Student Loan 2015 Discussion

DaveO

real1314 wrote: »

Given the current administration's (and the previous one's) changes to primary legislation for it's own employees in respect of both civil service redundancy terms and pension arrangements, can anyone genuinely rely on a government's claims to hold terms and conditions?
How long will it take for a "it's not fair that they only pay so little" campaign to start up? Another "them and us" type approach aimed at reducing the quality of life for everyone on the basis that some don't get the same "favourable" terms? :cool:

Not long.

Here is link from an article in May.

Student loans repayment level lowered?

And just in case students with pre-2012 loans feel left out there are discussions about shafting them with higher repayments so the student loan book can be sold off:

Raise Interest Rate Student Loans Secret Report

There is an astonishing level of cynicism expressed on both articles by the people behind these suggestions.

First that because people don't understand the loan system it wlil be easy to either lower the threshhold or freeze the repayment threshold with little opposition since they won't realise the implications.

And secondly for the pre-2012 loans the idea upping the interest rate can be sold to those graduates because they still get a better deal than the post-2012 students! Utterly unbelievable and just reinforces how poor a deal the post-2012 loans are at 3%+RPI.

What is also clear is that in order to sell the loan book off the preferred solution is to either get the government to underwrite the debt - so private companies profit while the taxpayer takes the risk or failing that the risk is transferred to graduates.

While neither of these things have happened (yet) my view is the fact students have no option but to sign the agreement which allows terms to be potentially varied like this this it is about time Martin Lewis stopped peddling the myth that the student loans are some sort of graduate tax levied by a benign government.

In fact in light of these articles I'd like to use this forum to publicly call for him to voice his opposition to the whole scheme!

setmefree2

Whilst it is true that Vince Cable has not committed to following the Rothchild's Report suggestions; it is also just as true that he hasn't taken them off the table either. Even a discussion about retrospectively changing the terms for people who left university years ago should worry us all.

I've never understood fully why ML ignores this issue either DaveO? I mean who takes on a loan without knowing the interest rates or period of payment? And who thinks that it's OK to do so? That's what the government asks/is asking of students and MSE/ML seems to have never had/has no problem with this.

No one in their right mind would agree to buy a luxury £50,000 car without knowing what their interest payments or the period of payment are likely to be. Yet this is exactly what is asked of students. They are told to sign an open-ended loan agreement where the interest rates and term of repayment can change, at any moment in time, at the whim of government, without the need to legislation. Don't young people deserve better protection? Why doesn't MSE/ML/moneysupermarket think they do?

Some might argue that retrospective changes will never happen as there are a lot of votes at stake - there are 3.8 million ex graduates with student loans - on the other hand a party might also ingratiate themselves with more right wing voters with such a move. So who knows? People once thought introducing £9k tuition fees would be politically unacceptable but here we are. Changing student loan terms retrospectively might not be as politically unacceptable as we imagine.

Icelandic bank account anyone?

setmefree2

By the way, student loans are not covered by the Consumer Credit Act. This exclusion was only made possible because loans were low-interest in the 1990s. Nowadays graduates earning more than £21,000 per annum are paying 6.6% interest, ie commercial rates – which some have suggested may mean that the government may be breaking the exemption terms.

Were student loans brought back under the Consumer Credit Act, the government would have to provide students with adequate and much more detailed financial statements, comprehensively outlining changes in rates of interest.



Isn't it about time someone took the government to court?

setmefree2

Separate revelations have also emerged that Mr Osborne wants to make current students start repaying their loans when they earn £18,000 per year rather than the current £21,000 threshold.

http://www.telegraph.co.uk/education/educationnews/10119622/Students-must-pay-back-loans-sooner.html

DaveO

setmefree2 wrote: »

Separate revelations have also emerged that Mr Osborne wants to make current students start repaying their loans when they earn £18,000 per year rather than the current £21,000 threshold.

http://www.telegraph.co.uk/education/educationnews/10119622/Students-must-pay-back-loans-sooner.html

Yes I was aware of the idea of lowering the threshold but wasn't aware Osborne was thinking of it. I had simply seen the article I linked to above where various luminaries at Universities seemed to be in favour of shafting students to protect funding.

My view is the new student loans have been mis-sold and ML's guide is part of that mis-selling not part of the solution because it is virtually all based on an unrealistic view painting an unrealistically positive picture.

By this I mean as we see here that although he mentions government can vary the terms he simply does not put up huge red flag that this could be a serious issue and instead it is as if because that is the way it is, then it's a shrug of the shoulders.

There is also the often repeated idea you don't pay if you don't earn over £21k. Well who goes to Uni expecting to be on such a relatively low wage for the next 30 years? In my view most students will pay and they have to or the government can't afford the scheme in the first place.

It's been costed based on the fact the loans will be repaid (or a at least large chunk of them) so it's disingenuous to sell the scheme as ML does flagging up this non-payment option.

