Student Loans 2012

setmefree2

Lokolo wrote: »

You're the one quoting the Daily Fail article, not me. I am just using historical data. If you want to do the same then fine, go ahead, make me a spreadsheet. But you can't use 5% (which it isn't even, its 4.8% with the December rate) and use that for the whole of 25 years.

I am not having this argument again, RPI is not going to continue at 5%. You say yourself you work in finance, so even you know what RPI is likely to do from previous history. It won't be at 5% for the next 25 years. Using the current RPI for the whole 30 years is extremely naive.

The bit in bold is irrelavant as loans get wiped, so even if you are paying back £3.75 a month or whatever, it won't matter at the end of the 30 years, and infact, the less you earn, the more you profit.

Fair enough - I have. Several in fact. This is what I found.

If a student borrowed £12,500 from SLC for 3 years. They would borrow in total £37,500.

Assuming inflation/RPI of 2%, a starting salary of £20k and a pay increase above inflation of 6% for 15 years and 3% from then on they would pay back £84,744. Interest of £46,838 of which £24,018 would be due to 2% inflation and £22,819 due to the interest over and above RPI. They would pay back the loan in 27 years.

Another example. Assuming inflation of 2%, a starting salary of £20k and a pay increase above inflation of 8% for 15 years and 6% from then on they would pay back £74,262. Interest of £36,514 of which £17,813 would be due to 2% inflation and £17,713 due to the interest over and above RPI. They would pay back the loan in 23 years.

These figures are pretty much the same as that of Steven Womack.

Oldernotwiser

You cannot get away from the fact that the enormous advantage of student loans over commercial loans is they don't have to be paid back if you don't have the income. Nobody can look into the future and see whether it holds redundancy, illness, children and other caring responsibilities or just a not particularly well paid job.

In any of those circumstances, a commercial loan will still have to be paid whereas a student loan won't and the student loan will ultimately be wiped out, however much is still owing. Nothing trumps these facts!

setmefree2

Lokolo wrote: »

The bit in bold is irrelavant as loans get wiped, so even if you are paying back £3.75 a month or whatever, it won't matter at the end of the 30 years, and infact, the less you earn, the more you profit.

Yes I agree with that. If you are not planning on earning very much take the loan.

setmefree2

Oldernotwiser wrote: »

You cannot get away from the fact that the enormous advantage of student loans over commercial loans is they don't have to be paid back if you don't have the income. Nobody can look into the future and see whether it holds redundancy, illness, children and other caring responsibilities or just a not particularly well paid job.

In any of those circumstances, a commercial loan will still have to be paid whereas a student loan won't and the student loan will ultimately be wiped out, however much is still owing. Nothing trumps these facts!

If you think you are not going to earn very much take the loan. How many students think they are not going to earn very much?

How many people are going to be ill before they are 50?

Having your loan wiped out is meaningless if the reason it is wiped out is because it had massive amounts of interest added to it. The student will have/ could have still paid back the initial sum borrowed plus plenty of interest.

melancholly

setmefree2 wrote: »

a pay increase above inflation of 6% for 15 years and 3% from then on

now i'd certainly like a job with that kind of pay scheme!

either way, the loans are the only way that most people will be able to afford to go to university. the total amounts that you've calculated to pay back are still considerably less than the lifetime benefit of having had a degree.....there are plenty of parents who couldn't even get a commercial loan for £37,500 from your example, so i don't think this debate is going anywhere!

the loans system isn't perfect and i think most people would prefer that huge student loans weren't necessary... but that battle has been lost and it's about making sure that students from any background understand that the cost of the new fees should not put them off going to university.

Lokolo

setmefree2 wrote: »

Fair enough - I have. Several in fact. This is what I found.

If a student borrowed £12,500 from SLC for 3 years. They would borrow in total £37,500.

Assuming inflation/RPI of 2%, a starting salary of £20k and a pay increase above inflation of 6% for 15 years and 3% from then on they would pay back £84,744. Interest of £46,838 of which £24,018 would be due to 2% inflation and £22,819 due to the interest over and above RPI. They would pay back the loan in 27 years.

Another example. Assuming inflation of 2%, a starting salary of £20k and a pay increase above inflation of 8% for 15 years and 6% from then on they would pay back £74,262. Interest of £36,514 of which £17,813 would be due to 2% inflation and £17,713 due to the interest over and above RPI. They would pay back the loan in 23 years.

These figures are pretty much the same as that of Steven Womack.

OK so I will take your figures and edit my spreadsheet. I did £8,000 originally.

If I change to £12,500 a year (so £37,500). Using the base rate for the past 20 years the total amount the person will have after this amount of time is: £109,147.20

The only problem with my spreadsheet is that the interest at the start is quite high (because I did 20 years, going back to the early 90s where interest rates were quite high).

Oldernotwiser

setmefree2 wrote: »

If you think you are not going to earn very much take the loan. How many students think they are not going to earn very much?

How many people are going to be ill before they are 50?

Having your loan wiped out is meaningless if the reason it is wiped out is because it had massive amounts of interest added to it. The student will have/ could have still paid back the initial sum borrowed plus plenty of interest.

You expect teenagers to be so unrealistic but not adults.

Students may not expect to earn small salaries but large numbers of them do. Young people may have to get involved in childcare, caring for parents (you perhaps?), they may be made redundant (just like anybody else), they may be involved in car accidents (frequent among young males) or any of the !!!!!! that life throws at people.

You've made a big thing of parents' responsibility to their adult children (and we've disagreed on this before) but just when it's actually necessary to point out to them that life has a habit of dropping you in it and they're not actually invincible, you back away and say something as silly as "How many people are going to be ill before they are 50? ".

It's this sort of advice that seems to be what a parent should be giving his children, far more than the accountancy type stuff about interest rates etc. Your family aren't immune from life's problems, so isn't it a parent's job to be warning them of these rather than expecting them to be living charmed lives?

setmefree2

Oldernotwiser wrote: »

Students may not expect to earn small salaries but large numbers of them do.

Then take the loan. I think people should study what they are passionate about. (In the end imho that is very often how people end up making lots of money anyway!)

I'm not saying students should or should not take the money. But people should be informed as to what the cost of these SLs really are over their life.

Looking at my spreadsheet these loans are a real burden to people in their 30s and 40s. Just when people are suffering financially anyway with kids and mortgages.

setmefree2

Oldernotwiser wrote: »

It's this sort of advice that seems to be what a parent should be giving his children, far more than the accountancy type stuff about interest rates etc. Your family aren't immune from life's problems, so isn't it a parent's job to be warning them of these rather than expecting them to be living charmed lives?

Ok so let's not tell them that they are actually going to be paying back much more than they ever borrowed, that they may well regret taking these loans much later in life, that when they are stuggling with kids and mortgages in their 30s and 40s and the government is taking 9% of their salary every month they wonder why nobody ever said anything. They also might wonder why when they are trying harder to earn more and they get a pay rise it all seems a bit pointless as it's all eaten up with paying back student loans....

....is that what we should be not telling them?

Or perhaps, we should give them the complete picture?

I'm not trying to put students off going to Uni. But I do think students and parents should have a complete feel for what they are letting themselves in for.

But that's just imho.

setmefree2

Many posters on this thread don't seem to be parents, so they may well have a VI (vested interest) in students taking on loans. I, for one, would be interested to know what those VIs are?