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

Lokolo

Also how were you planning on paying for your daughter if not through student finance?

gadgetmind

Lokolo wrote: »

can I assume you've had the same job throughout your whole working life?

Yes, but I'm not sure why you're asking.

If you've taken out a mortgage over 25 years and your daughter isn't even working after say 5.

A mortgage isn't in my model.

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?

I have modeled the scenario where she does a three year science degree (she's got medical/biological sciences as a backup option) and where her salary profile is therefore different.

These points should be considered when making your decision.

Agreed 100%, which is why I'm looking at several scenarios involving a student loan and a few without. What is hard to allow for at the moment is early repayment penalties as these haven't been announced.

Life does not work like that, someone at your age should surely know that?

Yes, I do thanks, and it's clear that a student loan (versus up-front payment) rewards a mediocre career yet punishes a successful one, so you need to look at risk versus reward. For any given career/life trajectory, I can work out in seconds whether a loan will beat any other funding approach, which doesn't mean our decision will necessarily be the right one, but at least it will be a well-researched and suitably informed one.

gadgetmind

Lokolo wrote: »

Also how were you planning on paying for your daughter if not through student finance?

The choices are capital, income or borrowing. Once you've discounted the latter, only two others remain.

wozearly

gadgetmind wrote: »

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.

But as I said before, and you pointed out on this page, the critical thing isn't the loan amount (which can get to scarily high numbers) but the repayments.

The total loan amount only comes into play if you're making large enough repayments to actually clear the loan before the 30 year point. The scenario you mention here suggests your daughter wouldn't actually clear the loan in full.

Using your kinder example of 6% interest (3% RPI + 3% for earning over £41k) than my 8%, that £122,000 loan carries an interest of £7,320 per year.

Spinning it round, that means a salary of £102,333 is required to make repayments of £7,320 per year (7320/9)*100 + 21,000.

Assuming her salary remains broadly constant for those 7 years, she'd pay back £51,240 more before its written off - definitely not enough to clear a £122,000 loan, unless her salary skyrockets again during those 7 years.

Don't get me wrong - I completely see why the current system is awful for your daughter as she expects to be a high earner. But she's in the minority that the government is intentionally lumping higher repayments onto to make the overall system more progressive. And as her degree is a requirement to become a doctor, she can't get that kind of salary in that field without it...and the benefit to her financially will still more than justify the total loan repayments.

Its a lot worse than the current system for her, but its by no means punitive even in her case. And if its possible to fund the course via alternative methods (commercial loans, parents, etc.) that you both believe will be cheaper in the long run, then go for it!

Ultimately, I'm not convinced that its a bad route for the majority of students. Its just a lot more complex and payments are uncertain (just like variable mortgages) which the current approach doesn't have, along with some scary headline loan figures...but actually, those headline figures aren't relevant, as unlike virtually all other loans, its expected that you might well never pay it back in full.

Its why HMG and, AFAIK, Martin Lewis have both focused so much on communicating the reality of the situation.

All that said, I accept that there's nothing they can communicate to you that makes your personal situation better, so good luck in battling to get the system changed. :beer:

Oldernotwiser

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.

We seem to agree that student loans and mortgages come into the same category. However, I just don't think that anyone would tell a FTB that they are "paying up front" for their property by taking out a mortgage.

I'm just surprised that you've put so much thought and effort into this process but have, in many ways, totally missed the point.

2sides2everystory

melancholly wrote: »

...the most important thing for parents to get is that this isn't commercial debt...

Putting aside what you mean by the phrase commercial debt (you might mean private sector debt perhaps) are you sure parents should sensibly "get" something which is an indigestible moving feast at best, touted and cooked-up by mealy-mouthed politicians and hungry education insiders for today who don't even have to be gone tomorrow for it to be taken off the menu and replaced by private sector catering any time they feel they can "get" away with it?

Whatever kind of debt this is will be linked for half a lifetime to our kids' names in 'orrible databases. Don't kid yourselves that Equifax and Experian and CallCredit will not have access to the data.

wozearly

2sides2everystory wrote: »

Whatever kind of debt this is will be linked for half a lifetime to our kids' names in 'orrible databases. Don't kid yourselves that Equifax and Experian and CallCredit will not have access to the data.

The credit ratings agencies don't have direct access to the student loans company (SLC) information.

What the SLC gives as standard is information on 'defaults' from the pre-1998 style loans. Credit ratings agencies have no way of knowing if you have a student loan, or how much it is, because all of the payments are dealt with via the tax system, so lack of payment or incorrect payment can only be achieved via tax evasion. HMRC certainly doesn't give credit agencies access to its records!

The only reason the SLC currently releases data is if you have a county court judgement against you for lack of payment.

So unless there's a significant shift in policy direction, I'd personally be very surprised if the credit ratings agencies got access to student loan information.

However, the repayments you make are accounted for in terms of disposable income that you have when applying for mortgages, etc - but no differently in principle to you having any number of standing contracts for mobile phones, sky television, etc.

2sides2everystory

And there were no US military in Laos and Cambodia - how long did that last, woz ? Maybe they woz just a bit early

gadgetmind

wozearly wrote: »

But as I said before, and you pointed out on this page, the critical thing isn't the loan amount (which can get to scarily high numbers) but the repayments.

Yes, and by 43, she's very likely to have paid more back than she borrowed yet still have a six figure sum outstanding.

The total loan amount only comes into play if you're making large enough repayments to actually clear the loan before the 30 year point.

I assumed the 30 years runs from graduation - is this correct?

If so, and accepting the vagaries of my other assumptions, she will indeed have some debt wiped out in 2047. At this point, she will have repaid £175k against initial borrowing of £62k but the outstanding £69k will be wiped out. Saying she won't be paying it off "in full" is technically correct but avoids the sticking issue of her having repaid several times what she borrowed due to the very high rate of interest they have set.

All that said, I accept that there's nothing they can communicate to you that makes your personal situation better, so good luck in battling to get the system changed. :beer:

Rather than fighting systems, I prefer to instead work to understand them and optimise my interactions with them.

melancholly

2sides2everystory wrote: »

Putting aside what you mean by the phrase commercial debt (you might mean private sector debt perhaps) are you sure parents should sensibly "get" something which is an indigestible moving feast at best, touted and cooked-up by mealy-mouthed politicians and hungry education insiders for today who don't even have to be gone tomorrow for it to be taken off the menu and replaced by private sector catering any time they feel they can "get" away with it?

Whatever kind of debt this is will be linked for half a lifetime to our kids' names in 'orrible databases. Don't kid yourselves that Equifax and Experian and CallCredit will not have access to the data.

to clarify what i mean by commercial debt:

debt that you sign up to make a minimum repayment every month, regardless of your personal circumstances. debt that you have to pay if you're ill off work or if you take time off to have a child. debt that is offered to you on different terms dependent on your financial history. none of that is the case with the SLC.

the new system is bad for new students compared to current students. but if the choice is take the loan or avoid uni, then the loan makes sense. fwiw, everyone in HE opposed the new system. all the student bodies opposed the new system. this got through parliament because lots of the people complaining now did nothing.

i get that you're angry - plenty of people are. but don't let that cloud judgement on the few remaining good points of the policy. without the repayment terms, this would be an unmitigated disaster. but they are still there and this makes it workable. many people (most in HE and most student reps) had this knee jerk angry reaction in December. it won't change anything...... i won't be forgetting this at the next election though (although Labour screwed the voters on student fees just as completely and people forgot that fairly quickly!)