be that some people are now significantly better off under the post-2012 system? And these people would be those on medium sized incomes?
    Originally posted by setmefree2
    40% now better off under post-2012 loans than under pre-2012 loans.

    https://twitter.com/PJTheEconomist/status/915156484761190401/photo/1

    There's no appetite to better the terms of pre-2012 loans as they're currently trying to sell them off...

    Now we're back to square 1 as the post-2012 system now costs more than the pre-2012 system it replaced, a retrospective change which defeats the whole point of the reform (and the now overturned policy to freeze the £21k threshold for 5 years), and indeed the entire system will be reviewed according to the PM (which begs the question why announce major changes before the review).
    Last edited by Ed-1; 04-10-2017 at 4:08 PM.
    • silvercar
    • By silvercar 4th Oct 17, 5:23 PM
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    silvercar
    Too many people don't understand the SL system, for that reason they should probably move to a graduate tax.
    Originally posted by setmefree2
    Too many issues with existing students for that.

    What do you do about people who didn't take the loans or who have made lump sum repayments in part or full?
    • zagfles
    • By zagfles 4th Oct 17, 6:09 PM
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    • 10,372 Thanks
    zagfles
    It's because most people don't understand the SL system and all the uproar is around the post-2012 system....I even heard Jeremy Corbyn say that he would help students by extending the amount of time students have to repay ! WTH that would cost students more.


    Read more at http://www.nme.com/news/jeremy-corbyn-will-deal-already-burdened-student-debt-2082478#WIaV5wFHpZsXiZfQ.99
    Originally posted by setmefree2
    Unbelievable, and some people want this clown to run the country!
    • zagfles
    • By zagfles 4th Oct 17, 6:45 PM
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    zagfles
    Looks like the govt are starting to listen to Martin!

    https://www.moneysavingexpert.com/news/loans/2017/10/student-loans-must-no-longer-be-called-a-loan-universities-minister-says?_ga=2.137272440.917094922.1504560936-134932888.1451414882

    A change in name is probably what it needs for some people to get their thick heads around how the system works!
    • silvercar
    • By silvercar 4th Oct 17, 7:33 PM
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    silvercar
    Martin Lewis posted this on facebook today:

    PLS SHARE WITH ANYONE WHO STARTED UNI BEFORE 2012.
    Many people are asking me "why aren't the govt increasing the student loan repayment threshold for those with type 1 (pre 2012 starters) loans as well as newer students?"
    The obvious answers are 1) as that's not the current political hot potato and 2) as they hadn't breached their promise on type 1 loans and gone back on their word by freezing the threshold, as they did last year with the type 2 (post 2012 starters) loans.
    Yet ignoring the politics and just looking at the finances upping the threshold for type 1 loan holders may not be such a good thing. Here's why...
    When you increase the threshold, people repay less each year. To spell it out. If you are repaying 9% of everything above £21,000 and earn £26,000 you repay £450/year, increase the threshold to £25,000 and you repay just £90/year.
    With type 2 loans as most people won't fully repay the loan and interest within the 30 years before it wipes increasing the threshold means they pay less each year for 30 years - so it saves them money - an average £15,000ish less during the 30 years.
    With type 1 loans as the initial borrowing was substantially lower (both tuition and maintenance) most will repay in full before the loan wipes. As upping the threshold means you repay more slowly, that means you're borrowing for longer so will repay more interest.
    While interest rates on type 1 loans is currently low, as it depends on inflation, they may not be in future, so its no where near as clear cut if people would gain from raising the threshold as with type 2.
    • setmefree2
    • By setmefree2 4th Oct 17, 8:42 PM
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    setmefree2
    With type 1 loans as the initial borrowing was substantially lower (both tuition and maintenance) most will repay in full before the loan wipes. As upping the threshold means you repay more slowly, that means you're borrowing for longer so will repay more interest.
    While interest rates on type 1 loans is currently low, as it depends on inflation, they may not be in future, so its no where near as clear cut if people would gain from raising the threshold as with type 2.
    Originally posted by silvercar

    40% of pre-2012 don't pay off their loans. So 40% would be better off with a higher threshold. 40% would be better off under the post-2012 system.

    Furthermore, 40% of the post-2012 students are also better off than they would have been under the old system (See post below).

    And to think some students went to Uni a year earlier to avoid "higher fees".
    Last edited by setmefree2; 04-10-2017 at 9:02 PM.

    • setmefree2
    • By setmefree2 4th Oct 17, 8:57 PM
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    setmefree2
    From Paul Johnson's (Institute of Fiscal Studies) Tweet.

    New HE loan policy raises cost of HE to govt by 40%, leaves 40% of graduates better off than pre-2012 system. This is a BIG change


    • Ed-1
    • By Ed-1 4th Oct 17, 9:08 PM
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    • 1,084 Thanks
    Ed-1
    Martin Lewis posted this on facebook today:

    PLS SHARE WITH ANYONE WHO STARTED UNI BEFORE 2012.
    Many people are asking me "why aren't the govt increasing the student loan repayment threshold for those with type 1 (pre 2012 starters) loans as well as newer students?"
    The obvious answers are 1) as that's not the current political hot potato and 2) as they hadn't breached their promise on type 1 loans and gone back on their word by freezing the threshold, as they did last year with the type 2 (post 2012 starters) loans.
    Yet ignoring the politics and just looking at the finances upping the threshold for type 1 loan holders may not be such a good thing. Here's why...
    When you increase the threshold, people repay less each year. To spell it out. If you are repaying 9% of everything above £21,000 and earn £26,000 you repay £450/year, increase the threshold to £25,000 and you repay just £90/year.
    With type 2 loans as most people won't fully repay the loan and interest within the 30 years before it wipes increasing the threshold means they pay less each year for 30 years - so it saves them money - an average £15,000ish less during the 30 years.
    With type 1 loans as the initial borrowing was substantially lower (both tuition and maintenance) most will repay in full before the loan wipes. As upping the threshold means you repay more slowly, that means you're borrowing for longer so will repay more interest.
    While interest rates on type 1 loans is currently low, as it depends on inflation, they may not be in future, so its no where near as clear cut if people would gain from raising the threshold as with type 2.
    Originally posted by silvercar
    But of course Martin overlooks the fact that there were broken promises on the pre-2012 system and threshold:

    See comments:

    https://twitter.com/MartinSLewis/status/915638993252966402
    • setmefree2
    • By setmefree2 4th Oct 17, 9:10 PM
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    setmefree2
    Institute of Fiscal Studies. 2 further bullet points at the bottom. See the increase in the RAB charge to 45% - that's what the government are not going to get back (or the government subsidy inherent in the student loan system).

    Last edited by setmefree2; 04-10-2017 at 9:16 PM.

    • Ed-1
    • By Ed-1 4th Oct 17, 9:56 PM
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    Ed-1
    I think even a competent government will realise the impact on the country will be too far in the future for a 5 year tenure to concern themselves over ruining their popularity. I can see state pensions being wiped in 25 to 30 years time (for the post 2012 era) to pay for the levels of write-off.
    Originally posted by Mogley
    My worry is they'll turn to increasing the repayment rate from e.g. 9% to 12% which would probably have to apply to pre-2012 loans too.

    But I can envisage a world in which if these ever get sold off to the private sector there could be massive discounts offered on paying off the account in one lump sum.
    Last edited by Ed-1; 04-10-2017 at 9:59 PM.
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