"We already have a graduate tax - just a better version" blog discussion

Oldernotwiser

JohalaReewi wrote: »

What about those graduates who paid their own way? Would they still be taxed?

One would hope so!

Porcupine

MSE_Martin wrote: »

I udnerstand your view - i just think the whole systems been disgracefully poorly communicated - all the focus was on tuition fees.

Indeed. What's more concerning is the noises being made about charging commercial rates on student loans... if debts started increasing at 5-7%pa people would think twice about borrowing (just like they should for a personal loan). That would cause even more hardship for those from the poorest backgrounds, whom life has taught to make every penny count. Once into that mindset, it's really hard to get out of it.

Plus getting a statement of 'you owe £xx,000' from the student loans company (where 'xx' increases every year) makes it feel like a debt even if the repayment terms are favourable. All our instincts are about staying out of debt. If, with uncapped tuition fees, your debt ends up being £30-50k, and you keep getting statements every year saying that you're managing to repay £200pa, that's just going to make people despair.

The other concern with the poor communication is that it has encouraged a generation of students into debt. Not that debt is a problem per se (as you've said frequently) but that once the threshold of being in debt has been crossed it's very easy to get carried away.

By the way, another concern is the messages that 'graduates earn £xx,000 more per year on average'. That only holds when some people have degrees and some don't, and a small number of graduates can cream off the best jobs. Give everyone a degree and you'll probably find that the income distribution is back how it was before. A lorry driver with a degree isn't economically more productive than a lorry driver without one - they can't drive the truck any faster. The money doesn't magically appear just because people have degrees, it's only if they can use those degrees to be more productive than an unskilled person (and the competition in other countries, probably).

buglawton

Here's a thought: my student son's mobile bill is higher then my rent was as a student. And for part of his studies he had an an-suite bathroom.

Oldernotwiser

buglawton wrote: »

Here's a thought: my student son's mobile bill is higher then my rent was as a student. And for part of his studies he had an an-suite bathroom.

Don't forget the essential running of a car!

DCodd

Oldernotwiser wrote: »

So what do students live on if they are "prudent" and only take a lower loan? This is an option only for those from better off homes and would, therefore be quite discriminatory. A graduate tax would apply to everyone, regardless of their background.

They get p/t jobs, live at home or with relatives etc etc. My O/H's DD didn't take all of the £4.5k she was offered as she has a p/t job and could fund the rest from that but under the proposed system their would be no benefit in not taking the £4.5k.

This will lead to higher Uni fees and a private sector offering courses that the main stream doesn't. as the "tax" wont come into play untill the graduates start earning above the threashold, the extra costs won't be recouped for 5 - 10 years and if the tax is scaleable according to earnings, the higher earners pay more back into the fund than the lower earners which leaves another 2 potential problems:

1) The higher earners will take longer to reach that potential earnings level while they progress their careers, leading to a further delay in recouping the funds.

2) The higher earners will be the high achievers, who are more likely to be in a position to leave the Country for better opportunities abroad, taking them out of the funding system altogether, which would be the financial contribution equivalent of up to 10 loan paying graduates a year under the current system.

Surely the current system is the fairest, all course fees are the same and the Loans are repayable on a scalable level once employed until the loan is cleared.

Oldernotwiser

DCodd wrote: »

They get p/t jobs, live at home or with relatives etc etc. My O/H's DD didn't take all of the £4.5k she was offered as she has a p/t job and could fund the rest from that but under the proposed system their would be no benefit in not taking the £4.5k.

This will lead to higher Uni fees and a private sector offering courses that the main stream doesn't. as the "tax" wont come into play untill the graduates start earning above the threashold, the extra costs won't be recouped for 5 - 10 years and if the tax is scaleable according to earnings, the higher earners pay more back into the fund than the lower earners which leaves another 2 potential problems:

1) The higher earners will take longer to reach that potential earnings level while they progress their careers, leading to a further delay in recouping the funds.

2) The higher earners will be the high achievers, who are more likely to be in a position to leave the Country for better opportunities abroad, taking them out of the funding system altogether, which would be the financial contribution equivalent of up to 10 loan paying graduates a year under the current system.

Surely the current system is the fairest, all course fees are the same and the Loans are repayable on a scalable level once employed until the loan is cleared.

I think that not taking the full loan is often to a student's detriment, either by encouraging them to work ridiculous hours (I've know people to work full time all the way through university!) or by making them choose lesser universities just because they're nearer to where their parents live.

I don't see any reason why a mechanism couldn't be found for students living abroad to still pay their loans through the tax system here, rather in the way that government pensions are taxed in the UK, regardless of which country the person lives in.

I'm not wholly in favour of a system like this but I think that there are certain advantages in it and I wouldn't protest if it were brought in.

DCodd

Oldernotwiser wrote: »

I think that not taking the full loan is often to a student's detriment, either by encouraging them to work ridiculous hours (I've know people to work full time all the way through university!) or by making them choose lesser universities just because they're nearer to where their parents live.

I don't see any reason why a mechanism couldn't be found for students living abroad to still pay their loans through the tax system here, rather in the way that government pensions are taxed in the UK, regardless of which country the person lives in.

I'm not wholly in favour of a system like this but I think that there are certain advantages in it and I wouldn't protest if it were brought in.

I agree that in an ideal world a student should be able to concentrate of their studies without the need for working responsibilities but most students I know don't have that luxury regardless of if they have taken the maximum loan.

The only mechanism for payment of the tax would be through something similar to the payment of maintenance agreements the UK have with a number Countries however as it wiill be a tax, International financial laws would have to be changed if the graduate was being paid by a Foreign company and working and residing in another Country, something most other Countries would block as the Graduate could claim tax relief in that Country for having to pay tax in the UK.

I understand that this is all speculation as the details have not been finalised and it is only part of a review process. so I guess we should watch this space.

minerva_windsong

I definitely remember the current loan system being pitched to me as a graduate tax, and I've always seen it like that. The only difference I can see on this one is that graduates who earn more (for whatever reason) appear to be subsidising those who earn less, whereas under the current system everyone pays for themselves.

That said, if it's this or £7,000 tuition fees, I know which one I'd prefer.

ETA: Re: the overspending thing, I always found it was the overdraft that got people not the loan amount. Maybe starting off with a smaller overdraft limit of, say, £100 or £200 and being more rigorous about extending it is the way forward.

DCodd

Premier wrote: »

They've never asked me for my net earnings, only my gross. It's gross earnings that they use for income multiples.

They then consider existing borrowings, and I thought student loans were included as that is a borrowing. Existing borrowings, if any, are then deducted from the amount they are prepared to lend based on income multiples.

I didn't think it worked like that but you have experienced it so I bow to your greater knowledge, I will say though that they do ask to see P60's as proof of earnings and if the Graduate tax does come in then I would suspect that this extra tax will be shown on your P60 as either a reduced personal allowance or, as is done with the student Loans, a seperate element of your tax paid figure.

Oldernotwiser

Premier wrote: »

They've never asked me for my net earnings, only my gross. It's gross earnings that they use for income multiples.

They then consider existing borrowings, and I thought student loans were included as that is a borrowing. Existing borrowings, if any, are then deducted from the amount they are prepared to lend based on income multiples.

I've mortgaged/remortgaged several times and never been asked for details of my student loans. It may be different if you're actually making repayments but I don't think the amount outstanding is normally taken into account.