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

gadgetmind

kayr wrote: »

Just read this thread and am struck by the way we all come at the subject from such different backgrounds and experience.

True enough. I guess I come it from an engineering and accounting angle, hence my fancy spreadsheets that let me model my daughter's future loan repayment schedule based on the level of up-front investment and her likely future earnings profile.

I have also been surprised by the number of friends and acquaintances who have said that their children are reconsidering going to university "because of the fees". These are usually people who will get grants and bursaries, so will actually have a lower debt than my kids

I recently sat through an hour-long presentation about "Funding your medical degree", which discussed all of the various discounts and bursaries that were available. I took a pen and paper but had no need of either. :-(

Yes, you're right, and it's odd: lots of people argue that this is the kid's debt, and parents shouldn't even consider contributing towards the fees, yet there seems to be the assumption that slightly wealthier parents will do exactly that as otherwise their kids, doing exactly the same degree, will emerge saddled with more debt.

Sorry, it stinks.

Alter_ego

Haven't read previous posts, just want to say- If they don't understand the fees system they are not bright enough for university.

Oldernotwiser

gadgetmind wrote: »

Student fees are just the same. While it could be argued that you're not paying up front, this is moving into "word play" territory as you're definitely paying even though someone is loaning you the money on unattractive terms. True, repayments on the money you have borrowed to make this up-front investment into your education are deferred, but interest is accumulating, and the debt isn't going away any time soon.

It may be just "word play" to you but it makes an enormous difference to a student planning to take out a loan.

If taking out a 100% mortgage isn't paying up front for a property then neither is taking out loans to pay your fees and living costs at university.

melancholly

kayr wrote: »

I have also been surprised by the number of friends and acquaintances who have said that their children are reconsidering going to university "because of the fees". These are usually people who will get grants and bursaries, so will actually have a lower debt than my kids, yet still have the same potential earning power. It just shows how our emotional attitude towards money can affect our financial decisions. And shows the need for financial education.

and this is the worst possible outcome..... i hope that financial education can make a difference to this. i also think a lot of the children will only be repeating what their parents say so getting through to the parents is as important as making things clear to school students.

2sides2everystory

melancholly wrote: »

... i also think a lot of the children will only be repeating what their parents say so getting through to the parents is as important as making things clear to school students.

For better or worse you are almost certainly right about this. So what is it that needs to be got through to the parents "for the best"?

The Greeks are on the streets again en masse today "for the best" of intentions. Here we have a bunch of MSE'ers with no consensus yet being shuffled ever closer to the edge. They are being counselled and quelled by people who won't be jumping and by people who fell over the edge with the last scheme and survived.

gadgetmind

Oldernotwiser wrote: »

It may be just "word play" to you but it makes an enormous difference to a student planning to take out a loan.

How? They are making an investment into (hopefully) their future, which involves them acquiring a large debt so they can pay the university's fees and for their board and lodging.

If taking out a 100% mortgage isn't paying up front for a property

But you *are* paying up front for the property - it's not on hire purchase, or a lease, you are paying 100% of the money up-front, before taking title.

Please note that I referred to "up-front investment" and not "up-front payment" - I fully accept that payment is deferred, as it is with a mortgage,

It does concern me that the ability to borrow money to buy things (whether a house or an education) would mean that people wouldn't very carefully consider whether this investment was wise and worthwhile. Regards what someone should put on the cost size of this investment value calculation, I'd argue that it's either the total price, or the total repayments, and wouldn't let myself be distracted by any "no repayments for a few years" carrots.

Lokolo

gadgetmind wrote: »

How? They are making an investment into (hopefully) their future, which involves them acquiring a large debt so they can pay the university's fees and for their board and lodging.



But you *are* paying up front for the property - it's not on hire purchase, or a lease, you are paying 100% of the money up-front, before taking title.

Please note that I referred to "up-front investment" and not "up-front payment" - I fully accept that payment is deferred, as it is with a mortgage,

It does concern me that the ability to borrow money to buy things (whether a house or an education) would mean that people wouldn't very carefully consider whether this investment was wise and worthwhile. Regards what someone should put on the cost size of this investment value calculation, I'd argue that it's either the total price, or the total repayments, and wouldn't let myself be distracted by any "no repayments for a few years" carrots.

Which you know with a mortgage but you are completely unaware of what it is for student loans unless you have a crystal ball.

It's very bad to not look at the student loans are a whole, you say you are taking out the "no repayments for a few years" but this has an effect on the total amount you pay back. Loans go after 30 years, so these "few years" will make a difference in the amount you pay back.

A mortgage repayment is very clear in it's terms. You know how much you've borrowed AND how much you will pay back (within reason). With student loans you don't no matter how much you will repay so you cannot compare them like for like and dismiss things such as "no paying back for under £21K".

melancholly

2sides2everystory wrote: »

For better or worse you are almost certainly right about this. So what is it that needs to be got through to the parents "for the best"?

