MSE News: £6,000 or £9,000 uni fees? Is it an irrelevant decision?

Former_MSE_Helen

This is the discussion thread for the following MSE News Story:

"New analysis shows all but high earners pay back the same, regardless of fee..."

Read the full story:
£6,000 or £9,000 uni fees? Is it an irrelevant decision?

JimmyTheWig

Many even earning £30,000 starting salaries (where salary rises by 5% each year) won't fully repay before the 30-year cut off if they pay £6,000/year fees and get the full living loan of £5,500 a year. This means a course with higher fees won't cost them more. Built into this assumption is that the threshold above which repayments are made rises by 4% a year.

I'm not sure that these assumptions are particularly sound.
If the threshold is rising by 4% a year, is that assuming inflation of 4% a year? I'm guessing so.
In which case I think a new graduate would generally get pay increases of more than 1% above inflation.

With more institutions wanting to charge £9,000/year than expected, the Government could get more back than expected.

This contradicts the rest of the article. If the government are getting back more than expected, surely this means that students are paying more than expected. I.e. by institutions charging more, students are paying more.

Lokolo

JimmyTheWig wrote: »

I'm not sure that these assumptions are particularly sound.
If the threshold is rising by 4% a year, is that assuming inflation of 4% a year? I'm guessing so.
In which case I think a new graduate would generally get pay increases of more than 1% above inflation.

The assumptions used:

Inflation is 3%
Salary Increase is RPI+2%
Threshold rises by RPI+1%

You can see the calculations here.

JimmyTheWig wrote: »

This contradicts the rest of the article. If the government are getting back more than expected, surely this means that students are paying more than expected. I.e. by institutions charging more, students are paying more.

Yes I didn't get that either.

JimmyTheWig

Lokolo wrote: »

Threshold rises by RPI+1%

You can see the calculations here.

Ahh, this is increasing with earnings rather than inflation? I can't see the government keeping that up for too long!

2sides2everystory

England expects its aspiring 17 and 18 year olds to make massive personal borrowing decisions based on less than half a skewed story.


But wait, it is not borrowing decision, it is tax avoidance decision.

Correction: England expects its aspiring 17 and 18 year olds to make a life changing tax avoidance decision based on less than a half skewed story.

But wait, its not life changing, its the same for everyone? Right?

Wrong!

First, to all those clever enough, you can work around this - if you don't mind travelling, and getting moved on occasionally, then you can always go and blag something for nothing elsewhere in Europe. Lucky heather not necessary.

Second, if you are already rich enough so as to already have some lucky heather in the family, you don't need a brain or a loan , do you? Your rich Mum & Dad's Amex will do nicely to help you avoid an extra tax and in the process keep your international CRA record squeaky clean for a few more years yet. Yes never mind Experian Equifax and CallCredit - watch out for the emerging German and US data repositories and bet your bottom dollar that signing up for anything headed "loan" will beam your name to some dark corner of the globe faster than you can unpack your rucksack in some dingey student accommodation in Slough.

So, the rest. What shall we do with you? Well, you're all the same. If you haven't created your own clever plan to avoid signing up with SLC and the graduate tax then maybe you should stick with the rest of the flock. Baaa! Baaa! Yes quieten down now and move along now ... Got your UCAS forms ready? Aim high. Sign on the dotted line for SLC too - its nothing to worry about really - never mind the numbers ... Keep moving. The last thing we want is for the sheep to be spooked and jump the rails.

It's a game of chance, some of you will be winners and survivors and others will be losers and top themselves or otherwise stuff up before you become useful citizens. Just sign up for the full amount unless you have a better idea. Go for it!

