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

Pelagic123

OK, I have now read all the way from December.
No one, not anywhere, discusses the most awesome spreadsheet for this very purpose. A number of people ask “How much?” other want to know “Total costs”, others claim it is a form of “Taxation on graduates, nothing more” (utter rubbish I'm afraid).


I have been looking seriously at this issue, as my daughter wants to go to University, to be a Vet, that's five years! Or should I say a £275,886 Veterinary qualification (and still owing after 30 years).


The spreadsheet is produced by The Department for Business, Innovation and Skills. It is aimed at giving an idea of the repayments required for student loans according to expected income.
It tells the tale of 4040 graduates over 35 years (why 35 not 30, when loans are wiped clean, I do not know). It depicts 2024 Ladies and 2016 Gentlemen (looking at this alone shows you that men pay more for their degree than women, £58,560 as opposed to £34,527, surely some one will take that one to European Courts) and estimates incomes for the loan duration.
It can be adjusted as you like, eg, we all will need to put in £13,000 a year, not £10,000, as most Universities have opted for this, just because they can (tail wagging dog, the Universities now tell the Government what their Higher Education budget is to be). We all need to adjust the RPI from 2.75% to 4.4% (as of May 2011) so that students pay 7.4% on the loan (more than my mortgage which is 3.75%, but then I HAVE to pay that off).


Much is made of this “you only pay when you earn a lot” line, rubbish, rubbish, rubbish. What you pay depends on how well off you are, the well healed pay less, the middle ranks pay a fortune (over ¼ million pounds in my daughters case, and still owe £36,000+ after 30 years). Many are “Taxed” on earning for 30 years, some are free after 5 years; This is fair?


The Government never gets back anything like the amount they pay out; after 3 tears they have paid out £20.0 billion (312,000 (ONS stats) students, £13,000( BIS stats) per year, nothing repaid for first three years) and £12.0 billion per year thereafter, more than the total HE budget.


So, remember you got it from me, the handily titled “BIS-Student-Loan-Repayment-Ready-Reckoner-model.xls” (Google it (other search engines are available)) there is a PDF to go with it to explain it all, it is rubbish and tries to excuse the never heard of before “Real-rate-of-interest” and uses the little known, outside of accountants and LSE grads vocabulary, Net-Present-Value, to justify it all. Rubbish, rubbish, rubbish.


It is Huge (50Mb), it is in clear view (why has no one here mentioned it?). It should be the end of fees altogether, or it will show thousands of students that it really is no good getting a UK degree, go elsewhere with the cash. Get £50,000 from Mum and Dad and start your own business, get some property, invest in whatever, but a UK Bsc, BA, BVMS etc are probably low on your list when looking to spend hundreds of thousands of pounds of your hard earned cash.


Pelagic

FATBALLZ

reevery wrote: »

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

True but if you are on £15k and anything extra you earn is taxed at 41% it is a real disincentive to trying harder, earning more and contributing more to our society.

Pelagic123

Ok here are some more figures (something I have heard Martin say he loves):
Assuming the original values with RPI at 2.75%, £10,000 loan each year for 3 years:

43% of loans are never paid off, not ever,
52% are still paying after 25 years
74% are still paying after 20 years
85% are still paying after 15 years
93% are still paying after 10 years, but remember this means that the rich and the dead (7%)are now paying no more "Graduate Tax"
96% are still paying after 5 years, but remember this means that the rich and the dead (4%)are now paying no more "Graduate Tax"

I'll do the figures for the new world state, £13,000 loan and 4.4% RPI next, if it looks like anyone cares anymore.

FATBALLZ

Pelagic123 wrote: »

Ok here are some more figures (something I have heard Martin say he loves):
Assuming the original values with RPI at 2.75%, £10,000 loan each year for 3 years:

43% of loans are never paid off, not ever,
52% are still paying after 25 years
74% are still paying after 20 years
85% are still paying after 15 years
93% are still paying after 10 years, but remember this means that the rich and the dead (7%)are now paying no more "Graduate Tax"
96% are still paying after 5 years, but remember this means that the rich and the dead (4%)are now paying no more "Graduate Tax"

I'll do the figures for the new world state, £13,000 loan and 4.4% RPI next, if it looks like anyone cares anymore.

My loan was just under £9k over 3 years (which I thought was massive at the time!), and I'm on course to pay it off in 2 years time, 7.5 years after graduation - and I've been relatively successful compared to most graduates.

This is one of the really awful things about top up fees and the new style system - for me, although the end has always been in the distance, it was in sight. So I have been motivated in that I know currently my marginal tax rate is 41% despite being a basic rate tax payer, but I know that rate will drop to 32% when my loan is paid off.