The Greeks are on the streets again en masse today "for the best" of intentions. Here we have a bunch of MSE'ers with no consensus yet being shuffled ever closer to the edge. They are being counselled and quelled by people who won't be jumping and by people who fell over the edge with the last scheme and survived.

until i see the details of the white paper later, i don't know!

i'm certainly angry about the scheme. it will cost students more, make life more difficult for unis and be more expensive to the tax payer than the current system. i think everyone loses. but we're stuck with it. all the protests in December were reported as scaremongering and suggestions that the government had completely misjudged the fee levels were laughed at..... well here we are now!

i started uni just after fees were introduced, when the labour government completely broke their election pledge. it's like seeing the same thing again and that is maddening. maybe because i felt betrayed and knew exactly what this system meant in December, when the majority of people believed the rubbish from the government about what the new system meant.

BUT (and that's a big but!), there is a lot of info out there that isn't correct. it's a worse system, no doubt, but it isn't as bad as some people are suggesting. the repayment terms make the loans bearable. no money is needed up front. this won't stop people getting mortgages and the repayments won't be unaffordable (granted they'll last a long time, but the amounts will be proportional to income). i'm no fan of the new system but without explaining it, so so so many people are getting the wrong end of the stick.

i'd like to hope for an NHS-like u-turn from the government but i don't rate our chances! i'd like to hope that they postpone the changes for another year to give parents (and universities) the chance to prepare.... i don't rate our chances on that either!

the most important thing for parents to get is that this isn't commercial debt..... they need to understand the repayment system in terms of month by month payments as much as they understand the totals!

gadgetmind

Lokolo wrote: »

Which you know with a mortgage but you are completely unaware of what it is for student loans unless you have a crystal ball.

You can't put an exact price on it, but you can model various scenarios and see how the numbers look.

The hard part is working out the interest rate. I ended up with -
=IF(H7<H10,RPI,IF(H7>H11,RPI+3%,RPI+((H7-H10)/(H11-H10)*3)%))

Whew! H7 is salary, H10 is the lower band before the rate starts to escalate, and H11 is the upper band where it levels off again. I moved the bands by CPI every year, and chose 3% for an ongoing RPI.

so you cannot compare them like for like and dismiss things such as "no paying back for under £21K".

Yes, student loans are very complicated: it took several hours before I was happy with my spreadsheet, and it still might not be right. However, with the framework in place, I can copy this to various tabs, each with a different scenario, and push the numbers around.

As for the deferred repayments, it's open to debate as to whether these are good or bad. It does let someone get through uni and get their career started, but all the time, that mountain of debt is growing and growing.

Assuming my daughter does a medical course, and starts to get a junior doctor's salary in 2017, and manages to grow her income at 8%pa from there onwards, she'll still be 43 by the time her debt starts to reduce, and at that point she'll owe £122,000

For other students, doing shorter courses and/or with different salary expectations/profiles, the numbers would be different, but I'd hope that people have at least made some attempt to model things before deciding to go ahead.

Lokolo

gadgetmind wrote: »

You can't put an exact price on it, but you can model various scenarios and see how the numbers look.

The hard part is working out the interest rate. I ended up with -
=IF(H7<H10,RPI,IF(H7>H11,RPI+3%,RPI+((H7-H10)/(H11-H10)*3)%))

Whew! H7 is salary, H10 is the lower band before the rate starts to escalate, and H11 is the upper band where it levels off again. I moved the bands by CPI every year, and chose 3% for an ongoing RPI.



Yes, student loans are very complicated: it took several hours before I was happy with my spreadsheet, and it still might not be right. However, with the framework in place, I can copy this to various tabs, each with a different scenario, and push the numbers around.

As for the deferred repayments, it's open to debate as to whether these are good or bad. It does let someone get through uni and get their career started, but all the time, that mountain of debt is growing and growing.

Assuming my daughter does a medical course, and starts to get a junior doctor's salary in 2017, and manages to grow her income at 8%pa from there onwards, she'll still be 43 by the time her debt starts to reduce, and at that point she'll owe £122,000

For other students, doing shorter courses and/or with different salary expectations/profiles, the numbers would be different, but I'd hope that people have at least made some attempt to model things before deciding to go ahead.

Yep thats all well and good, can I assume you've had the same job throughout your whole working life?

Life changes and you've made it very mathematical without thinking "outside the box".

What happens if you daughter marries a doctor and decides to become a SAHM? If you've taken out a mortgage over 25 years and your daughter isn't even working after say 5.

What if she decides being a doctor isn't for her and goes into another medical field that doesn't pay as much as your expectations?

As for the "deferring" it's completely different compared to a mortgage. With a mortgage, these payments would still need to be paid. With student loan, they may not.

These points should be considered when making your decision. A lot on here say it's financial very bad to take out student loans as my son/daughter is going to be earning £35k+ and increasing it every year for the next 30 years. Life does not work like that, someone at your age should surely know that? (no offence intended!)