Student Loan 2015 Discussion

setmefree2

The article starts with

Amid a fresh batch of A-level results, the founder of moneysavingexpert.com explains why the "ignorant" debate on tuition fees risks damaging a generation.

Clearly, students aren't being put off going to Uni.

Record numbers of students have been accepted into UK universities within 24 hours of receiving their A-level results, according to the latest figures from the admissions body Ucas.
By midnight on Thursday, 401,540 applicants had been accepted for undergraduate courses, 9% up on the same time in 2012.
This is also higher than 2011, the year before tuition fees trebled to £9,000.

http://www.bbc.co.uk/news/education-23725540


So, really what's the point of this article ML?

Well, apparently it's

Time to stop calling student loans a loan

Really?

How about we stop quibbling about semantics and start tackling the real issues?

Dunroamin

setmefree2 wrote: »

The article starts with
Clearly, students aren't being put off going to Uni.

http://www.bbc.co.uk/news/education-23725540


So, really what's the point of this article ML?

Well, apparently it's

Really?

How about we stop quibbling about semantics and start tackling the real issues?

If you call a student loan a graduate tax (even better, if you actually make it one) it's not really a question of semantics.

GeneHunt_2

Dunroamin wrote: »

If you call a student loan a graduate tax (even better, if you actually make it one) it's not really a question of semantics.

A turd is a turd whatever you call it

sunnyflower

My son starts University in a few weeks.
The finance is sorted.
However, does anyone know what would happen if I changed my job / took early retirement over the next academic year? Could his financial position be reassessed and be allocated a larger grant / loan?
I have read lots of information on student finance but can't find anything about this.
Anyone have any ideas please??

atypical

sunnyflower wrote: »

However, does anyone know what would happen if I changed my job / took early retirement over the next academic year? Could his financial position be reassessed and be allocated a larger grant / loan?

You can ask for a reassessment if your income decreases by 15% or more. Have a read here:
http://www.sfengland.slc.co.uk/full-time-study/parents-and-partners-of-students/if-your-income-has-dropped-by-15-per-cent.aspx

setmefree2

GeneHunt wrote: »

A turd is a turd whatever you call it

Quite.
No one would sign an open ended credit agreement without fixing the terms of repayment, yet this is what young people are being asked to do / are doing.

Shame we never hear Mr Lewis bleating on about that.

The marginal tax rates created by this system on low incomes are criminal.

Shame we never hear Mr Lewis bleating on about that.

Student Loans fall within the basket of goods that affect the Consumer Price Index which means benefits for older generations rise accordingly. Around £90billion each year is spent on state and public service pensions. The annual increase in that spending
resulting from higher tuition fees is the equivalent to roughly £0.5billion annually representing a large transferfrom young to old.

Shame we never hear Mr Lewis bleating on about that.

DAISYDOG

Example of what interest accrues on your loan whilst at university

While you are at university, your loan will accrue interest
The rate of inflation for 2012/13 is 3.6%, so on average you will be paying 6.6% interest on your loans (this equates to an annual rate of interest of 6.8% as interest is applied monthly.)
If you borrowed £14,500 each year, (a total of £43.500) for example, then at the end of a 3-year university course, you would owe £49,688 (assuming inflation was at 3.6%) because of the accrued interest of £6188.
Tuition fee borrowed Maintenance fee borrowed Total borrowed Interest (APR) at 6.8% Total borrowed plus interest
Year 1 £9,000 £5,500 £14,500 £986 £15,486
Year 2 £9,000 £5,500 £29,986 £2,039 £32,025
Year 3 £9,000 £5,500 £46,525 £3,163 £49,688
The interest rate remains at RPI +3% until April 6th of the following year after you graduate, irrespective of whether you are earning above £21,000.
Example of Interest on your student loan whilst you are working

Once you earn above £21,000, each year you will be charged interest of RPI plus 3% on your loan. (Below £21,000, you are charged an interest rate of RPI only)
Assumed slary Your annual payments at 9% Total borrowed Annual interest at 6.8% Total borroed plus interest
Year 4
£27,000 £540 £49,148 £3,342 £52,490
Year 5
£28,000 £630 £51,860 £3,527 £55,386
Year 6
£30,000 £810 £54,576 £3,711 £58,287
Year 7 £35,000 £1,260 £57,027 £3,878 £60,904
Year 8 £40,000 £1,710 £59,194 £4,025 £63,219
Year 9 £45,000 £2,160 £59,059 £4,016 £63,075
Year 10 £60,000 £3,510 £59,565 £4,050 £63,615
If RPI were at 3.6% then the interest rate would be 6.6% (an APR of 6.8% as interest is applied monthly). On a loan of £49,688, this would equate to an annual interest of £3,342, once you have paid back 9% of earnings above £21,000.
The example above shows what you would have to pay back and what you would accrue in interest at certain notional salary levels.
As you can see, interest accrues significantly each year.
As the above table shows for example, if you are earning £35,000, you would be making annual payments of £1260, but interest would be accruing at three times that amount (£3878). Your debt therefore gets larger every year.
You need to be earning over £60,000 to actually start to stop your debt actually growing every year. At this salary level, you would still only be paying the interest back. (It does of course depend, how much loan you took in the first place).
Student Finance: Other issues

Your student debt will generally not be taken into account when applying for a mortgage or loan, but the repayments will reduce your income. This in turn will reduce the amount a lender will lend to you. Generally mortgage company’s work on the basis of lending you a multiple of your income or salary (3 times or 4 times your income for example).
The repayment terms of the existing loans can be changed – there is no guarantee of the current rates. So future governments could decide to extract higher returns. The contract you sign commits you to ‘repay your loan in line with the regulations at the time and as they are amended’.
The government could actually ‘sell’ its student loan book to the private sector. This may have the effect of putting interest rates up.


