'Student Finance 2012 changes – it's time to tackle the ignorance' blog discussion

Former_MSE_Helen

This is the discussion to link on the back of Martin's blog. Please read the blog first, as this discussion follows it.

Read Martin's "Student Finance 2012 changes – it's time to tackle the ignorance" Blog.

Please click 'post reply' to discuss below.

Rafter

Great initiative Martin.

I have been going into schools helping A level students with thinking about their costs and dispelling these myths. It is incredible that such a poor job has been done to explain what the changes mean but I agree that the media has stoked the flames and led to a misleading impression of what the changes mean.

Look forward to seeing your guide and incorporating this resource into the training and resources available to potential students to get the real objective facts.

R.

2sides2everystory

I don't understand why MSE is supporting this student finance scheme at all.

Do you get out much into Europe Martin?

Are you aware of the student economic migration that is occurring right now?

Where are EU students headed? If they are serious about study it is not UK unless they have rich parents.

No it is where the 3 or 4 years of study and living offers the best value.

That most decidedly is now not England where my kids were born.

Like most parents, I like to think my kids are bright. My kids are good at most subjects and in particular at maths physics and sciences.

We do not have the existing education system to thank for it. Mostly we have the education system that educated me and the kids' mother to thank for it.

I did not set out to instill a particular interest in maths and science in my kids but they have tended in that direction, partly because I've always found it enjoyable, and thanks to one or two very commited individual teachers along the way (not schools - individual teachers conspicuously different to the majority still churning out 'Lord of the Flies' to a 50 year old syllabus.)



Meantime, whilst the whole country is reeling - or at least that majority part of it with any bright promising teenage kids embedded in it - from being told that university will from next year cost nine thousand pounds per student not counting accommodation and other living costs, I am trying to teach them other basic stuff I learned good like:

1. The financial services industry in the UK is the pits and they are more powerful than the government.
2. The government is trying to reduce employment rights to a level not seen in the last 50 years where zero hours contracts are seen as normal and you have to bite your lip and take every kind of cr&p for 2 years or you are out and I mean right out of everything.
3. Any borrowing at rates you have no control over especially double-digit interest rates is to be strenuously avoided because it always ends up in the private sector who will document your debt in a big brother file called a CRA record. For a proportion of CRA records read "Government condoned blacklist".
4. Treating debt especially double-digit interest debt as non-debt or deferred accountability debt is the path to ruin unless you are extremely clever (more clever than the dweebs who dreamed up the scheme that got you into debt in the first place).
5. Pretending you do not have to worry about debts in your name because someone tells you there is a special scheme that discounts it is just total misleading dangerous and nationally useless propaganda.
6. ... and even this one ... erm if you go out in a normal town on a Saturday night ... try not to get stabbed or shot.

It is 2011, 37 years since I had a free university education in the UK. All students should be entitled to a free university education everywhere in the UK as is the case in other leading states in Europe. If Chinese and Americans and other students wish to come here to study then they should stand the entire costs of running the worthwhile universities that the government does not wish to subsidise. Full stop. Let me see the day when students from these other places do not wish to study at our universities. It will never happen. We don't actually need them but they need us. Just like we don't actually need foreign bankers running UK banks - they need us.

We should not be giving a free ticket to all the universities good and bad to start collecting a minimum £9000 per student. Where is the incentive in that for them to be better than the next university? It is real money, the universities WILL collect it, yet who will eventually pay to just hand those over-inflated amounts on a plate to them? It will be the masses of future ordinary taxpayers (many of them graduates who never quite managed to fulfill partticular promise in our system). And what will happen to the record of who actually owed the money? It will lie for decades in some adjunct to CRA databases to be fiddled with by goodness knows who and to control unfortunates who were unable to rise above it - until they are too old for it to matter much that is.

What is the difference between the scheme you are today using the power of MSE to get in front of a massive audience on behalf of the government, and the "scheme" presented by those cold-callers who day in day out call the nation saying "we are calling on behalf of a government scheme which means that we can definitely reduce the amount you owe ?"

This country does not have worthwhile jobs for the bulk of the graduates our universities turn out each year (most of the people on those phonelines are graduates and in the retail malls in the phone shops and in the banks and even the cashiers in the banks - they are largely recent graduates because thats the best they have been led to expect for years unless they are really sharp like as razors.). So why the hell should the bulk of 2012-on graduates be saddled not only with even sh!tt!er prospects than the ones the last five or ten years worth of graduates have faced, but also from next year onwards the entire cost of running a broken education system like that because the government wishes to wash its hands of supporting our greatest educational institutions altogether?

The current Tory led government at least has no intention of fixing the system because in fact it suits their kind to keep churning out a heap of cheap labour to feed this country's big businesses which are largely based on financial services hype and lies and on retailing container loads of shiney baubles type stuff from China? This country is not creating entrepreneurs in droves. There is no focus at any university on that - quite the opposite - any intellectual property developed whilst at the university belongs to the university not to the bright spark that thought of it.