The new system is more or less just a graduate tax for life unless you get a really amazing job. And to my mind, it really is just a way of shifting the tax burden onto the young to raise more money without upsetting the baby boomers and generation x who are worth a lot more votes to the government. If it was suggested that basic and higher rate tax was raised 9% there would be riots and angry claims that it penalises success to the point where it isn't worth trying for - instead this massive tax hike is 'subtley' being forced onto the young. I really feel for the people who are affected by top up fees and the new system.

Pelagic123

Fatballz,
They are all in for a surprise, the Govenment cannot afford to do this, they want to make savings, but underwrite all their savings and NEVER get them back. Yes it is a horrible way to treat young people (or their parents), but their own figures, now that budgets are set by Universities, rather than Government, show a loss from day 1.

Here are my current "not going to repy figures: 4.4% RPI and £13,000 per year loan;

74% of loans are never paid off, not ever,
81% are still paying after 25 years
86% are still paying after 20 years
93% are still paying after 15 years
94% are still paying after 10 years, but remember this means that the rich and the dead (7%)are now paying no more "Graduate Tax"
96% are still paying after 5 years, but remember this means that the rich and the dead (4%)are now paying no more "Graduate Tax"

Would those parents of students on a 5 year, or masters+Phd course like to see those figures? Yes let's..............

Pelagic123

So, your child wants to be a Vet? A Doctor? Do further study? Maybe a Phd?: So, that's five years, 4.4% RPI and £13,000 per year loan;

84% of loans are never paid off, not ever,
89% are still paying after 25 years
91% are still paying after 20 years
93% are still paying after 15 years
95% are still paying after 10 years, but remember this means that the rich and the dead (5%)are now paying no more "Graduate Tax"
96% are still paying after 5 years, but remember this means that the rich and the dead (4%)are now paying no more "Graduate Tax"

....... and some other things;

Your child could pay off £275,886 and then after 30 years, have the remaining £35,236 wiped off, how kind!

The worst/best debt wiped out comes in at £380,688, having already paid off £100,449. Bet they feel it was all really worth it!!!!!!!!!!

Some one who never pays anything, due to earnings or whatever, has a debt of only £300,956 wiped out. The reason this debt is lower than the previous poor soul is that the Government feel it kindly to charge less interest to those on lower incomes, which you might think is admirable, but just look what happens to the the guy/girl above when they make some sort of go of it, they get hit full in the face.

Pelagic

DaveO

I have said all along the real sting in the tail (and hidden by the govt - they never talk about it but prefer to harp on about who won't pay due to low earnings) is the real rate of interest that will be charged on these loans.

They have to charge a real rate of interest when the loan gets above about £7K a year otherwise a subsidised loan of the type that existed until this lot got in power would cost too much and no savings would be made. And that is before current levels of inflation were around which makes it look like they won't save anything anyway if a brief look at Pelagic's figures mean what I think.

How did we get to this stage? I firmly believe it's for one reason only and that is political . The desire to try and show "we are all in it together" led this bunch of lunatics to come up with a policy that made it look like potentially well off people (graduates) would be paying for their own education. The trouble is, like the child benefit cuts which was another daft policy right out of the same school of thought, it was not thought through (understatement).

This fee policy has been swallowed by many people as right and proper because they are easily persuaded by a cynical government that practices the politics of "divide and conquer" in order to get one part of society happy to see another part pay more for whatever it may be, in this case higher education. Next will be the well-off baying for cuts in benefits or tax credits because the fees their kids are paying at Uni have gone through the roof.

"You won't pay a small amount of income tax toward my sons higher education (and it IS a small amount)? Then I don't want my taxes being used for your tax credits." <---- that is where we are heading.

Sadly no English (as opposed to the SNP) political party will dare stand up and say "hang on, the only sensible thing to do is fund higher education out of income tax" because they have divided and they have conquered.

What was it Thatcher said? "There is no such thing as society."? Well here you go, that is where we are heading with policies like this.

Pelagic123

The figures below look awful, but just select, copy and paste into a spreadsheet, all the numbers go into a single cell, but you can see the progression, and the end result. If you wanted, you could save it as a TXT file and "Import" it with a tab or space delimiter.
They show how much students "Owe" the Government, all students ie 321,000 each year. After 30 years, the students still "Owe" £250.0 Billion and climbing, but a great chunk is written off for 1st years. These are not my figures, these are simply totalling the BIS spreadsheet figures and multiplying by the Office for National Statistics number of English students entering UK universities, so I have not made them up.