“In summary, be very wary of plan 2 student loans, and do not take them out if you do not need them – they are not cheap money. If you do need the financing, take as little borrowing as you can survive on.

It would be better to work during your university years and endeavour to subsidise yourself in this way. The student loan is a ticking time bomb for you for years to come, and will accrue increasing levels of interest each year as you potentially struggle to pay it off.

Dunroamin

setmefree2 wrote: »

Quite.
No one would sign an open ended credit agreement without fixing the terms of repayment, yet this is what young people are being asked to do / are doing.

Shame we never hear Mr Lewis bleating on about that.

The marginal tax rates created by this system on low incomes are criminal.

Shame we never hear Mr Lewis bleating on about that.

Student Loans fall within the basket of goods that affect the Consumer Price Index which means benefits for older generations rise accordingly. Around £90billion each year is spent on state and public service pensions. The annual increase in that spending
resulting from higher tuition fees is the equivalent to roughly £0.5billion annually representing a large transferfrom young to old.

Shame we never hear Mr Lewis bleating on about that.

Given that those on low incomes won't be making any repayments, that sounds like a really weak argument.

Dunroamin

DAISYDOG wrote: »

Example of what interest accrues on your loan whilst at university

While you are at university, your loan will accrue interest
The rate of inflation for 2012/13 is 3.6%, so on average you will be paying 6.6% interest on your loans (this equates to an annual rate of interest of 6.8% as interest is applied monthly.)
If you borrowed £14,500 each year, (a total of £43.500) for example, then at the end of a 3-year university course, you would owe £49,688 (assuming inflation was at 3.6%) because of the accrued interest of £6188.
Tuition fee borrowed Maintenance fee borrowed Total borrowed Interest (APR) at 6.8% Total borrowed plus interest
Year 1 £9,000 £5,500 £14,500 £986 £15,486
Year 2 £9,000 £5,500 £29,986 £2,039 £32,025
Year 3 £9,000 £5,500 £46,525 £3,163 £49,688
The interest rate remains at RPI +3% until April 6th of the following year after you graduate, irrespective of whether you are earning above £21,000.
Example of Interest on your student loan whilst you are working

Once you earn above £21,000, each year you will be charged interest of RPI plus 3% on your loan. (Below £21,000, you are charged an interest rate of RPI only)
Assumed slary Your annual payments at 9% Total borrowed Annual interest at 6.8% Total borroed plus interest
Year 4
£27,000 £540 £49,148 £3,342 £52,490
Year 5
£28,000 £630 £51,860 £3,527 £55,386
Year 6
£30,000 £810 £54,576 £3,711 £58,287
Year 7 £35,000 £1,260 £57,027 £3,878 £60,904
Year 8 £40,000 £1,710 £59,194 £4,025 £63,219
Year 9 £45,000 £2,160 £59,059 £4,016 £63,075
Year 10 £60,000 £3,510 £59,565 £4,050 £63,615
If RPI were at 3.6% then the interest rate would be 6.6% (an APR of 6.8% as interest is applied monthly). On a loan of £49,688, this would equate to an annual interest of £3,342, once you have paid back 9% of earnings above £21,000.
The example above shows what you would have to pay back and what you would accrue in interest at certain notional salary levels.
As you can see, interest accrues significantly each year.
As the above table shows for example, if you are earning £35,000, you would be making annual payments of £1260, but interest would be accruing at three times that amount (£3878). Your debt therefore gets larger every year.
You need to be earning over £60,000 to actually start to stop your debt actually growing every year. At this salary level, you would still only be paying the interest back. (It does of course depend, how much loan you took in the first place).
Student Finance: Other issues

Your student debt will generally not be taken into account when applying for a mortgage or loan, but the repayments will reduce your income. This in turn will reduce the amount a lender will lend to you. Generally mortgage company’s work on the basis of lending you a multiple of your income or salary (3 times or 4 times your income for example).
The repayment terms of the existing loans can be changed – there is no guarantee of the current rates. So future governments could decide to extract higher returns. The contract you sign commits you to ‘repay your loan in line with the regulations at the time and as they are amended’.
The government could actually ‘sell’ its student loan book to the private sector. This may have the effect of putting interest rates up.


“In summary, be very wary of plan 2 student loans, and do not take them out if you do not need them – they are not cheap money. If you do need the financing, take as little borrowing as you can survive on.

It would be better to work during your university years and endeavour to subsidise yourself in this way. The student loan is a ticking time bomb for you for years to come, and will accrue increasing levels of interest each year as you potentially struggle to pay it off.

Working excessive hours in an attempt to avoid taking out a student loan will have far greater repercussions on your future career than having a loan will.

gadgetmind

Why get a degree that will result in a low income? Employers are desperate for skilled grads, so why not work hard and get those skills?