MSE News: Only one third of pupils understand the new tuition fees system

Lokolo

gadgetmind wrote: »

I have, thank you, several times, and in great depth.

"Those against it" seems to be close to everyone. What is it that you think they want me to think and what reason would I have for thinking it?

HMG (and you!) seem to be trying to get across the message that if you're against the new system, then that's because you don't understand it, and they then start to explain it again. MSE is just adding fuel to the "keep explaining and they'll grow to like it" fire IMO.

Sorry, don't bother explaining it again, not you, not HMG, not MSE, because I understand it in exquisite detail and have even put together a complex model in Excel that projects my 17yo daughter's likely situation though to her mid 50s. Based on this, I hate every scintilla of the new scheme.

Are you the only one that reads the articles?

Just because YOU know how it works, doesn't mean everyone does. That's why the guides are created. MSE is very much for "newbies" to finance. Everyday there are questions such as "Can I open an ISA?" and "Can I cash in a pension?", this is what this forum is for, understanding finance.

Another thing, you all do complain about it, yet you sit on your backside doing nothing but whining on these forums. If you don't like it, start a petition, do something about it instead of having a go at MSE and it's contributors who are there just to try and inform people about the new system.

2sides2everystory

Taiko wrote: »

Why would MSE take that approach? It's a done deal, ...

It is far from a done deal - individual universities have taken the mickey by charging similar fees to other establishments that they could not in a hundred years ever hope to emulate e.g. Brunel saying they'll charge £9000 same as Imperial and indeed it appears that the government may be breaking the law by implementing their scheme.

Hopefully they have a legitimate Plan B.

gadgetmind

Lokolo wrote: »

Are you the only one that reads the articles?

No, far from it, and I'm far from being the only one who understand it. Yes, a few youngsters don't get it, but the vast majority of those it affects seem to have a really good grasp.

Another thing, you all do complain about it

Wrong. By understanding it, I hope to find a route through this minefield for my daughter.

Should I be doing more? Yes, maybe, but no way do I want my daughter to be saddled with debt for most of her working life, so instead I'm putting my energies into earning a bit extra so we can cover these costs on her behalf.

I'm happy to add my voice to a any lobbying/protest group who seem to be getting the point across, but I also reserve the right to criticise any group, organisation or body who I feel are acting at right angles to where we should be applying pressure.

wozearly

gadgetmind wrote: »

Both my 17yo daughter and myself fully understand the new fees system (other than those aspects that they haven't yet decided upon!) and let me assure you that understanding it does not make it any easier to swallow.

I personally wish MSE would stop banging the "people don't understand it" drum and instead move ahead with the "people understand it and think it stinks" message.

...HMG (and you!) seem to be trying to get across the message that if you're against the new system, then that's because you don't understand it, and they then start to explain it again.

There are several elements of the new approach to university funding I don't like, but the way that student loans work isn't actually one of them. And in fairness to HMG, most people seem to assume that you get landed with a £27k+ loan that you have to pay off over 30 years, which is the worst case scenario and definitely not a typical one...ultimately its their fault for atrocious communication around the whole issue.

I really hope I don't accidentally descend into re-explaining this, but the key benefit is that for a significant chunk of students its likely that a) they will never pay back the loan in full (from memory, one think tank pegged it as over 40% for women) and b) they'll pay a lot less during the earlier years, which is when people have the least free money in any event.

Where its problematic is for the aspirational students who believe they'll be earning far, far above average earnings for most of the 30 years after they graduate, in which case they pay a heck of a lot more than the current system, as they subsidise those who don't. No shame in your daughter being in that category, I might add - but the burden of any 'progressive' system will always fall on those who earn the most.

And, to be honest, I imagine a much larger chunk of students believe they'll end up in that category than is actually the case. We all dream, right?

For comparison, if the government withdrew all subsidy to universities and let them charge a true global market rate then intuitively we'd see costs rising to a more similar level to those in the US, which (depending on the course) can go up to about $15,000 - $50,000 per year. And that's before living expenses, textbooks, etc.

Assuming the midpoint is 'average', that's tuition fees and associated charges of about $32k. So it wouldn't be unreasonable to see UK universities charge an average of about £20k per year...its back of a napkin stuff, but the most that the new system does is ask students to pay an absolute maximum of half of their cost of tuition (plus inflation and a bit over 30 years, granted).

...so yes, its a lot more than the current 1/7th or so of the cost (plus inflation) over your entire working lifetime, but historically students have contributed only a fraction of the cost with society picking up the tab. Once huge numbers of people started going to university, that was never going to be politically sustainable - especially not during a major recession.

Even though I believe there's a lot of merit in your idea that we shouldn't be encouraging everyone to go to university, its spent so long as an aspirational symbol for young people (and other countries continue to send even higher proportions of people to university) that, rightly or wrongly, there is no political will to propose forcing people to drop their aspirations either by forcibly limiting places by number or grades, or shifting the financial goalposts to discriminate on price.

gadgetmind

wozearly wrote: »

for a significant chunk of students its likely that a) they will never pay back the loan in full

Some may never pay off the loan, but this is due to the high interest rates. Many will pay far far more than they are forced to borrow. There is also talk of penalties for paying off early, which is evil.

wozearly

gadgetmind wrote: »

Some may never pay off the loan, but this is due to the high interest rates. Many will pay far far more than they are forced to borrow. There is also talk of penalties for paying off early, which is evil.

I agree that penalties for paying off early are evil...although worryingly the system may rely on them to force those who later earn high salaries to pay more than their 'fair' share to subsidise everyone else.