Pelagic


Total owed Total owed after repayments Total owed Total owed after repayments Total owed Total owed after repayments Total owed Total owed after repayments Total owed Total owed after repayments Total owed Total owed after repayments Total owed Total owed after repayments Total owed Total owed after repayments Total owed Total owed after repayments Total owed Total owed after repayments Total owed Total owed after repayments Total owed Total owed after repayments Total owed Total owed after repayments Total owed Total owed after repayments Total owed Total owed after repayments Total owed Total owed after repayments Total owed Total owed after repayments Total owed Total owed after repayments Total owed Total owed after repayments Total owed Total owed after repayments Total owed Total owed after repayments Total owed Total owed after repayments Total owed Total owed after repayments Total owed Total owed after repayments Total owed Total owed after repayments Total owed Total owed after repayments Total owed Total owed after repayments Total owed Total owed after repayments Total owed Total owed after repayments Total owed Total owed after repayments
For just the 4040 students on the spreadsheet

£261,054,555 £131,481,952 £394,317,299 £263,717,885 £530,602,094 £397,473,375 £669,089,781 £532,165,623 £809,087,645 £667,251,330 £949,942,127 £802,030,114 £1,090,544,765 £936,734,560 £1,230,857,940 £1,070,362,951 £1,370,362,933 £1,202,382,101 £1,508,075,612 £1,332,004,567 £1,643,442,757 £1,458,735,717 £1,775,586,007 £1,583,435,290 £1,905,648,172 £1,705,645,017 £2,032,979,287 £1,824,669,693 £2,156,996,845 £1,940,039,284 £2,277,293,223 £2,051,346,375 £2,393,126,136 £2,159,728,047 £2,505,553,233 £2,264,464,723 £2,614,320,095 £2,365,154,838 £2,718,953,613 £2,461,454,462 £2,818,809,496 £2,552,758,209 £2,913,579,275 £2,640,506,187 £3,004,551,936 £2,724,488,572 £3,091,640,682 £2,804,817,809 £3,174,743,416 £2,881,649,777 £3,254,069,777 £2,955,487,758 £3,330,350,738 £3,027,743,910 £3,404,799,583 £3,098,259,765 £3,477,500,079 £3,167,164,981 £3,548,720,625 £3,234,828,927

For a full cohort of 312,000 students For a complete cohort of 312,000 students

£20,160,648,769 £10,154,051,702 £30,452,227,017 £20,366,331,743 £40,977,191,446 £30,695,963,576 £51,672,280,135 £41,097,939,228 £62,483,996,326 £51,530,300,738 £73,361,867,202 £61,938,959,333 £84,220,288,782 £72,341,876,944 £95,056,355,754 £82,661,693,241 £105,830,008,674 £92,857,231,588 £116,465,245,307 £102,867,679,446 £126,919,341,593 £112,654,837,557 £137,124,463,918 £122,285,101,598 £147,168,868,721 £131,723,080,493 £157,002,360,801 £140,915,085,221 £166,579,954,395 £149,824,815,968 £175,870,169,665 £158,420,809,155 £184,815,681,769 £166,790,878,881 £193,498,170,457 £174,879,453,830 £201,897,987,511 £182,655,522,171 £209,978,595,893 £190,092,522,771 £217,690,238,300 £197,143,703,244 £225,009,092,492 £203,920,279,779 £232,034,703,983 £210,406,048,118 £238,760,369,487 £216,609,692,191 £245,178,204,427 £222,543,250,103 £251,304,398,620 £228,245,589,249 £257,195,403,540 £233,825,767,314 £262,944,918,275 £239,271,546,217 £268,559,412,050 £244,592,939,140 £274,059,612,595 £249,818,471,574

pjala

Pelagic123 wrote: »

Fatballz,
........
Here are my current "not going to repy figures: 4.4% RPI and £13,000 per year loan;
.........

Worse, RPI was 5.2% for April, so add a compounding .8% on top of that.
Your figures are very interesting - I have downloaded the xl spreadsheet, and will be playing with it. I did maintain in an earlier post, that if you could extend your mortgage - at a fix of around RPI, then you will be gaining 3% per annum, and your son/daughter will be paying you back, not the loan shark.
The problem is, that the UK government has still not told us whether it will be ok to pay up front or not.

Beats me why our 16/17 year olds have not been demonstrating continuously over this issue - worrying that our young people are happy to just sit back and take it.

pjala

The highest rate of tax on dividends is currently 28% - whereas the current rate of tax on earnings is 50%. Will any dividend income you earn count as income, and therefore have 9% applied to it? Will interest in banks/building societies be classed the same and have 9% applied to it?
Are there any tax experts/ accountants out there who know the answer as to where and when this 9% fee structure is applied?

It is assumed that RPI represents the payments keeping in line with real increase in prices - NPV - net present value? But what if there is a freeze, and your wages go down relative to inflation. Effectively the NPV increases relative to your wage - is this a double whammy?

Thanks in advance.