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

inicholson

Why is free higher education not a right? We all assume that because free education ends at age 16 that this is normal and correct- but this has only been the case since 1972. Yet we continue to offer free education in schools for a further 2 years for those who want it on the basis that better educated young people are good for out economy. Suddenly at age 18 we're no longer interested in educating the young.

In the short term this will make no difference to our nation's finances as we will have to foot the bill up front and wait for graduates to earn over £21k and pay us back. Even in the long term it may not help much as we're going to have to pay doctors, nurses, teachers, social workers, etc. more to cover the cost of the education we demand they have in order to do those jobs.

The irony is that by allowing universities to increase fees the government has handed over control of the purse-strings. Where previously the government could tell universities how much money they were getting, now the universities tell the government!

Claireannejames

Why is the entire cost of tuition fees being shifted to the student, when we ALL benefit from graduates in every walk of life. University education should be funded from general taxation. Or are we going to roll this out to primary and secondary education too, turn tax into debt for everyone who goes to school?
The number of students educated in the UK and going on to university will be dramatically reduced by these fee rises, I wonder if it's part of the plan to make them appear more frightening than they are, to misinform and mislead, deliberately in order to put off the less well-off? So that the children of Cameron and his kind will find it much easier to get into Unis, without all these clever state-educated folks taking 'their' places.
And we will consequently have to bring in even more Doctors, Teachers, Engineers etc etc from abroad, whilst a generation of intelligent people remain in low income jobs or on benefits. The whole thing stinks.

buzben

This is such a worry as my daughter is just taking her GCSEs and will be faced with the new 'tripled uni fees' situation after her A levels.

She wants to teach which requires a degree, but I hope more employers can be encouraged to take on post-A level entrants and fund degrees over, say 5 years, via day release or similar.

I have some questions which perhaps someone can answer please?

1 - are overpayments / lump sum reduction credits allowed, penalty free?

2 - is early repayment possible, penalty free?

Thanks.

FATBALLZ

pjala wrote: »

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

And of course an existing graduate earning £15,001 also has a 41% marginal tax rate (NI is now 12%).

Still, as long as the baby boomers and generation x get that tax break to fund that shiny new beemer...

pjala

buzben wrote: »

This is such a worry as my daughter is just taking her GCSEs and will be faced with the new 'tripled uni fees' situation after her A levels.

She wants to teach which requires a degree, but I hope more employers can be encouraged to take on post-A level entrants and fund degrees over, say 5 years, via day release or similar.

I have some questions which perhaps someone can answer please?

1 - are overpayments / lump sum reduction credits allowed, penalty free?

2 - is early repayment possible, penalty free?

Thanks.

For 1 and 2, even though Universities will be looking at open days for 2012, so helping lower sixth formers/college students decide, no-one yet knows for sure the answer to the above, as the Government is still to decide, or at least tell us.
My guess from statements so far is, no and no. They are seeking to justify all this, and not allow themselves to be criticised for making University only available for rich kids. If they allowed the "rich" to pay up front/pay off early/part pay then this would be detrimental to the trap they are placing poor students in - i.e. 9% additional tax for 30 years.
Also, lets face it, it really is not a tax. With tax, if you have tax deductible expenses of some form, then you don't pay tax on those things. A pension is an example. If you pay £200 a month into your pension, your tax is calculated after pension deduction.
With the loan for student fees, the amount taken out of your wage is calculated from your gross wage. This means the more pension you pay, the bigger proportion of your take home you will pay to the loans company.
So the Conservative government who hate taxes, have created a system for our children, that is a lot WORSE than taxes. A loan that does not even disappear if you go bankrupt.

pjala

FATBALLZ wrote: »

And of course an existing graduate earning £15,001 also has a 41% marginal tax rate (NI is now 12%).

Still, as long as the baby boomers and generation x get that tax break to fund that shiny new beemer...

I am the tail end of the baby boomers, and I have kids, and they are suffering as a result of this, therefore I am suffering as a result of this.

The whole "baby boomers get it easy", "old people have massive pensions" - is just divisive propaganda to make us forget that it ain't the only thing that can be done, it is an economic policy created by a nasty chancellor, who wants to ensure that we keep our economic system broadly as it is.

reevery

FATBALLZ wrote: »

And of course an existing graduate earning £15,001 also has a 41% marginal tax rate (NI is now 12%).

