'Unlimited tuition fees – does that mean unlimited student loans?' blog discussion

Smidster

Just one quick thing looking through the report - it is at least NOT a 'commercial' rate of interest

''Students with higher earnings will pay a real interest rate. The interest rate will be equal to the Government’s cost of borrowing (inflation plus 2.2%).''

So yes still bad but not as bad as it could have been.

crumpsall

Still awaiting the detail to emerge, but we have already seen that a Government can unilaterally alter the terms of existing loans, apparently at will, by regulation (the 2009 regulations enabled them to avoid the promise previously given of tracking inflation).

We believed that my son's 2006 contract was based on the Student Loan Guide to Terms & Conditions booklet, which said "The aim is to maintain the value, in real terms, of the outstanding amount of the loan. This means that however long it takes you to repay your loan, you will repay no more, in real terms, than you actually borrowed." Then inflation went negative, so the rules were altered by the 2009 'Regulation', which wasn't even debated in the Commons.

Having broken one promise, what is to stop any Government in future imposing 'commercial' rates of interest on existing loans?

One suspects that there is little that can be done to help future students avoid unfair and unwelcome changes. But what can be done to hold the Government to the terms of the contracts that current and former students signed?

glider3560

Smidster wrote: »

Just one quick thing looking through the report - it is at least NOT a 'commercial' rate of interest

''Students with higher earnings will pay a real interest rate. The interest rate will be equal to the Government’s cost of borrowing (inflation plus 2.2%).''

So yes still bad but not as bad as it could have been.

It almost a commercial rate though. RPI for March 2010 was 4.4%. Add 2.2% onto this and you get 6.6%.

Nationwide's loan rate is 7.5% APR, so this is only 0.9% short of being "commercial".

gmang

bassitt74 wrote: »

To be seen as ahead of the rest, I may need to complete a masters as well.

I'm not so sure on the logic of carrying on after a first degree to appear more employable, unless it is either fully funded (e.g. by a research council) or leads down a vocational path (e.g. LPC / PGCE).

The figures I have seen don't seem to add up. I read that the new loans will be set at higher rates - at the government rate of borrowing (currently 2.2%) plus inflation (currently 4.6% using the RPI). And also that the loan payback threshold will increase to £21k. Even for the universities setting their fees at "only" £7k per year, including the maintenance loan this is a debt of £32,250 after 3 years (£37,300 in London).

The average starting salary for graduates (using the HESA figures for 2008) is £19,677. The mean average earnings index (the mean increase in salaries per year since 1990) is 4.05%.

Using these figures, someone graduating with a debt of £32,250, earning the average graduate starting salary (which increases at the mean average earnings index) while their loan increases at 6.8% p/a and gets paid off at 9% of their earnings above £21k will take 89 years to pay off the debt! If their earnings increase at twice the average earnings index (8.1%) then they still take 29 years to pay off the debt. And even if their pay increases at three times the average earnings index, it still takes 20 years to clear the debt.

In my opinion, it is not feasible for the government to allow people to pay back at 9% above £21k with the interest rates they are suggesting. They have not said anything other than

"...they would not have to start repaying it until their earnings reached £21,000 per year, up from the current level of £15,000."

I can only conclude that there will be some sort of sliding scale, where you start paying at 9% at £21k, but then this increases steeply as you earn more. Otherwise large numbers of people will have their loans canceled after 25 years or they retire.

grastgirl

jeanmd wrote: »

Worried, worried, worried.
Dd has just sent of her application for next year with predicted grades of A.A.A* She's wanting to study up to Ph.D level. The thought of her tuition costs at the end of this is frightening.

Just wondering who it will affect as her BF has just started this year i.e. would students already at Uni have the increase or is it just new students?

At PhD level the research councils usually pay the student a tax-free stipend, which is usually enough to live on without having to work extra (not that you'd have time). They also pay the tuition fees, so don't worry yourself unnecessarily about that.

jeanmd

grastgirl wrote: »

At PhD level the research councils usually pay the student a tax-free stipend, which is usually enough to live on without having to work extra (not that you'd have time). They also pay the tuition fees, so don't worry yourself unnecessarily about that.

Thank you, I'd not looked at funding so far off that at least is something.

jamesjenkinsyates

Sorry Martin, your wrong on this one. Student fees over £6,000 will be government supported, just a proportion of fees over that amount will go to the government. Under the current proposals.

mcphearson

I finished Uni in June, How is this likley to effect me and others that are currently repaying thier loans, will i see a rise in interest that's not relative to inflation under the current system?

I am lucky that im in the position to repay the loans in full as i only took them out to put down a deposit for a house, although repaying them will mean putting off buying a house.

globalds

mcphearson wrote: »

I finished Uni in June, How is this likley to effect me and others that are currently repaying thier loans, will i see a rise in interest that's not relative to inflation under the current system?

I am lucky that im in the position to repay the loans in full as i only took them out to put down a deposit for a house, although repaying them will mean putting off buying a house.

You should go into politics ...you seem to have most of the required qualities.

teabelly

The whole higher education system has been in a mess since the disastrous idea of turning all polytechnics into universities and having anyone doing a degree. It is the 40% participation rate which hasn't been adequately funded that has caused this problem. Universities should only be for the intelligent. Not those that can scrape a D in woodwork! The loans system should also be tiered on ability - make the thick ones pay more of the full cost. They'll be the ones that drop out and cause problems for the others as lecturer time is spent on dealing with the ones that shouldn't be there. The reason that universities are full of public school children is that their standard of education is much higher. They can afford to be picky about who they let in so some poor beggar from a comprehensive in an inner city fighting against disruptive peers is going to find it much harder to get into any university.

I also think HEFCE should not claw back fees for drop outs. Those that aren't fit for study need to be thrown out at Christmas thus saving a fortune to the tax payer. Universities shouldn't be penalised for chucking out academically poor students.

There's also been a paradigm shift within universities in student attitudes. As they're paying for tuition they are more likely to complain about standards. Some of which you can't do anything to address due to lack of funding. Also I think academics are finding it hard to grasp that they're a service provider now and it is creating a level of stress between doing research and doing teaching. Both are needed but time constraints and paper work and student numbers mean it is harder and harder to do both, well.

There is a big black hole in vocational training. This is what the polytechnics used to cater for. I'd return back to the old system with polytechnics with practical business based courses with reduced fees and business sponsorship (unlimited places) and keep universities down to 15-20% of those with good A-levels. Businesses are always whining that there aren't the skills. They need to start paying for those skills too. There isn't a skill shortage so much as a training shortage. I'm sure there are plenty of people that could be trained to fill the gaps business is claiming to see.

Glad I'm not a student now. I don't think it is worth going to uni now for a lot of subjects as graduate salaries have been eroded to the point there is barely anything gained compared to the loss of earning for an extra 3 years.