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

oskie

pjmony wrote: »

Martin, thanks for the article.
However, I thought your sums were a bit misleading.
Sure, if you have a debt of £21k under the new rules you pay less per month than under the
old rules.
However, under the old rules you'd only have a 3rd of the debt to start with.
Or have I got that wrong?

My objections to these charges are as follows :-
- people assume that you're investing in your future. NOT NECESSARILY. I've seen reports from
the USA where claims that a degree gives you a larger salary are exaggerated by colleges.
Degrees are not as highly regarded as they used to be.
- the very people who got a free education, have been paying into good pensions and have
benefited from house price inflation are the same ones who are saddling our children with
large debts.
Youngsters will end up with this debt, wont be able to afford their first house, wont have as
good a pension.
They'll be expected to pay for/look after the same bunch of selfish people who lumbered them
with this poor situation.

I have to say I have thought this too. Deductions from wages (however small) will impact on future lives- money that could be paid into pensions, used for housing, spent on children. This system will be repayments that go on for virtually all of the students working life. £50 a month less pay may be a pittance to those in westminster, but to a normal person who moves on in life and is trying to raise a family, it is a lot of money. Especially so if there are two graduates living together with similar debt. If a woman is paying it back then takes a career break to have children, the interest will keep totting up. If she is lucky enough to be able to get back into work and do well the payments will resume, making it less profitable for her to work at all. It will be something families will have to consider, along with everything else, when they plan their lives.

oskie

..and no doubt the businesses of the day (fast forward 10 years) will be moaning that the new generation dont spend as much as they used to in the shops. Well how can they? The country will still be recovering from the credit crunch (its going to be a long road), the credit crunch has taught everybody to be more careful, so no access to spending there like the last reckless generation. The government will be scratching its head wondering why all the graduates arent contributing to the economy like they expected. Well that will be because they are either strategically working in jobs that pay under the minimum repayment amount, or they will be in good jobs but trying to manage their repayments whilst putting some away for their own kids education, and trying to save some for their retirements. In short they are going to be hit from all angles. Graduates will be making choices about how they want to tackle it, and many will be going for lower paid jobs and topping it up with things like tax credits (unless the tories abolish that too, or say the student loan can count that as income as well) So, what happens to the student loan company when it cant get back what it has paid out? Do the taxpayers bail it out (indeed are we funding it already?)

kittykitten

At last someone is talking sense about this! I don't understand what all of the fuss is about. Basically you only pay a very small percentage of your wage back, and it'll be even less than at present - I don't even miss my student loan repayments from my monthly salary, because even though I don't earn a huge amount the money that's going back is money that I never had because it vanishes before my pay hits my bank account. It's just numbers on my payslip, like the tax, NI and pension.

Student loan debt is not like real debt, it does not affect your credit rating and will eventually be written off if you haven't already repaid it, so there's nothing to worry about as even if you leave uni with £40k of student loan to repay, work a low wage job for your entire life, the government will never come chasing you for that money. All that will happen is that you'll hit retirement age and it'll be wiped.

People in this country have a very distorted view of debt in general, with a feeling that all debt is bad (not true) hence the reason why they're not making the effort to understand student loan.

lanky_stephen

Martin, the REAL problem with the increase to student fees is that the government is seeking to exclude Further Education from ANY financing by itself from the tax system. A country's real wealth and hope for the future can be measured by the potential of its young people. What £9,000 pa fees, to increase no doubt year on year, will do is to deny degrees and opportunities to many of our young people in future on class and income grounds. Why is it suddenly anathema to finance education at least partly from the public purse? High class education is a benefit to ALL.

setmefree2

kittykitten wrote: »

At last someone is talking sense about this! I don't understand what all of the fuss is about. Basically you only pay a very small percentage of your wage back, and it'll be even less than at present - I don't even miss my student loan repayments from my monthly salary, because even though I don't earn a huge amount the money that's going back is money that I never had because it vanishes before my pay hits my bank account. It's just numbers on my payslip, like the tax, NI and pension.

But paying a small amount back forever and ever means that you will pay back a lot more than you ever borrowed......