I just do not understand how on the one hand Martin you can be so much for educating students in financial providence because it is dangerous out here in the real world with financial services and retail predators, and yet on the other you now feel you must say 'ok now you know how it ought to work so you are now well equipped, but to get you started in this dangerous world I want you to forget what I just taught you and jump into this nice warm pool like everyone else with any sense of a future in the UK. Trust me its like gilts. It's the government. It isn't as bad as it seems in fact it is good.'

I do not like this pitch one bit and it will take a great deal of persuading to get me to start assuring my kids that this is the way they should be thinking in the same way it was me not the government that helped them get into a way of thinking to begin to enjoy important subjects at school that the government had failed to make very interesting.

Tell me why I should not be budgeting £27,000 to £36,000 of my own money and planning to increase my own borrowings again just to pay the academic fees for each of the kids. Tell me why I should advise them "Actually kids, I am not going to pay for it, you are, but don't worry".

You'll have to excuse me but I must go now because a CRA has just texted me because someone has been fiddling with my personal data ... only about the sixth text they've sent me this month ...

MSE_Martin

I find the last comment a little confusing Im afraid.

Im not supporting the student finance scheme, Im supporting communicating it so people understand it and can make a decision based on whether the actual cost to them is worth it.

2sides2everystory

But why Martin? Why are you trying to explain a government scheme that no normal parent of bright kids wants?

I understood the scheme that educated me - I understood how I need to budget and how I could only afford salad sandwiches towards the end of summer term.

My parents understood their part.

I am a damned sight better educated than most and I cannot understand the scheme proposed.

It is as weird and wonderful as an Aviva reattribution - in fact reattribution is probably as good a name for this student finance scheme as any other.

It cannot be understood because it is not in the public interest. At best it will be tolerated without understanding and only then because it is being spun using names like Martin Lewis and Vince Cable who have earned reputations as public spirited champions.

But that doesn't make it right.

And my last comment is a warning about how all this debt will be recorded and yes it does mean I doubt any assurances about it not having an effect on getting a mortgage or any other kind of credit.

Those kind of assurances are easily skewed to suit future agendae.

And the fact so much of this is privatised debt worries me greatly. The major financial services companies are more powerful than our government. It is they who control the personal data that most affects our future contentment (happiness) i.e. our household and family financial debt burdens.

It is that everyday burden that sinks so many, causes so much break up.

And it is all recorded in CRA files which few of us can control and which ultimately stay with us for our entire lives accessed everttime a big company considers us for a job. Accessed for all manner of purposes in fact which we are largely uncertain about. That is why I made that last comment.

anotheralias

I don't understand the point your making here 2sides. That by educating people on how the new scheme works Martin is endorsing it?

You are right that very few parents or children want the new scheme, and (I assume) Martin mostly feels the same way about the higher fees. But like it or not the new fees are here to stay and I don't see how suggesting that people avoid understanding them is going to help the situation.

At the end of the day, even with the higher fees it would be awful for someone to decide not to go to Uni based on misunderstanding how they work - it is important that they are fully informed when making what could be one of the most important decisions in their life.

The situation is similar to the bank charges, in that this site aims to inform and educate people about them even though they are roundly disliked and unwanted.

Ultimately, it is undeniable that the new scheme generally speaking makes going to Uni significantly worse, but it is still important to inform students of the positives also (such as the higher earning threshold) - to ensure that the decision whether to go is definitely the right one.

MSE_Martin

The system is here to stay.

We need students to be educated when appropriate and don't want to disenfranchise them

Educating them about the system is very important.

I don't like the way credit ratings work - but we have a huge guide to explain it

I don't like the way savings accounts operate their slash and grab rates - but we have a huge guide to explain it

Why is student finance any difference.

jamesd

I think that the key message needs to be:

Don't let the talk of the costs deter you from going to university. You're not going to have to pay anything back until you're making at least as much as the average person and payments increase gradually above that.

Lots of caveats but that's the most important message for those who can gain most from university.

brummierebel

The last time there was a sea-change in the way student finance worked was in 1998. Then two things happened – tuition fees were brought in and the loans changed from the old ‘mortgage style’ to the new ‘income contingent system’.
The media then concentrated on the contentious tuition fee issue as it was the better story – little was said about the change of loan repayments, which meant that rather than needing to repay the whole loan over 60 months once you hit a threshold, you simply repaid 9% of everything you earned each year through the tax system – a much more gradual and less harsh system.