Not true, 12% NI rate only applies between £139 and £817, it's 2% above that. so at worst, for that £1, they'll be paying 31%.
0-£139: 0%
£139-£817: 12% (£81.36)
£817-£7,475: £2% (£133.16)
£7475-£15,000: 20%+2% (£1,655.50)
£15,000-£15,001: 20%+2%+9% (£0.31)
Total tax, NI and student loan repayment: £1,870.33 (approx 12.5%)

At the end of the day, we seem to want everything for free, but aren't prepared to pay for it. The main problem we have is that the government had to do something about the irresponsible borrowing of the previous government, and so spending had to be cut. In practice, they haven't reduced spending on HE, they've just shifted it around (the student loans come from the treasury's pockets, rather than the budget).

"I can't go to university because I can't afford it any more" or "I thought I'd got enough saved up for my child's university education but now with triple fees I haven't" couldn't really be any more wrong. Every British student can get a student loan. It isn't at all linked to credit ratings, and if you can't pay it off then it's written off. There is no ramification of being unable to pay - it's entirely underwritten. If you can get the loan, which you can, you can afford to go to University. It's then taken off some of your salary when you're earning, so it has nothing to do with how much parents have saved away or how much you think you'll be able to earn to pay it back.

buzben wrote:

1 - are overpayments / lump sum reduction credits allowed, penalty free?

2 - is early repayment possible, penalty free?

Both are possible now, but I believe the incur a penalty. It's unlikely this will be changed - in order to maintain a sense of parity between those who have to take the loan and those who could pay it off. The interest rates are going up because, at the moment, those people who can afford to pay it off know that they're better off putting that money in a high-interest savings account than paying off a low-interest loan. There was talk at one stage of penalising those who don't take up the loan, along with a whole other range of things to try and maintain fair access, but for now we don't know the technicalities.

FATBALLZ

reevery wrote: »

Not true, 12% NI rate only applies between £139 and £817, it's 2% above that. so at worst, for that £1, they'll be paying 31%.
0-£139: 0%
£139-£817: 12% (£81.36)
£817-£7,475: £2% (£133.16)
£7475-£15,000: 20%+2% (£1,655.50)
£15,000-£15,001: 20%+2%+9% (£0.31)
Total tax, NI and student loan repayment: £1,870.33 (approx 12.5%)

I'd love to only be paying 2% NI, however you are reading it wrong. 12% applies for earnings between £139 and £817 per week. The 2% rate applies after £42k ish a year.

reevery wrote: »

At the end of the day, we seem to want everything for free, but aren't prepared to pay for it. The main problem we have is that the government had to do something about the irresponsible borrowing of the previous government, and so spending had to be cut. In practice, they haven't reduced spending on HE, they've just shifted it around (the student loans come from the treasury's pockets, rather than the budget).

This is a strange contradiction, you say the government had to cut spending, but that this move does nothing of the sort. I entirely agree, therefore this change is unrelated to the deficit.

You complain that people want something without paying for it while missing the obvious truth of this system - the people who repay their investment through tax on high earnings are paying twice, while the people who take their education and give nothing back (emigrate, low paying job etc), pay nothing at all.

reevery

My mistake, of course it is. However, the 41% is still only on £1 in that example...

I know that HE funding hasn't been "cut", that wasn't my point. I meant to say that this is one of those changes that looks like a cut but frankly isn't. I don't believe successful people are paying for it twice: we spend so much on other things that this has become an easy way of taking funding out of a budget and spending it elsewhere. It's impossible to ring-fence budgets like this but it does feel as if very little tax income is now being directed at HE.

pjala

I would love to know the exact economics of this worked out between the government and the loan company.
My guess, as this is an economic loan for the duration of time the student is at University - that is RPI (currently 5.6% or so) plus 3% - 8.6% is a fairly good return on any loan. Just imagine being able to get 8.6% on your savings, it is impossible.
So the loan is probably provided commercially initially.
When it starts being paid back, if you only earn less than 21000 per annum, probably the government will be paying the 3% extra on the loan costs to the loan company - i.e. subsidising them during the process of this.
Only when you earn over £40000 per annum will you be paying the full cost of the loan, and it won't be costing the taxpayer anything at all.

I guess it is my democratic right to know the exact details of the arrangement, if anyone knows how to get hold of this information I would be grateful. Secrecy makes me suspicious.