As others have mentioned calling it something like a graduate tax is misleading because it isn't progressive yet at the same time he doesn't highlight that graduates will be paying a marginal rate of 42% on earnings above £21K (or £18K iif Osborne gets his way).

Other factors such as the fact when you aren't paying the Interest still accrues is also glossed over.

He also mentions you can't be chased for the lean as it comes out of your wages so you can't default. That still doesn't alter the fact you are paying a marginal rate of tax for 42% and your spending power is reduced.

So what we have in the end is terms that can be varied on a whim, a high interest rate loan that compounds when you take a payment holiday and when you are paying it, it costs 9% of your wages over a certain threshold resulting in a marginal rate of tax of 42%.

ML would tell you to avoid such a loan like the plague if it was being offered by a bank to an individual.

atypical

DaveO wrote: »

By this I mean as we see here that although he mentions government can vary the terms he simply does not put up huge red flag that this could be a serious issue and instead it is as if because that is the way it is, then it's a shrug of the shoulders.

Students can only base their decision on the information available today. Making people aware of all potential future possibilities wouldn't be helpful.

DaveO wrote: »

There is also the often repeated idea you don't pay if you don't earn over £21k. Well who goes to Uni expecting to be on such a relatively low wage for the next 30 years? In my view most students will pay and they have to or the government can't afford the scheme in the first place.

This point is stressed not to imply the loan will never have to be repaid, but that the repayments will only need to be made when students are earning so should be manageable.

Some might think they'd be struggling with repayments even when they don't have a job.

DaveO wrote: »

As others have mentioned calling it something like a graduate tax is misleading because it isn't progressive

Taxes don't have to be progressive.

DaveO wrote: »

ML would tell you to avoid such a loan like the plague if it was being offered by a bank to an individual.

The comparison of the state as a lender accountable to voters vs a private company accountable to shareholders is difficult to make. The terms are very favorable so I can't imagine anyone avoiding them like the plague.

DaveO

atypical wrote: »

Students can only base their decision on the information available today. Making people aware of all potential future possibilities wouldn't be helpful.

What? I am sorry and I don't wish to be rude but that is absolute nonsense.

Not making people aware of future possibilities is tantamount to deliberately misleading them by hiding any potential issues.

Looking round the net the expected salary for a Computer Science graduate is £25500. That means they would pay an additional £33.75 a month in loan repayments on top of income tax and NI. If as those articles suggest the threshold is lowered to £18K that goes up to £56.25 a month.

The idea when this move is actively being considered the possibility should not be mentioned and such examples given is crazy in my opinion.

This point is stressed not to imply the loan will never have to be repaid, but that the repayments will only need to be made when students are earning so should be manageable.

Some might think they'd be struggling with repayments even when they don't have a job.

I watched ML's program on ITV recently where he went into a 6th form college and that certainly is not how he puts it across. I felt sorry for the kids quite frankly as you could see they thought £21K was a lot of money and that the fact you didn't pay if you didn't earn it was amazing. It looked like they thought they were getting something for nothing. He was his usual enthusiastic self at mentioning the £21k limit and IIRC he didn't qualify that with an equally loud caveat that when you aren't paying the debt compounds at whatever rate is being charged.

As I said the whole scheme is predicated on graduates paying back the loans or it simply won't work. If the loan didn't incur interest when the graduate wasn't paying back due a period out of work that might be different but all the current scheme does is quickly wipe out any capital paid down once you stop repaying which will guarantee a high marginal rate of tax for 30 years for many.

The government is currently panicking because graduate pay is not rising as they expected which means the amounts paid back are going to be less than expected. They also didn't expect the vast majority of Uni's to charge £9K but to complete for students with lower fees. As that has not happened the government is in another pickle as it has had to lend more then expected and so as we see there is talk of varying the terms after merely one academic year of operation to claw more money back faster.

These facts make it more likely the terms will be changed for the worse and so I think its about time ML made these possibilities plain and what lies behind it.

Taxes don't have to be progressive.

A graduate tax would be so it is disingenuous to use your argument above to excuse a misleading part of the guide.

The comparison of the state as a lender accountable to voters vs a private company accountable to shareholders is difficult to make. The terms are very favorable so I can't imagine anyone avoiding them like the plague.

They don't have a choice but to take them unless they are poor and get their higher education for free or rich and Mum and Dad pay. The issue is they are an extremely bad deal the terms of which you would not accept yourself from a commercial lender and if the loan book is sold off it will be the next step to have commercial lenders issuing the loans in the first place.

Dunroamin

DaveO wrote: »

What? I am sorry and I don't wish to be rude but that is absolute nonsense.

Not making people aware of future possibilities is tantamount to deliberately misleading them by hiding any potential issues.

Looking round the net the expected salary for a Computer Science graduate is £25500. That means they would pay an additional £33.75 a month in loan repayments on top of income tax and NI. If as those articles suggest the threshold is lowered to £18K that goes up to £56.25 a month.