Actually, three things happened in 1998 - tuition fees were introduced, maintenance grants were abolished and the loan repayment system was change from mortgage-style to income-contingent. The reason the latter happened is because student loans debt trebled as a result of maintenance grants being abolished, which would have been impossible to repay under the old system, and in fact the abolition of maintenance grants was the biggest change because it cost the poorest pupils nearly £2000 a year as opposed to the £1000 a year that was the maximum tuition fee - but the media concentrated on the policy that would affect the middle classes most.

In any case, I think you are wrong in saying this was the last sea- change - this happened in 2005 when tuition fees were trebled, maintenance grants were brought back (along with bursaries) and a tuition fee loan was introduced so students were not forced to pay their fees upfront. The latter was vitally important because otherwise students would literally not have been able to afford university with upfront fees.

I think the biggest problem we are having with the current proposals is the terminology. This is not really about student loans and tuition fees; the government have introduced a capped-graduate tax but are not advertising it as such because the Conservatives don't want to point out they have introduced a new tax. It is also a tax the rich can potentially buy themselves out of by paying upfront tuition fees, although we will have to wait and see if there wil be any premium for people who choose to pay in this way.

2sides2everystory

OK so the old scheme meant that 9% of earnings above £15,000pa were payable towards any loan and now its 9% of £21,000pa?

And that's as good as the good part gets?

Old loans were contracted on low single figures interest rates linked to inflation (and even went backwards once or twice on RPI?)


But hang on a minute, what was a typical student debt under the old scheme? Was it front ended by £27,000 or £36,000 of finger in the air academic fees? No it wasn't. As brummierebel points out, after the 2005 changes, many students were able to get maintenance grants again. Was a typical student debt even as high as those numbers at all (including accumulated living costs)? I don't think so. Students from low income families certainly did not "typically" accumulate debts like that (sure lots did but I am not convinced that hoards of them did) - many risked their studies a bit more than is sensible and took low-paid part time jobs and shopped around for interest free overdrafts and generally kept a lid on what was a tough challenge but one which at least was bounded within sight when they looked into the future. Nevertheless for many it was too much and sunk those from low income families who had no resource to bail them out.

Maths question: What is a low income family? Is it a below average income family? Well no that isn't a good measure is it? Because average incomes have been skewed by disgracefully high incomes by the type of people that inhabit Canary Wharf by day the average income in London Borough of Tower Hamlets borough was being reported as over £60,000pa well over 5 years ago. What do you think a typical income might be for the majority of residents in Tower Hamlets or Newham which are full of young people?

Where do you think they aspire to work one day?

Does David Willetts think that is good? Does David Willetts think that he is disgracefully overpaid? I think not ... he will like many senior politicians have already allowed his thoughts to drift to what he might be able to earn as a director of a big company should he not survive a general election - probably in financial services. So he will view his ministerial salary as quite modest. Does that make his massive brain any more or less suitable for promoting this new scheme?


The most important thing for A level students to learn right now is that they cannot afford a university education. If someone else can afford it for them that's great.

My son is due to start university next year. Now as I have said, he is bright. He is also an economics student (something I never was).

One of the main strands to his rough made plans is to investigate sponsorships, specifically from the RAF. Interesting. Who pays then?Another strand of his thinking is to carry through his part time retail career into his university years. He currently earns £3.64 an hour and gets taxed at 20%. Frustrates the hell out of him when he sees that he would be easily earning four times that in another European country which is only an hour's flight away, AND he'd get a free university education.

£3.64 an hour for a student who needs to manage his time well in order to study effectively. 20% tax until the end of the year when a rebate is expected. Silly numbers aren't they compared to the world of discussions between David Willetts and his cohorts? This week my son and I are discussing mobile phones. His old one has finally fallen apart. He really would like an iphone 4, Dad. Yes I am sure any A level student would, and indeed many do.

Dad is paying more in fortnightly allowance ("pocket money" in old language) than DS "pockets" from his retail mall experience. Dad also handles the mobile contract and all the other usual expenses. Call that a kind of sponsorship if you like.

My son is one of those that Rafter thinks he needs to be talking to. Right. I say think again.

Don't be talking to my son Rafter until you have spoken to me and convinced me you have something I should listen to and something I can sensibly guide my son to understand.

Until then, why should I consider this new student finance scheme as anything other than an orgy of misselling of brand new debt hitherto handled by the government but now abdicated by them?

They banned advertising cigarettes to children years ago. It was clearly dangerous to their future health prospects. How is this government promotion different?

antonia1

Martin,

Thanks for the expanation - and keep them coming. Education is key, and understanding your financial commitments is the first step to tackling larger problems. I started university in 2003 and graduated in 2008 (chemical engineering) and so have a good understanding of how the previous system of loans worked. My younger sister will (hopefully) be starting university in 2012 and I will be helping her with all the forms and understanding what it all means. Any information which you can provide, or reiterate in simple terms is much appreciated!

Antonia