Student Loan 2015 Discussion

mrs_deadline

Lokolo wrote: »

I would also like to point out something.

Take £43,500 on a 4% mortgage (now this is assuming 4% throughout, which I think it pretty low, so could be even higher) over 30 years.

Total repayments would be £75,466.

Compare that to the paying back of student loan, whereby the highest amount paid back will be £77k with those assumption. Still thinking of taking out the mortgage?

Absolutely - the crucial difference being that I would have the choice to pay down the amount in 8-10 years rather than 30, paying a lot less interest and buying my offspring 20 years of financial freedom in their mid-thirties and forties when they are really going to need it.

Isn't that why so many of us choose to overpay our own mortgages?

AnnBar

Oldernotwiser wrote: »

The current threshold for getting a fee grant and course grant for part time study is £22,000 based on household income so, if you're single, you wouldn't be paying any fees anyway, or for the rest of your Foundation degree.

I would expect your "top up" study to come under the new rules but you'll then be able to take out a loan from the Student Loan Company so you won't have to pay anything up front to finish your qualification.

http://www.kent.ac.uk/courses/funding/undergraduate/costs/bis-pt-flyer.pdf

It is my understanding that part time students (of which I am one) will be able to take out the loans but they will have to start repaying them after 3 years and not once their qualification is complete.

melancholly

mrs_deadline wrote: »

Absolutely - the crucial difference being that I would have the choice to pay down the amount in 8-10 years rather than 30, paying a lot less interest and buying my offspring 20 years of financial freedom in their mid-thirties and forties when they are really going to need it.

Isn't that why so many of us choose to overpay our own mortgages?

if that's what you choose to do, that's great - but there are plenty of families where borrowing that kind of money isn't even an option..... realistically, the financial freedom you're talking about is a repayment of, for example, 3.6% of a £36K salary. that's not going to impact as much as some posts on here suggest!

i think it's important to realise how these repayments work and that in reality, the amounts being repaid aren't massive on a monthly basis and aren't really going to inhibit much for graduates when they're adults. if parents can afford to help out then that's incredibly generous, but there is a danger that parents don't always understand the exact nature of the repayment system and will put themselves in financial hardship unnecessarily. plenty of families don't own property and it would be tragic if students were put off uni because they misunderstood the loans (as opposed to understanding and making a decision of no once they got the whole system).

kayr_2

melancholly wrote: »

if that's what you choose to do, that's great - but there are plenty of families where borrowing that kind of money isn't even an option..... realistically, the financial freedom you're talking about is a repayment of, for example, 3.6% of a £36K salary. that's not going to impact as much as some posts on here suggest!

i think it's important to realise how these repayments work and that in reality, the amounts being repaid aren't massive on a monthly basis and aren't really going to inhibit much for graduates when they're adults. if parents can afford to help out then that's incredibly generous, but there is a danger that parents don't always understand the exact nature of the repayment system and will put themselves in financial hardship unnecessarily. plenty of families don't own property and it would be tragic if students were put off uni because they misunderstood the loans (as opposed to understanding and making a decision of no once they got the whole system).

You are quite right to point out that the repayments are not exactly huge, but as mrs_deadline points out, £100 a month when you're on a salary of £36000 (I think 3.6% works out at about that - correct me if not) in your mid-thirties and forties is not an insignificant amount as you would probably be on a tight budget if you have kids etc. I don't know.

One of the problems with this discussion is that every family's financial situation and attitudes towards money are very different. So there is no "right" answer as to how to proceed. If someone doesn't like being in debt, no matter how "good" a debt it is, then maybe it would be better for their peace of mind and thus quality of life if they didn't have the debt. You can criticise their attitude towards money but people do have different personality types; some are happy to rack up thousands in credit card debt and others like to save up first. Suppose I had £40000 saved up which I wanted to use to pay for my child's education, because it would give me more satisfaction to do that than buy a fancy car and have some luxury holidays. Under the current system it would be wise to put that money in an account to cover the loans as it will at present grow at a rate higher than the loan is increasing by, and would result in the child being able at a later date to have access, in effect, to a cheap loan. I'm not sure that the new system would be attractive to someone in that position - as mrs_deadline said, you could potentially avoid paying a lot of interest. The new loans would grow faster than your savings. Of course borrowing money outside the system is a different matter and I suspect not a good idea but we don't know the full details of the new system yet so I wouldn't dismiss the idea totally. I think the comparison to paying off mortgages early is good.

kayr_2

melancholly wrote: »

if parents can afford to help out then that's incredibly generous,

I actually don't think it is particularly "generous", it's just part of being a parent. You choose to have children so should take on the responsibility of educating and supporting them financially, as much as possible, until they can earn their own living. I happen to think that point is reached when they graduate from university, but that's just my point of view and I know lots of people would disagree with that! However I do agree that it is crucial to make sure they understand how the financial system works and that they are responsible for their finances; no point giving them money without the financial education.

motivatedmonkey

I've researched the new system quite thoroughly and although I understand it, I struggle with the change of mindset that is required, and this seems very common on this forum.

It is a tax, for sure, and one that like all our taxes, is of benefit to those at either extreme end of the scale, the less well off will benefit more (that's good) and the very rich won't notice either way, (they're rich), and those in the middle income bracket WILL bear the brunt for 30 years. They will be considered to be in a slightly higher income group will pay a higher percentage back and any small salary increase will be erased from their net income.

I think many people are sceptical enough of the new system to want to try and investigate possible alternatives before willingly signing up for further taxation.

mrs_deadline

More than sceptical MM - I've come to the conclusion that it's a divisive levy on educational ambition, cynically imposed on a group who are too young to vote against it.

Where I lost faith in the process was when our illustrious leaders failed to stop £9,000 tuition fees becoming the norm. If they didn't even see that one coming, I seriously doubt they're capable of predicting the long-term ramifications.

Dustykitten

With the drop out from uni being quite high, especially in the first term (this is actually just what I've heard from friends rather than research) would it be a good idea if possible to pay the first term/year's fees if you had the cash to avoid the loan in case the course is not finished? If you dropped out and did not finish but still had to wait until you would have graduated and then start paying the loan (with the interest) it would be a bit like getting a car on a loan, writing it off and still having to pay the loan back long after you did not have the car.

Oldernotwiser

AnnBar wrote: »

It is my understanding that part time students (of which I am one) will be able to take out the loans but they will have to start repaying them after 3 years and not once their qualification is complete.

That's interesting, I hadn't come across this before.

ETA, I've just checked this and you're perfectly correct, so thanks again for pointing it out.

Oldernotwiser

Dustykitten wrote: »

With the drop out from uni being quite high, especially in the first term (this is actually just what I've heard from friends rather than research) would it be a good idea if possible to pay the first term/year's fees if you had the cash to avoid the loan in case the course is not finished? If you dropped out and did not finish but still had to wait until you would have graduated and then start paying the loan (with the interest) it would be a bit like getting a car on a loan, writing it off and still having to pay the loan back long after you did not have the car.

If you don't actually graduate, you start repaying the loan long before your graduation date.