The idea when this move is actively being considered the possibility should not be mentioned and such examples given is crazy in my opinion.

Computer Science graduates are quite well paid, so using their salaries as an example isn't particularly reasonable.

I watched ML's program on ITV recently where he went into a 6th form college and that certainly is not how he puts it across. I felt sorry for the kids quite frankly as you could see they thought £21K was a lot of money and that the fact you didn't pay if you didn't earn it was amazing. It looked like they thought they were getting something for nothing. He was his usual enthusiastic self at mentioning the £21k limit and IIRC he didn't qualify that with an equally loud caveat that when you aren't paying the debt compounds at whatever rate is being charged.

The last thing you want is to scare students from poorer families from going to university by scaring them with the idea of taiking out student loans. The information on interest being added is also very clear.

As I said the whole scheme is predicated on graduates paying back the loans or it simply won't work. If the loan didn't incur interest when the graduate wasn't paying back due a period out of work that might be different but all the current scheme does is quickly wipe out any capital paid down once you stop repaying which will guarantee a high marginal rate of tax for 30 years for many.

The government is currently panicking because graduate pay is not rising as they expected which means the amounts paid back are going to be less than expected. They also didn't expect the vast majority of Uni's to charge £9K but to complete for students with lower fees. As that has not happened the government is in another pickle as it has had to lend more then expected and so as we see there is talk of varying the terms after merely one academic year of operation to claw more money back faster.

These facts make it more likely the terms will be changed for the worse and so I think its about time ML made these possibilities plain and what lies behind it.



A graduate tax would be so it is disingenuous to use your argument above to excuse a misleading part of the guide.



They don't have a choice but to take them unless they are poor and get their higher education for free or rich and Mum and Dad pay. The issue is they are an extremely bad deal the terms of which you would not accept yourself from a commercial lender and if the loan book is sold off it will be the next step to have commercial lenders issuing the loans in the first place.

Nobody gets their education free these days, regardless of family income.

Many pre 1998 loans have already been sold, with no change to the t&c whatsoever.

atypical

DaveO wrote: »

Not making people aware of future possibilities is tantamount to deliberately misleading them by hiding any potential issues.

The idea when this move is actively being considered the possibility should not be mentioned and such examples given is crazy in my opinion.

The issue is very clearly explained in the dedicated section on the student loans article. The article further links to Martin's blog on the issue which goes into much more depth. His blog further links to a dedicated forum topic where users are discussing the issue. The student loans article is one of very many on the site. It would be impractical to keep a running commentary of political developments, and it's outside the sites remit in any case.

And remember, Martin is approaching the topic with the aim of ensuring students aren't put off university due to misinformation.

DaveO wrote: »

As I said the whole scheme is predicated on graduates paying back the loans or it simply won't work.

The government's own impact assessment indicated that they expected around 50% of graduates to have some part of their loan written off.

I agree that the current scheme seems to be precariously funded. But I don't think retrospective changes will necessarily occur. The £9k system has only been in operation a short while, so making retrospective changes wouldn't have a significant impact (versus the political cost) whereas future changes would. The 1998-2012 are a different matter, but that's irrelevant for people deciding whether to take loans out now.

DaveO wrote: »

A graduate tax would be so it is disingenuous to use your argument above to excuse a misleading part of the guide.

I don't think a graduate tax has to be progressive.

DaveO wrote: »

The issue is they are an extremely bad deal the terms of which you would not accept yourself from a commercial lender and if the loan book is sold off it will be the next step to have commercial lenders issuing the loans in the first place.

As I said before, I don't think the comparison with commercial lenders is useful.

DaveO

Computer Science graduates are quite well paid, so using their salaries as an example isn't particularly reasonable.

Their salary is bang on the average starting salary for graduates (for 2013 and 2014) so I think it is entirely reasonable. That is why I chose it as an example.

If you want another example a newly qualified teacher starts on £21,588 (or £27K for inner London).

Of course if they are unemployed on graduation or do not get a graduate level job they won't earn this much but that isn't what the system is predicated on happening or it is unaffordable and of course their debt increases.

The point I am making is most graduates who get a graduate level job will pay so the "don't pay if you earn less than £21K" message should be put forward as a safety net not being shouted about to give the impression you are going to get a free Uni education and that is certainly how it came across in the TV program.

The last thing you want is to scare students from poorer families from going to university by scaring them with the idea of taiking out student loans. The information on interest being added is also very clear.

You can't not tell people the whole story. If the whole story scares people it tells you there is something wrong with the story.

Many pre 1998 loans have already been sold, with no change to the t&c whatsoever.

They have? Who to? Do you have a link or something I could read about this?

The Rothschild report makes it plain the pre-2012 loan book is not commercially viable unless the interest rates can be increased and the risk (of loans not being paid back) left with the taxpayer.