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

dmliverpool

Its a shame that the government has effectively privatised universities in such a short space of time, yet the government has spend more in the past quarter than labour.

What's the fascination with university as a primary route to a career? We have a whole host of courses such as level 4 & 5 nvqs which hold more ground than degrees because learners actually do the jobs whilst gaining experience.

I would prefer to employ a person who has done the hard work, who can buy a home with little debt on there mind than someone with very little work experience, who has been in the university bubble that thinks the World is a fair place.

Doesn't this just highlight to young people that work will pay? Saying that with absolutely no help and support for younger people and no jobs things are looking bleak.

dmliverpool

One big con is that to go to uni we are lending from a government that has effectively borrowed that money, so it is not the government nor society that benefits from silly interest rates, rules that change each quarter, its our good friends the bankers.

I know a person who has managed to get through many years not paying the debt off. This is wrong in my view as if I took a loan out I would be bound by an agreement. Many uni grads reside in lower paid jobs for the same reasons and this is where the government should focus its attention. Getting so many people so highly qualified already to actually rise to their full potential.

Again my point is why waste money and forfeit buying a house, when you can go through a vocational education and not have a penny debt by the end of each year?

DaveO

dmliverpool wrote: »

Again my point is why waste money and forfeit buying a house, when you can go through a vocational education and not have a penny debt by the end of each year?

And when they have completed their vocational training what industries are going to employ them?

The jobs market is vastly different than when I went to University (graduated 1981). Back then engineering apprenticeships were plentiful and we had a much bigger manufacturing industry than we do now so vocational qualifications made sense for many. We are not in that situation now and simply do not have the industries to support a much larger vocationally trained body of young people. Sending less to young people to University and putting them on vocational training will not magic up jobs for them to go to at the end of their training.

You seem to be of the opinion we send too many to University and should revert to a much lower percentage going there but ignore the fact there is not a vast untapped jobs market for the vocationally trained waiting for them.

Plenty of jobs require a degree qualification. Nursing for example and social work is another. Not highly paid but highly paid enough not to avoid paying the loan back.

Discussing how many should go to University v the vocational route is rather academic (pardon the pun) anyway as the situation we face is as it is and so the policy of increasing student fees needs to be debated on its own merits.

As my figures show it does not cost a lot in terms of our taxes to maintain the current level of funding which exposes the policy as a bad one in my opinion.

pjala

reevery wrote: »

lighting

Where did you get that anyone earning £21k would be paying 40% tax? That's still easily in the basic (20%) income tax rate and when you do the maths taking into account allowances etc it's less than that. The interest paid on the loan at that rate would be tied to RPI.

That £15k you saved up, even now you should be putting it in a savings account where it will earn more interest than your child would accrue from the loan. You should only voluntarily pay it off when the interest is higher on the loan than in the bank. The Government are talking about introducing a fee for that, like most mortgages.

The variable rate of interest is to discourage people who can afford to pay for their fees to take the loan, stick it in a bank account and make a profit from it.

NI is 11%, add in 9% student loan - and Voila you are paying 40% tax on anything over 21000 per annum.

springspab

I'm not prepared to saddle my daughter with this debt and interest charges. I really don't care that it will be her debt and not ours and care more that she gets to enjoy a good start ion her professional life once she finishes university(although she is yet to decide what she wants to do in life).

I would be prepared to take on extra work myself rather than saddle her with this level of debt - I wouldn't mind so much if she could opt to pay of the debt early without pecuniary interest or redemption charges. I simply do not agree with this.

Any ideas on the best type of loan that I could take out to pay for this? Is it 0% credit cards or something else more suitable? All I know is I want to take on the debt and my daughter's savings will pay for the living costs.

My daughter is not due to go to Uni until 2013.

pjala

springspab wrote: »

I'm not prepared to saddle my daughter with this debt and interest charges. I really don't care that it will be her debt and not ours and care more that she gets to enjoy a good start ion her professional life once she finishes university(although she is yet to decide what she wants to do in life).

I would be prepared to take on extra work myself rather than saddle her with this level of debt - I wouldn't mind so much if she could opt to pay of the debt early without pecuniary interest or redemption charges. I simply do not agree with this.

Any ideas on the best type of loan that I could take out to pay for this? Is it 0% credit cards or something else more suitable? All I know is I want to take on the debt and my daughter's savings will pay for the living costs.

My daughter is not due to go to Uni until 2013.