I appreciate that you've looked into this in great detail, and with (I presume) specific salary expectations between you and your daughter, so I won't presume to challenge that specific situation. Would you be willing to share any of your calculations in the interest of this discussion?

As for paying more than is borrowed, that'll depend on a) how much someone's loan is, and b) how much they earn.

As a purely hypothetical example for other people to follow (not trying to explain to you!), the loan could build up like this:

Year 1: £9k tuition fees, £3.25k maintenance, £1k interest (8% (RPI@5% + 3%) = £13.25k

Year 2: £13.25k + £9k + £3.25k + £2k interest = £27.5k

Year 3: £27.5k + £9k + £3.25k + £3k interest = £42.75k


I'll assuming RPI averages conveniently at 5% for the 30 year loan term (its been between 3-5% as an average for the last 20 years, IIRC).

The student then needs to pay 5% (£2,140 per year / £178 per month) to hold it at breakeven, assuming they earn below £21k.

As that breakeven requires a salary of £45k per year (students pay 9% of any salary over £21k) and above £41k students pay the +3% on RPI, actually the equilibrium point is an interest charge of 8% (£3,420 per year / £285 per month).

To meet that, a student needs to earn £60k. Only about 7% of people earn that (source: earnings survey & population info from the ONS).

This is why a large chunk of people will never pay back the loan. There just won't be enough high earners amongst the cohorts leaving university to outstrip the inflationary impact.


So the key issue (IMO) iin most cases is how much someone repays, which is purely linked to salary. These are the repayments for some different salaries (for sanity, this assumes a consistent level of earnings over 30 years):

£25,000 salary = £30 per month x 12 x 30 = £10,800
£30,000 salary = £67.50 p/m x 12 x 30 = £24,300
£35,000 salary = £105 x 12 x 30 = £37,800
£40,000 salary = £142.50 x 12 x 30 = £51,300
£45,000 salary = £180 x 12 x 30 = £64,800
£50,000 salary = £217.50 x 12 x 30 = £78,300
£55,000 salary = £255 x 12 x 30 = £91,800
£60,000 salary = £292.50 x 12 x 30 = £105,300


Bearing in mind the total loan taken out was £42,750 including the mandatory interest, a £40k average salary is the first point on this scale that goes higher than the original loan payment, but that would be a low effective APR on the loan.

I'm not sure what your threshold for "far higher" is, but by the time we're talking about a career average salary of £50,000+, I don't think we're talking about the average graduate any more. There's just too many of us to earn that much on average, even with inflation.

So as I said previously, its the most successful that suffer - but primarily because of the high fees universities are charging that racks up the base loan so highly.

All that said, if the degree was a key part of that successful student earning way more than the UK average of about £24,000, then even with the heftier repayments, doesn't it still represent a very positive return on investment?

I'd personally happily have a £105,000 loan repayment if it meant I'd averaged £1.8 million in earnings over the same time period!

Taiko

Those against it tend to start off with the unions, who fear for their jobs being cut. They redirect this fear into those students who choose not to read into things, like you may well have done.

A prime example of this, I had a weekend away back in March. Whilst wandering around Cardiff, I stumbled across a rally being held near to what transpired to be the conservative party conference. Up on stage, you had various opposition MP's and union reps, each time mentioning on the subject of fees that upon graduation, you'd have no money under the new system as it would all be used to pay off the increased debt. Not one of them mentioned the £21,000 threshold, and not one of them offered an alternative, it was just a case of them complaining.

Oddly enough, the Labour alternative was a straight £9000 fee for all. Funny how that has been forgotten.

On the note that someone said against this possibly breaking the law, do you care to explain how this may be?

2sides2everystory

I think MSE should start a campaign so that next year as many 2012 students as possible alter the declaration wording on the completed loan application to something like:

I am agreeing to these conditions under duress and reserve the right to challenge the validity of the contract at a later date when the imperative to sign this document in order to gain unrestricted access to my right to a university education has passed.

MSE should be aiming for student solidarity in that respect alone. I am sure Martin and friends can come up with a shorter and more appropriate alteration and get the word out.

I have found that it usually sends ultimate form processors into paroxysms of uncertainty and ultimate 'do nothingness' when you manually alter the wording of a forced agreement and someone has already accepted it for processing. If any such applications actually get processed in numbers and come out the other side then the validity of the whole thing will emerge as that which the government deserves

The last time I used that was at Stansted Airport when BAA unilaterally decided at very short notice without even communicating the matter via new signs, to change the right to take your car into the pick up area for free for 15 minutes and also slapped a twenty quid charge on anyone there for more than an hour. My friend's flight was late and I was there for over an hour. I got to the barrier and learned the worst.

I offered a fiver and they would only let me out of the car park on condition I go to the office first and sign an underpayment form with my name and address which I manually altered into a Complaint Form setting out my thoughts. Didn't hear a thing from them afterwards :rotfl:.

Taiko

They would just have Paragraph 5(3)(f) of The Education (Student Support) Regulations used against them, and support terminated on that basis, so no loans would be provided at all.

gadgetmind

wozearly wrote: »

Would you be willing to share any of your calculations in the interest of this discussion?

Yes, sure, but tomorrow, or soon after.

She's wanting to study medicine, and it's by no means certain she'll get in, but if she does, it's a big up front investment. I've assumed she's going to earn enough to be paying back something as soon as she's earning, which seems reasonable.

The engineering peeps we employ will be doing the same.

TBH, if you're never going to pay it back, the whole country is on a big fat looser if you take the course. A degree should boost your earning potential into the stratosphere IMO.