Sign it / damn you!

tyllwyd

How on earth can it be good financial planning to make a decision about taking on a debt based on the assumption that you won't have to pay it all back? Its the moral equivalent of saying don't worry about borrowing £100K rather than £10K, you can always go bankrupt and avoid paying it all off.

melancholly

i think MSE has told it straight - they've listed repayments per salary and done all the number crunching that a lot of people wouldn't be able to work out. it's now up to the students to take this information on board. i can't understand howpost 5 above makes anything at all even remotely clear!

no-one should make their uni choice only on fees. on the whole, it won't make a difference to repayment and tbh, most of the places offering low fees places aren't going to offer as many advantages as most of the higher fees (that's a generalisation, but is broadly true).

i guess if you add on top fees and expensive london living versus lower fees and cheaper living, the total amount spent could be very different. it's worth considering it, but only as one part of the decision process. the right course is the most important thing.

melancholly

tyllwyd wrote: »

How on earth can it be good financial planning to make a decision about taking on a debt based on the assumption that you won't have to pay it all back? Its the moral equivalent of saying don't worry about borrowing £100K rather than £10K, you can always go bankrupt and avoid paying it all off.

that's what makes the system 'progressive' (allegedly). those who financially benefit from uni pay for it whereas those who don't, won't pay it all back. that's the key principle of the government system. like it or not, that's one of the cornerstones of the policy - it's exactly what it's designed to do. most people won't pay it all off. this isn't people milking the system; this is the system!

but fwiw, student loans don't get wiped out if someone declares themselves bankrupt, so as long as graduates are working and being paid above threshold, they'll be paying and not avoiding it!

tyllwyd

melancholly wrote: »

that's what makes the system 'progressive' (allegedly). those who financially benefit from uni pay for it whereas those who don't, won't pay it all back. that's the key principle of the government system. like it or not, that's one of the cornerstones of the policy - it's exactly what it's designed to do. most people won't pay it all off. this isn't people milking the system; this is the system!

but fwiw, student loans don't get wiped out if someone declares themselves bankrupt, so as long as graduates are working and being paid above threshold, they'll be paying and not avoiding it!

But there is no obligation to take a high paying job and pay back - so if you don't think you're heading for a high flying career, there is an incentive to go for a low paid job ... as a graduate, a middling income type of job is getting less and less attractive. By telling people that they should sign up on the implicit understanding that they don't have to pay it back, you are nudging graduates to head towards low paying jobs, and how can that be sensible?

And yes, I know that student loans don't get wiped out if you declare yourself bankrupt. My understanding was that they used to be, but too many students were doing exactly that so they changed the rules. If people take out loans now on the assumption that they won't have to pay back, do you trust the government not to change the rules (or carefully manipulate the thresholds to get the result they want) in the future?

2sides2everystory

tyllwyd wrote: »

Its the moral equivalent of saying don't worry about borrowing £100K rather than £10K, you can always go bankrupt and avoid paying it all off.

Is it a fact that the new scheme can be played that way? Somehow I doubt it as it isn't a debt as we know it Jim, or is it? Perhaps we should be telling our young people that's the way to go (bankrupt as soon as they have finished studying) - graduate and then send this government a message in a bankruptcy application, get it out of the way early before it becomes life changing :money:

Edit: Ah ... I thought so ... sneaky government types have already thought of it and closed the gate. Keep calm and carry on ...

melancholy wrote:

i can't understand howpost 5 above makes anything at all even remotely clear!

nothing is remotely clear. Are we at least clear about that? You can create as many formulae in spreadsheets as you like to plot your demise over 30 years which will serve as an everlasting reminder of how you bought into this missold mess, but the only clear conclusion will be that they were as useful in the short medium and long term as a chocolate teapot.

Oldernotwiser

2sides2everystory wrote: »

Is it a fact that the new scheme can be played that way? Somehow I doubt it as it isn't a debt as we know it Jim, or is it? Perhaps we should be telling our young people that's the way to go (bankrupt as soon as they have finished studying) - graduate and then send this government a message in a bankruptcy application, get it out of the way early before it becomes life changing :money:

.

Despite the fact that it's just been mentioned in the post before yours, you're ignoring the fact that student loans aren't included in bankruptcy.