Student Loan 2015 Discussion

Ed-1

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.

While I agree with most of what you're saying and that for the majority with large balances on graduation, it'll be virtually impossible to pay off anywhere near the full balance, the interest rate is compounded monthly but the rate advertised is the APR so 6.6% for 2012/13 (6.3% for 2013/14) is the annual rate (i.e. the monthly rate would be a bit lower to take into account the fact interest is applied monthly and compounded).

Brookrose

I spent 2 years of my student finance already. The first year on my course I didn't receive any support for my dyslexia until the final term, and then I failed. I then retook my failed units and for this year i had barely any communication or help from my course leader so I failed the re take aswell.

Now I want to do a new degree course at a new university and I only have 2 years of funding left. I'm not sure what to do because theres a course I have found which suits me and I really want to go for it. Student finance will only fund my 2nd and 3rd year, so how do I fund my first year? I come from a low income background so I don't have a chance on my own. Is there anything I can do?

TurnUpForTheBooks_2

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.

Oh I see that others most certainly have raised the real problems of Repayment Plan 2 i.e. Student Loans for 2012 and 2013 starters. And here we have Dunroamin again brushing it under the carpet.

The MSE article this thread originally followed when it started in 2011 is now shown to be terribly misleading. There is still a paragraph in it that suggests that student loan balances will not affect the ability to get important credit later in life. What lies. Of course it will affect the most important credit that is required in most UK lives - the ability to get a mortgage to buy your own house.

Ed-1 glibly notes that some Student loan balances could not possibly be paid off, with the implicit suggestion no-one should try. Dunroamin suggests that no student should attempt to avoid using the loans by working while they are a student.

These loans are a disgrace to our country.

I challenge those two posh boys to go on television and explain how a typical student loan stacks up showing interest rates and loan balances and calculating the outstanding loan balance at graduation using maths and a blackboard. I have a feeling they are not capable of doing so. We must have a majority in the house who are incapable or simply care about nothing but their own political careers.

I bet not one single MP has ever worked out the numbers for themselves like DAISYDOG has done, not even that pointy headed Willetts.



Various people thought it was clever to sell Repayment Plan 2 as a graduate tax and to ignore the loan balances. I think these are the people that have no real understanding of the way money actually works - not now in UK, not last year or 5 years ago, nor 5 decades ago but how it has always worked for centuries if not millennia around the developed world. Our student loan debts in the UK will be owned by corporates and some already are as they are in the USA where student loan debt is out of control.

The current UK loan scheme is a dangerous bubble and almost no-one with any clout in these MSE forums has warned about it. Instead there are willing shepherds ushering our students into the mire.

£65 FFFing THOUSAND QUID one student I know will owe before graduation even if RPI remains the same, and that's not a medical student.

You people brushing the enormity of this under the carpet should be ashamed.

setmefree2

TurnUpForTheBooks wrote: »

You people brushing the enormity of this under the carpet should be ashamed.

Hear hear.

However, I do think that generally people's understanding of the tax system is so poor that they will probably never realise how badly they have been stitched up.

SlimmingSusan

Dunroamin wrote: »

I'm glad you put a question mark after that because it's certainly a questionable statement. I think that the MSE message to students is very clear, that debt outside the student loan is a bad thing. I also doubt that very many students have mortgages either.

Dunroamin, I have found many of your remarks, especially those about degrees nowadays being A plus levels.

I went to grammar school, after passing my 11 plus, and had a damn good education. I chose to have chikdren after my a levels, no help from thwe govt.

I am entitled to go back now, after chikdren, caring. How dare you put down something which is a lifesaver to me. Remarks like yours really get to me.

norfolkmum

My daughter is going to university next September 2014 and I haven't a clue about the loans. I've been trying to read up on them, but my head is about to burst. At the risk of sounding really thick (I'm feeling it at the moment), can someone help me? I think my problem is, my husband earns too much. I think from what I've read that my daughter will only get 65% of what she needs and we have to pay the rest. Is that right?

I don't get this, surely it's a loan between her and the company? Why should it have anything to do with what we earn? Our wages do look good on paper, but with all our outgoings, we don't have any 'spare' money, and I'm now really panicking that she won't be able to afford to go.