I think a number of parents will be extending their mortgage. With RPI currently around 5.5%, the interest on the loan while your daughter is at university will be 8.5% per annum, so any mortgage that is costing less than that you will save money on.
You can get a fixed rate for 5% for five years, RPI would have to come down to less than 2% for a mortgage to be more expensive.
I love the way the government is basically acting like a loan shark.

Martin couldn't be more wrong when he says this is a cheap form of debt. I notice that he is not commenting on it any more.

Lokolo

pjala wrote: »

I think a number of parents will be extending their mortgage. With RPI currently around 5.5%, the interest on the loan while your daughter is at university will be 8.5% per annum, so any mortgage that is costing less than that you will save money on.
You can get a fixed rate for 5% for five years, RPI would have to come down to less than 2% for a mortgage to be more expensive.
I love the way the government is basically acting like a loan shark.

Martin couldn't be more wrong when he says this is a cheap form of debt. I notice that he is not commenting on it any more.

Current interest rates are also blocked by the low base rate, it maybe be applicable to the future loans (but also may not).

The RPI + 3% interest is only applicable when the person earns over £41k, and starts at RPI for those earning less than £21k. So infact, whilst at univeristy you would be paying RPI, not RPI + 3% (unless you are the amazing that you are earning £41k+ whilst studying).

edit-
I would be interested (and surprised) if you will be able to find a mortgage cheaper than RPI in a couple of years time. I guess time will tell.

pjala

Lokolo wrote: »

Current interest rates are also blocked by the low base rate, it maybe be applicable to the future loans (but also may not).

The RPI + 3% interest is only applicable when the person earns over £41k, and starts at RPI for those earning less than £21k. So infact, whilst at univeristy you would be paying RPI, not RPI + 3% (unless you are the amazing that you are earning £41k+ whilst studying).

edit-
I would be interested (and surprised) if you will be able to find a mortgage cheaper than RPI in a couple of years time. I guess time will tell.

Check your facts before you post - you are assuming that there is logic in the governments proposal but you are sadly wrong.
You are actually misleading the asker of the question, so please anyone who posts, at least read the student loans details on the government site:
http://www.direct.gov.uk/en/EducationAndLearning/UniversityAndHigherEducation/StudentFinance/DG_194804
To quote:
"Interest is charged on your loan while you’re studying. Until you start repaying the loan, interest is charged at the rate of inflation plus three percent."
When you start paying, it goes back to RPI, assuming you are only earning less than 21000, 21000 to 41000 sliding scale up to RPI plus 3 percent, over 41000 RPI plus 3 percent.

Note a couple of extra things:
It says "inflation" not RPI, so as the government is dictating that inflation for everything else is CPI, it is breaking its own rules when it uses RPI. Surely this is against the human rights convention?
If you are earning 41000 as you study, and you take out a loan, and you are not paying it back as you take it out, you will pay RPI plus 3 percent - not as the above is stating. Lokolo is just using sloppy thinking. Only after you have left Uni will you start "paying it back" and have the interest reduced to RPI.

As I said, we need a statement from Martin to say the student loan is only for those who cannot afford at all to pay for the fees up front - so rich students will have no graduate tax, poor students will pay a 9% tax - in reality more than that - on everything above 21000 per annum.

gizzie121

maybird wrote: »

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.


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.

I completely agree with you on everything you said, but wanted to especially agree with you on the two points above. Just like you, I went to uni when it was free and my husband didn't. I'm a stay at home mum, so obviously, earn nothing, and my husband earns quite a tidy sum.

So I do have to beg the question, is the government right in making people pay for their education? After all, here we are, two educated women, with free degrees, paid for by the state, and the state is getting nothing back in return for it's investment in us.

On the other hand, not having a degree clearly wasn't a deterrent to our husbands doing well.

(I don't like it, but the government can't keep paying for people to do degrees, if they then don't use them.)

As for charging above inflation interest rates. What a terrible terrible blow. I can understand charging fees (at a stretch, and there needs to be some serious bursaries for job based degrees in areas we are short of in the UK) But to make money on students is very wrong.

For that reason, I would not encourage my children to go to uni if they want to study arts based degrees and I would only encourage them if they have a clear idea of how their degree will support the job they want to do, and if that job pays enough to pay the loan back.

Otherwise, forget it.

grizzly1911

This used to bother me - I thought we had provided a good chunk of our children's costs but this just blows all our planning to bits.

As I said when first announced this is a tax nothing more nothing less. Don't stress about interest rates because I can see most of the tail end accumulated costs being written off under this plan.

Just wait until they appreciate the real cost of those write offs and they start trying to attach the debt to parents property and/or (as I will probably be pushing up daisies by then) equity in their (child) property (if they ever afford one).;-)