'The argument over student loans could kill the next generation's...' blog discussion

This is the discussion to link on the back of Martin's blog. Please read the blog first, as this discussion follows it.

Please click 'post reply' to discuss below.
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  • kaz0705kaz0705 Forumite
    240 Posts
    I know a few of the key students from UCL involved in the protests, including the one outside Top Shop on Oxford St this week. I think, overall, the protests are about more than just tuition fees but I think this blog has been incredibly helpful for explaining issues to Joe Bloggs.

    The 'bad' debt that the government is so keen to get future generations into is terrifying, especially, I'd imagine for many DFWs like me who know only too well the implications of bad debt.

    On Facebook the other day, unrelated to the student fees debate, a friend posted that she's just worked out that it'll take her 200 years to pay off her student debt. Another friend commented that it she finished uni 10years ago and is still paying off hers.

    The point for me is not necessarily the fees- I understand *some* need to be levied and I never had a problem with taking my loan. IT's the fact that those on the lowest wage that can start repaying will be doing so forever. Those, like some of my friends, who go to work in the city or as solicitors, will be able to pay it back fairly quick, incurring minimal interest.

    Those, like my boyfriend, who has yet to reach a threshold to start paying his back are simply incurring more and more interest as each pay day passes.

    It's terrifying how much social workers, for example, who need a degree but are poorly paid, will end up owing yet they are a vital part of our society.

    I work with vulnerable children and regardless of reassurances of the help they will receive, when you don't necessarily have a home to return to during the holidays (fostering provisions stop at 18), the additional barrier of unending bad debt would simply be the final nail in the coffin. I know young people who have taken GCSEs early and achieved As and A* and other that have 10 A*. Just because they are vulnerable children does not mean they do not deserve a chance to have a degree. Yet these fees, combined with the current hurdles they face, would- in my opinion- reduce the already low figure of looked after children who attend uni (9%) to the figure it has been for decades before the Labour government (1%).

    Oops- bit off track there.

    In summary- great blog!
    LBM: January 2010
    DFD: August 27th 2012
  • I have a son in his 2nd year of Uni. He is doing a 4 year degree. He is based in London and the hours of the degree is virtually full time with no free time really to allow him to take a part time job. As parents we both work full time, our income is such that his grant amounted to £75 for the year. His loan is therefore nearly 10k, 3k+ for fees and 7k to cover accomodation in a shared house with 5 others. We pay his weekly transport costs of £20 as well as his food. When he leaves Uni he will owe nearly 40k on his student loan. There is no way we can afford to give him more money to reduce this debt. I am unsure how the grant system works but I feel that it seems unfair that my son will come away from Uni owing such a huge sum because we work whereas if we did not work he would receive a grant and have little or no debt. Surely all students should be treated the same, at the end of the day it will be them a degree benefits with the increased opportunities and chance to earn more money. As you say they do not start to repay their debt until they earn over 21k. Perhaps the abolition of grants could fund the lower fees for all. Imagine our sons debt if fees were higher! Our sons view on the cost is you have to speculate to accumulate. He is going to Uni with a view to earning more money later on and why should that tax payer or his parents fund this. Don't get me started on Wales and Scotland and Uni fees. Are we a United Kingdom or not? I feel that English students are being discrimiated against. Anyway thats another argument.
  • irishwench69irishwench69 Forumite
    807 Posts
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    Hi,

    Absolutely great blog, totally agree with your points.

    What's scary is definitely the interest rates as you say. I don't really have any smart ideas for how to tackle this other than keep the message narrow - all I hear on the news at the moment is about the level of fees being charged, and this is really a separate issue, and means the interest implications are lost.

    At a time like this when so many people have bad debts and the economy is the way it is, the last thing we should be doing is lumping people with potentially toxic debts when they're just trying to improve themselves.

    Unfortunately this is something of a political battlefield - it doesn't seem possible to separate out the arguments about whether there should be tuition fees or how many people are entitled to go to university with the more important thread of what are the debt / interest implications on people taking out loans under the new / proposed system. Maybe this is where you come in Martin......but surely if you fight against them removing the cap on interest, wouldn't the first query be what's your alternative?

    What would the cost be of introducing fees but keeping the cap on rates when it comes to loan repayments? Does anyone know?

    IW x
    Official DFW Nerd Club - Member no. 222 :beer:
    :T Debt free wannabe - Proud to be dealing with my debts! :T

    Remember the MoneySaving mantras!

    IF YOU'RE SKINT......
    Do I need it? Can I afford it? Can I find it cheaper anywhere else?

    IF YOU'RE NOT SKINT......
    Will I use it? Is it worth it? Can I find it cheaper anywhere else?
  • A simple thing you could do would be to raise this in your weekly email.

    Since it goes to 5 million people, that in its own right would have a big impact on educating people appropriately.
  • Thank you Martin, for posting an assessment of the situation, free of the histrionics that come from both sides of the debate.