We will try and help her as much as we can, but that isn't going to be much, and what about parents who aren't interested or don't want their children to go to Uni and won't help them? Does that just mean they can't go? I just assumed they could borrow it all. It's really doing my head in now

Thanks in advance for any help anyone can give me.

lana8

Hello,

Im after some advice regarding grant overpayments.

I have been informed that I was overpaid £3, 000 during the academic year 12/13 and have been told that the full amount will be deducted from my grant entitlement this academic year, resulting in financial strain.

I have contacted student finance england on numerous occasions to see if I can repay the amount over the next three years of studying, meaning only £1, 000 would be deducted each year.
They still have not responded to this letter so I contacted them today, I was on the phone for nearly 4 hours, trying to sort this out and I have got nowhere. The last adviser I spoke to said there is nothing that can be done about it as the amount has already been deducted from 13/14 grant entitlement. This is confusing as I recieved an e-mail this morning, again explaining how the full £3, 000 would be deducted this year but also stating that 'if I feel this would put a strain on my finances and studies call the grant overpayment department to discuss repayment'.

Is there anybody who knows if I have a right to repay the amount over the next three years of my studies or have I no choice but to pay it all in one year. I have been going round in circles with student finance, they have not been very helpful at all.

Thank you.

Dunroamin

SlimmingSusan wrote: »

Dunroamin, I have found many of your remarks, especially those about degrees nowadays being A plus levels.

I went to grammar school, after passing my 11 plus, and had a damn good education. I chose to have chikdren after my a levels, no help from thwe govt.

I am entitled to go back now, after chikdren, caring. How dare you put down something which is a lifesaver to me. Remarks like yours really get to me.

I'm not going to argue with you; I've spent a large part of my career helping mature students to go to university and I know how rewarding and life changing it can be.

However, wait until you've been on your course for a while and then come back and tell us whether your degree is actually a big jump from the standard that you were studying at A level in the past.

I did a degree in French 25 years after I did the subject at A level and I can honestly say that we covered nothing that I hadn't studied before until the end of the second year. It was also no problem to do the degree after a gap of that length of time with no study preparation whatsoever.

I just think it unfortunate that we allow students to run up vast debts only to achieve the same standard that they would have achieved by the age of 18 after A levels in the past.

Anyway, I hope you enjoy the experience and that it takes you where you want to go.

Dunroamin

norfolkmum wrote: »

My daughter is going to university next September 2014 and I haven't a clue about the loans. I've been trying to read up on them, but my head is about to burst. At the risk of sounding really thick (I'm feeling it at the moment), can someone help me? I think my problem is, my husband earns too much. I think from what I've read that my daughter will only get 65% of what she needs and we have to pay the rest. Is that right?

I don't get this, surely it's a loan between her and the company? Why should it have anything to do with what we earn? Our wages do look good on paper, but with all our outgoings, we don't have any 'spare' money, and I'm now really panicking that she won't be able to afford to go.

We will try and help her as much as we can, but that isn't going to be much, and what about parents who aren't interested or don't want their children to go to Uni and won't help them? Does that just mean they can't go? I just assumed they could borrow it all. It's really doing my head in now

Thanks in advance for any help anyone can give me.

You have to be on a high income for the student loan to be reduced by that much and, unfortunately for you, outgoings aren't taken into account.

Don't forget that you'll be saving a considerable sum by no longer having to keep your daughter at home and that sum should well be enough to bring the loan up to a liveable level.

Lokolo

TurnUpForTheBooks wrote: »

The MSE article this thread originally followed when it started in 2011 is now shown to be terribly misleading. There is still a paragraph in it that suggests that student loan balances will not affect the ability to get important credit later in life. What lies. Of course it will affect the most important credit that is required in most UK lives - the ability to get a mortgage to buy your own house.

Just to point out, the student loan balances DO NOT have an effect on getting credit, it is repayments that have an effect, not the balance. There is a big difference.

I think in the end, the balance is just a number that doesn't really matter. It is the repayments that people should be looking at. The debt is wiped after 30 years (obviously if this changes this it changes my view), so you could earn £21k a year for the next 30 years (+RPI), end up having a balance of £300k, and paid not a single penny. It's then wiped.

Obviously, gadget things everyone is after money after going to uni (this was a factor for me, but not for others), and therefore if you think you are going to earn a lot, you should look at how much your repayments would be.

edit - and this doesn't mean I think RPI+3% is fair either, just pointing out the facts.