Student Loan 2015 Discussion

lsur02

Lokolo, of course you cannot do a report into every detail of living expenses. However, students will not necessarily know before they sign up for the loan how much rent they will have to pay - that will depend on the university and in many cases will be a lottery, leaving students to find rooms in town at the market rate.

Likewise, it is misleading to sell the scheme on the grounds that graduates earn substantially more than non-graduates - this is not as true as it was 30 years ago when fewer people got to university yet is still quoted as a fact. The raising of the payback threshold is a give away that not all graduates can afford to pay.

It is not the living expenses at the time either - my point is that the arrangement is very much longterm and involves a notoriously hardline bunch of people, the Student loans Company.

Let the buyer beware! (which I am sure you know in Latin :-))

setmefree2

In point number 8

You WILL owe money for longer and MAY pay a LOT more

1. 
   The flip-side of people repaying less due to the higher £21,000 threshold is that it will take much longer to pay off the loan. And this is compounded by the fact the original debt is bigger and the interest rate higher.
   
   The cost is effectively being spread over a much longer period. It means initially graduates will be able to keep more of their income to spend than now, though later on when they would've paid off the loan under the current system, they'll have less as now they'll still be repaying.

I think that it might be possibly worth mentioning here that the loan will be at its most expensive just as the student is thinking about buying a house and having kids ie in their 30s and 40s.

melancholly

lsur02 wrote: »

Based on my own experience of the Student Loan Scheme, I would advise prospective students to be very careful indeed before signing up. The Scheme has been mis-sold since the outset. It is not clear, for example, how long the loan is meant to cover each year - is it a full calendar year or just 30 weeks of the academic year? How will you pay the rent for the rest of the year, especially with unemployment being so high for everyone, young people included. You will have no rights to any form of social security.

It is a nasty scam and only suitable for a minority of students. Take care before you get caught with lifelong debt!

well you get more money in your first two years than in your third, because it gives some money towards your summer. after the course finishes, JSA is an option (obviously as is a job). that should help clarify things (but should be fairly obvious anyway)

i think it's completely wrong to say that student loans are only suitable for a minority of students; without the loans (fees and living expenses) the majority of people couldn't afford to go to university. even if there were no tuition fees, plenty of families couldn't afford to subsidise the living costs and students shouldn't work full time during the course to pay rent.

it isn't a scam but you're probably right in indicating that a lot of students pick expensive halls of residence over much cheaper shared student houses and don't really know much about living expenses. i don't think this applies to the majority but i certainly don't think their lack of real world skills is the responsibility of the SLC.

if you take out a loan with anyone, they want to know where they can contact you. if you don't tell them and try to avoid paying, then they'll chase you. this is all in the T&Cs - very clearly. signing without understanding is very common, but that doesn't make it an excuse. if you had any commercial loan and tried to hide and not pay, they'd come after you too! the SLC don't get CCJs on a whim; only people who have been clearly avoiding payment and avoiding contact will have that problem.

the SLC have their fair share of problems (just in processing applications on time!) - there's enough to genuinely complain about without bringing up things that have nothing to do with them and seem to suggest that the person signing the loan form should be completely exempt from any personal responsibility.

setmefree2

melancholly wrote: »

but that's half the equation; it's living costs plus fees. as has been already said, one is probably an overestimation and one is a probably an underestimation. making both more accurate won't change the total very much.

I think it's perfectly reasonable for posters to want to see a worked example of what happens if a student takes both the full tuition and maintenance loans.

I thought you were all for students being informed?

The_Baroness

Lokolo wrote: »

Because those with higher incomes are more likely to be able to contribute towards the childs educations.

'More likely' being the operative words. And, if we parents are not in a position to do that, due existing financial commitments such as mortgages etc. - what exactly are our children supposed to do? Go out and get a loan at full commercial rates? I feel very upset that there isn't a level playing field when it comes to access to loans at preferrential rates, effectively penalising my children if they want to go to university. I should add that my oldest child is currently in year 12, so even if we had money spare to put in to savings, we haven't got enough time to build up any significant amounts before she would need access to them.

Pete-Husky

Dear MSE

I like the guide. Especially the calculated equivalent marginal rate tax (51% higher rate? How we have moved on from Blair's aspiration culture to avoid dis-incentivising success)

My son is only 14 so we're thinking ahead.

One thing I would like to see relates to the competitiveness (or not) of the commercial interest rate. I find it scandalous that these loans will be at 8-9% based on current and projected RPI when most of us have mortgage rates at 1-4%.

Here is the question - can you add a section on "Is this the best deal?"

For example - how does it compare to the BOMAD (Bank Of Mum and Dad)......

Are there better unsecured or secured loans out there for the amounts borrowed? What would be the difference in total amount repaid?

Equally, if BOMAD is loaded, and can fund a loan to their child amount up front, what is the interest they are forgoing based on the same payment schedule, and best long term saving rates available?

This is really important to know early, especially if the govt introduces early repayment fees (scandalous) as it may be advantageous to sort out in advance so never enter the new system. Your site always helps us be clever to spot the best deal on offer, so it would be really good to see whether the government 'product' is the best we can do

melancholly

setmefree2 wrote: »

I think it's perfectly reasonable for posters to want to see a worked example of what happens if a student takes both the full tuition and maintenance loans.

I thought you were all for students being informed?

i am - but everything is a guess until the white paper is out and as a rough example, the guide is great. i think it's a bit premature to be asking for it to be 'perfect' since most of the details aren't concrete and a guide on the 'average' student seems most sensible to me (and as the fees go up i think there will be a real shift towards students living at home to save money).

for me, the focus on fees without living expenses is the same as the debate on loan amounts without mentioning the repayment terms. it all has be included together. i get that people's opinion can differ on that though, but i don't think suggesting that i'm anti giving information is fair or helpful!

jamesallen

Has any more information come out yet about how much paying up-front will be penalised?

kayr_2

The_Baroness wrote: »

Can someone pls explain why, if it is the student who is taking out the loan, parental income is taken into account when setting the amount of living cost loan they are eligible for?

We are quite prepared to contribute to our children's university education, mostly because we had a great time and want them to have the opportunities we had. But it is quite annoying to be told constantly that it's the student's responsibility to fund him/herself through university, for example:

Let me be clinical for a moment: it could sound callous but you need to decide whether paying for it really is your responsibility.

The system is set up that the cost is met by the beneficiary of the education - your child. When this is referred to as a 'loan' many parents feel guilty and become desperate to avoid their child getting into this debt, even though they may not need to repay it.


Obviously those of us earning above £45k-ish are expected to contribute because our kids won't get grants/bursaries (I met a student last year who was given £6000 a year so she doesn't need to take as big a maintenance loan) but the government doesn't explicitly call it the "parental contribution" any more. Given that the maintenance loan is less than the £6-7K they are estimated to need for living expenses, I don't understand why "richer" students can't borrow the full amount (I may be wrong but I think they are only eligible for 72%?); their parents are already being asked to provide the money they don't receive in the form of a grant.

Oldernotwiser

nickyhellard wrote: »

Lots of questions around marriage/partnership. E.G. If a graduate gets married, works for awhile, pays off some of the loan (perhaps) ,but then gives up work to have a family, what happens to the rest of the loan. Is the working partners salary taken into account when considering if the income is sufficient to qualify for repayment. (years ago both partners income was considered when applying for a mortgage). Are they then liable to pay off that loan as well as perhaps their own loan in the case of two graduates marrying.

Student loans are totally personal and based on the graduate's own income and nothing else.

If at an point salary falls below the threshold, repayments cease although interest still accrues