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'Student loans – the seven deadly sins of early repayment penalties' blog discussion
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brummierebel wrote: »To make it more like a graduate tax I would:
1) Disallow any early repayment and
2) Force all students, including those from rich families to take out the loans
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This is exactly what is needed otherwise it's just another Tax that can be avoided if you are rich enough. (or your parents are rich enough.)0 -
brummierebel wrote: »To make it more like a graduate tax I would:
1) Disallow any early repayment and
2) Force all students, including those from rich families to take out the loans
Fannying around trying to make a loan look like a tax just means you end up doing ludicrous things. Like banning early repayments, or charging penalty exit fees, for example.
As long as it's a loan they should treat it like a loan and play fair. Banks aren't allowed to behave like loan sharks and charge stupid exit fees, so the govt certainly shouldn't!0 -
So the system is designed such that higher earning graduates will pay higher interest rates in order to subsidise lower earning graduates.
But if the government wants to subsidise lower earning graduates, why should it be only high earning graduates who pay? Why should not all high earners including non graduates and overseas graduates contribute to the subsidy?
Income redistribution, i.e. making high earners subsidise low earners, should be a matter for general taxation where the tax system should be transparant and under parlimentary control.
QUANGOs such as The Student Loans Company should not be in the income redistribution buisness. Therefore there should be no penalties for early repayment.
My main concern with this is that at present taking out a student loan is a no brainer. No rational parent would increase their personal debt in order to pay university fees up front. But as soon as you complicate the system with repayment penalties there will be much greater uncertainty about the best course of action. As we have seen from comments on this thread, many parents may feel they need to take on commercial debt to pay their children's fees or maintainance up front.0
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