    Many of my American friends have (or had) student loans to fund their higher education, and although no-one actually wants debt, they took it, as an investment in higher incomes later.

    I think, too, that forcing students to think long and hard about what they are signing up for may reduce the number of seemingly pointless degrees that do not lead to work.

    As for how to move the debate forward, I think the previous suggestion is a great place to start. Publish your blog in the weekly email please. Let us get this discussion going, properly, without all the screaming, shouting, name calling, graffiti and fire extinguishers.
  • I am VERY worried about: not being able to repay early, interest potentially going up and up so taking longer and longer to repay, people getting comfortable with the idea that it's okay to go through life owing tens of thousands of pounds (regardless of what job/career you want) without being able to sell off a tangible asset and relinquish the debt.

    How will people ever feel truly FREE to make their own choices throughout the rest of their life if they have a massive debt like that over them? I mean, at least with a mortgage you can sell the house, pay off your debt, pack your worldly goods in a suitcase and set off for new horizons. It will hang over you like a black cloud.

    And what about relationships where both have massive debts before they even start trying to get a home together. How will that work out when people marry, someone goes part time to look after kids or whatever and then they divorce???

    This is a mess. I went to uni (when it was free), my husband didn't. He earns more than me. I have serious doubts whether I will want my kids to go.

    For working class people like me the concept of debt is not something we can just shrug off lightly. Unlike for the Osborn's, Camerons and Cleggs of this world £40k is not pocket change. (And let's face it, it probably feels quite cheap for those who've spent the last 10 years paying private school fees).

    Interest must NOT continue to grow at inflation rates. Or if they persist in this people MUST be able to repay early. Anything else is scandalous.
    Waddle you do eh?
  • Looking at the way that these loans are repaid it looks to me that a large number of students that borrow responsibly may never be able to repay their debt. Now if they realise that, they may consider that it is not worth borrowing responsibly and instead borrow to the max because they are never going to pay it off anyway.
  • Thanks for explaining this Martin.

    I consider myself to be financially literate, and politically aware, but I had no idea that (for example) the loans have no impact on mortgages, or how the repayments kicked in. I've two kids still 10 years away from uni, so no doubt it will change several times between now and then, but even now I worry how they'll be able to afford it.

    I agree with you that moving the interest rates to a commercial level away form inflation will cause huge problems, there will be many many graduates who end up on "normal" jobs (as opposed to high flying professions or city jobs) who will effectively be paying 40% marginal rate of tax form £21000. Someone earning £50000 is going to have a marginal rate of tax of 50% for near to 20 years under this system. That can't be right.

    I'm really hoping that the increase in fees will move universities to start competing on the type of course they offer. I think with fees at 6k+ a year, the days of doing a 3yr, full time degree are going to be numbered. Hopefully it will be much more common to do part time degrees over 5 years, while working 3-4 days a week also rather than people just not doing a degree.

    However, I also think there's something wrong with the entire system that requires 50% of it's young people to enter the workforce with £40k worth of debt, even it it's "special" debt that doesn't count sometimes.
  • I think Martin needs to communicate a clearer and simpler message on the proposed student loans if he wants the masses to understand it.

    The proposed system can be broadly summarised in the following sentence: you pay a real rate of interest on your student debt and make repayments of 9% of the portion of your income over £21k, until the debt is cleared or 30 years have passed, with no facility for overpayment.

    What this will mean is...

    - Students who end up on low incomes won't pay much back, if anything, because of the £21k repayment threshold and because their debts will be written off after 30 years (despite possibly running into six figures by then).

    - Students who quickly become higher rate taxpayers and top earners will pay a bit more than the true cost of their borrowing due to a real rate of interest being levied for a couple of years without a facility for overpayment, but their debts will be paid off relatively quickly (within 10 years).

    - Yet for everyone else, the majority, those with starting salaries of £20-£30k and 5% annual pay rises, the policy is a 30 year graduate tax (at a very punitive rate) on all earnings above £21k and they are likely, due to the real rate of interest and no facility for overpayment, to repay the true cost of their borrowing many times over.

    All in all, the proposed policy will mean that it is the so-called 'squeezed middle' that will end up subsidising the debt write-offs elsewhere. The more prosperous graduates will, on the other hand, get away relatively lightly.
  • C_MababejiveC_Mababejive Forumite
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    If certain students say they are not willing to take on a preferential loan for their education then we will have to import more graduates and skilled people from other countries.

    After all,if we can import Polish plumbers/brick layers/builders and vegetable pickers, we can also import Polish graduates and those who would do the jobs which require a degree level of education.
    Feudal Britain needs land reform. 70% of the land is "owned" by 1 % of the population and at least 50% is unregistered (inherited by landed gentry). Thats why your slave box costs so much..
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