Do you know how much you will pay back?

jamesd

kittykitten, student loan debt does affect your credit rating when it's being repaid because it reduces your disposable income. Not all potential lenders will include this factor, it's up to them whether they do. Some graduates might also make fraudulent loan applications that don't include loan repayments, when asked about monthly expenses or loan repayments. It's important to properly declare all loan repayments or regular expenditure if asked about it.

setmefree2, hopefully you won't go and produce numbers that aren't corrected for wage inflation. Wage inflation is likely to be high for many graduates, greatly increasing the value to them of delaying repayment because it frees up money early on when their finances are most tight and then repayments become trivial towards the end of the term after years of wage increases.

Having any interest rate that's above wage inflation will increase the real cost of the loan but it's often worth accepting that to get the money repaid at a time when it's more affordable. It's still an increase in real cost of the loan, just one that may well be worth accepting to defer repayment.

oskie

jamesd wrote: »

kittykitten, student loan debt does affect your credit rating when it's being repaid because it reduces your disposable income. Not all potential lenders will include this factor, it's up to them whether they do. Some graduates might also make fraudulent loan applications that don't include loan repayments, when asked about monthly expenses or loan repayments. It's important to properly declare all loan repayments or regular expenditure if asked about it.

setmefree2, hopefully you won't go and produce numbers that aren't corrected for wage inflation. Wage inflation is likely to be high for many graduates, greatly increasing the value to them of delaying repayment because it frees up money early on when their finances are most tight and then repayments become trivial towards the end of the term after years of wage increases.

Having any interest rate that's above wage inflation will increase the real cost of the loan but it's often worth accepting that to get the money repaid at a time when it's more affordable. It's still an increase in real cost of the loan, just one that may well be worth accepting to defer repayment.

Fully agree here about the disposable income issue. The student loan deduction will show very clearly on a wage slip. When you go for loans and mortgages they often ask for your wage slip. If you are paying back money it comes off your "top line" and therefore reduces your salary. Most banks WILL add this fact to their calculations because its not fairy land, if a graduate is having a legal deduction taken from their wage for several years, then they dont have that money available, however much they would like people to ignore that fact. Isnt ignoring these things why the banks got us into trouble in the first place?

lighting

As a parent of children hoping to go to uni, one of the craziest things about the fees plan is that graduates will be paying 40%tax rate when they earn £21k.
The fees are so high, and the increase so steep that even those (like us) who have saved for their kids education will not be able to make much of a difference - eg
under old system costs = £25k, parents budgeted to pay £15k, net debt = £10k - just about manageable
new system costs = £40k, why bother reducing the debt with the £15k? Repayments not reduced, rate not reduced.


Under the new system EVERYONE LOSES

1. government loses - no parents (apart from the rich) will be able to clear debts, so they will have to wait for any contribution
2. graduates lose because they will be paying 40% tax rate at £21k

SHEER MADNESS

tightus_wad

I imagine most wont pay it off as the interest will probably be more than the repayments and the "debt" will mount up and be written off. Ends up costing the economy (we the people) more - just wait for 32 years time when the first ones are being "wiped". Mind you, goodness only knows what will happen in that time!

Has anyone worked out how much it would cost to have "free" education as it was in Cameron's day? Does it really cost the economy that much? As much as Trident replacement or a few Nimrods (that have been scrapped).

One certain thing tho' Liberal Dem's just look like absolute fools for the changes in their manifesto v actual policies. How can they argue this?

A very dark day for education in my opinion...:(

riskaverse63

No wonder there is a lot of anger and fear about student fees. We are not given enough information to make sane decisions. Only today have i realised that students pay the 9% extra tax on the money earned over £21,000. i thought it kicked in at £21k and they were taxed on the whole £21k.
I am a keen Money Saver with one daughter just started uni this year and one to follow in 4 years time so i want to understand this and i have been trying very hard to. Even this site isn't helping me. I want my youngest to have the same opportunity as her sister. What would help me is a clear guide to the two systems we will be faced with which will allow me to explain to them how much they will both be paying back over their working lives. Does this exist?

What seems really unfair to me is that there are so many different loan systems in existence and the amount students pay has been dictated by when they were born. Surely a graduate tax would be a fairer system which could replace all the current existing loans? Again i am not in a position to have an informed opinion on this as i can't find any useful information to help me understan.....