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Oldernotwiser

mayb wrote: »

Many would have had no idea that their loans would be accumulating interest from day one of their courses with no way of stopping that or of influencing the amount they owe by the end of it.

Then "many" should read the conditions before signing anything! Students are supposed to be, by definition, intelligent; to excuse such ignorance insults and patronises everybody!

Oldernotwiser

Adam_W wrote: »

at the minimum repayment or increase the payment at any time.

As a result, my way of thinking is this is just another 'tax' of 9% to pay on any earnings over the £15,000 threshold.

So, if your still with me, a few questions:

1) Does the loan get cleared when i die?
2) If this is the case, does it get taken out of my 'estate'?

3) Or, does it get cancelled and that is the end of it...no debt passed on to any family etc?

If it happens to be 3), then what is the incentive to pay off the loan, other than the minimum repayments?

You're absolutely right to look at this as a graduate tax rather than as a loan; this was one of the options discussed when loans were introduced but was such a vote loser that it was discounted.

1. Yes, the loan is cleared if you die.
2. No, just wiped out.
3. No, not passed on to family.
3 a.Also wiped out if you become too disabled to work.
3 b.Any monies outstanding are also wiped out when you reach 65.
3 c. If your earnings drop below £15,000 (unemployed, childrearing, further study, travel) you pay nothing although your loan carries on accruing interest.

No incentive at all to pay extra off the loan as you'll see if you read more thoroughly on here, including Martin's factsheet on the subject. You just musn't think of it in the same way that you think of other loans; these are totally different and different rules apply.

Adam_W_2

Thanks for the prompt reply, Oldernotwiser.

Answers my questions perfectly and certainly gives me no incentive to pay this loan off, assuming the answers are correct.

As for not having to pay if you earn less than 15,000, although still accruing interest, i hope this never happens. Out of choice i am not going to be working for less than £15,000 (unless special circumstances occur), so my theory of an 'extra tax' holds true. Sadly

Thanks for the advice.

Adam W

Oldernotwiser

If you're a young graduate already earning over £15,000 and expecting to have a steadily progressing career I can't really see why you should think that a £17,500 loan should increase to £50,000 in 22 years.

I can't be bothered to do the maths properly (compound interest etc.) but 4% of £17,500 is about £700 pa interest which multiplied by 22 is £15,400, added to the original loan makes about £33,000; nothing like £50,000. This also doesn't allow for making any payments at all which you sound as if you're already doing; these will rise as your career progresses. I know I've only done this roughly (and after several drinks!) but I'd be interested in knowing how you came about such a large, depressing figure?

Adam_W_2

You are right, the figure of 50,000 is incorrect, that was calculated with the interest rate of 4.9%.

Using the rate of 3.8% the total is roughly 39,000. This is without making any repayments however.

But, considering for the forseable future, and, if all seems to be correct will continue, i will only be making the minimum repayment, which, at the current rate, barely covers interest for 2 months. Therefore, the gross figure will not change too much.

Of course, i am still going to do some maths to work out, but the only reason i see myself ever paying more than the minimum is that by the time im 65, considering it as a tax, i would've paid out substantially more than the original loan value of 17,000.

Not depressing...just frustrating.

The_One_Who

You should not really be expecting to be earning just over £15,000 for the rest of your life, so the loan will be paid back quicker once you start earning more.

Oldernotwiser

You always end up paying far more for a loan than the amount you borrowed. It's quite normal to repay more than double the amount borrowed on your mortgage, for example.

As I said, if you're currently earning around £16,000 then you should see this as a starting point in your career. Why you should see yourself earning this sort of salary for the rest of your career escapes me. Once you reach about £23,000 you'll start making inroads into the amount owed, whilst still only making payments of about £80 per month.

Adam_W_2

Oh don't get me wrong, i don't think ill be earning just over 15,000 for the rest of my career. In fact, i was reluctant to take a job for so little money given the graduate opportunities available to me, but, given the current economic state, i was finding it very hard to get a graduate position. So, by next summer or within the year i ideally want to be earning 22-25 on a grad scheme. We'll wait and see.

Thanks all for your advice tho regarding my questions, much appreciated.

Adam W

Oldernotwiser

Adam_W wrote: »

Oh don't get me wrong, i don't think ill be earning just over 15,000 for the rest of my career. In fact, i was reluctant to take a job for so little money given the graduate opportunities available to me, but, given the current economic state, i was finding it very hard to get a graduate position. So, by next summer or within the year i ideally want to be earning 22-25 on a grad scheme. We'll wait and see.

Thanks all for your advice tho regarding my questions, much appreciated.

Adam W

Good luck for your future and for getting on a graduate scheme.

mayb_2

It would appear to me that we live in a time when the eminent banking fraternity were appartently unaware of the details of the little packages they were selling each other and would finally lead to the state of the economy as we speak. Keeping that in mind, it is not so suprising really that students who have no financial experience to speak off at the point of starting their courses, no matter how intelligent, do not understand the implications of their loan. I don't think it is me who is being patronising here.

In the long run students are paying extra taxes twice as their income progresses from £15,000 as their extra income will of course mean extra tax is paid as well as extra student loan.

My argument is against the whole concept of debt being acceptable state of affairs and in fact one encouraged by the policy of the government that students are encouraged to start their financial independence encumbered by a debt of any sort. There is also the matter of insurance sales, promotional offers on opening bank accounts with free overdrafts and all sorts of other 'benefits' offered to new students too. Was anyone advised against taking out a student loan and what were the alternatives offered if so?

It is a culture that encourages one and all to live to the level of debt they can accumulate rather than the level of income they have. The American way - as is paying for your university education. It is not patronising it is a fact that very intelligent people will still get into financial difficulties - ask our top bankers (mind you they can give themselves a nice bonus to see them over their mistakes and there is always the golden handshake to look forward too).

There is probably little that can be done about this but I stand by my original comment and wish you all well with your loans and degrees.