MSE News: Guest Comment: Govt student loan explanations 'woeful'

Former_MSE_Guy

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

"With tuition fees rising to £9,000, student finance expert Prof Nicholas Barr says governments haven't explained costs ..."

Read the full story:
Guest Comment: Govt student loan explanations 'woeful'

melancholly

i guess the question is, is this all the responsibility of government, or should the press also be mentioned for explaining things so badly? much as i'd love to blame the coalition entirely, the way this has been reported has hardly helped!

Oldernotwiser

Mind you, it's good to have an expert confirm what several of us here have said from the beginning.

"They are a payroll deduction, like income tax and national insurance, but smaller than either. A better way of thinking of the system is as a form of graduate tax, but one that does not last forever."


Couldn't have said it better myself!

GeorgeOld

I think there was one glaring omission in this article and that was teaching or advising the student on how much money to borrow.

I attended a local university and lived at home. So had relatively low overheads. However, as the amount I could borrow was based on my parents income (relatively low), I could borrow a lot of money. Money I didn't necessarily need, but took because I wasn't looking at the long term.

However, if someone had drilled into me that, one day you will pay this back and yes, to start off with the repayments will be low, but when you start earning good money, the repayments are substantial. My repayments are now comparable to my mortgage repayments.

I actually disagree with the professors view of not looking at a student loan as a debt. It IS a debt, albeit one you payback out of your gross wage, but you STILL pay it back, all of it.

My advice is, if you don't need it don't take it.

Lastly, the professor states "Remember that your income will generally be higher because you have a degree and lenders regard graduates as good risks".

No lender has ever took any notice of my degree, it's always been based upon earnings and credit rating, so god knows where he got this from.

The_Baroness

Ok. I understand how the loans work. My gripe is, that although all students have access to full tuition loans, they do not all have access to the full maintenance loans, as these will be means-tested taking parental income into account - even though we keep being told it is supposed to be the student's loan.

Although on paper some of us may look as though we have a good incomes, living in London, with all the high outgoings that involves means there is not a lot left over once food and other bills are paid. We are going to struggle to support our daughter with living costs if she gets a place at university for next year...and no, we don't go on lots of holidays, or go out for lots of meals etc. In fact we're not going away anywhere this summer.

I do not see this as fair to all students applying and feel that my daughter is being put at a disadvantage.

melancholly

GeorgeOld wrote: »

My advice is, if you don't need it don't take it.

others would advise exactly the opposite; even if you don't need the whole amount, it can be saved to be used later, for example as a house deposit. even if you have the means to get by on a month by month basis, that doesn't often include the ability to save up a lump sum....

it swings both ways!

Oldernotwiser

GeorgeOld wrote: »

However, if someone had drilled into me that, one day you will pay this back and yes, to start off with the repayments will be low, but when you start earning good money, the repayments are substantial. My repayments are now comparable to my mortgage repayments.

I actually disagree with the professors view of not looking at a student loan as a debt. It IS a debt, albeit one you payback out of your gross wage, but you STILL pay it back, all of it.

.

Very few people pay back all of their student loan, many pay none of it.

You must be earning an enormous amount of money for your loan repayments to be as much as your mortgage!

GeorgeOld

Oldernotwiser wrote: »

Very few people pay back all of their student loan, many pay none of it.

I've never heard of people not paying it back, you have no control, unless you a) move country and are untraceable (run away from it) b) declare yourself bankrupt or c) pass way. None of which are desirable.

Oldernotwiser wrote: »

You must be earning an enormous amount of money for your loan repayments to be as much as your mortgage!

No I wish, my mortgage repayments dropped due to the low interest rates. What I was trying to say was that the student loan repayment is sizeable.

GeorgeOld

melancholly wrote: »

others would advise exactly the opposite; even if you don't need the whole amount, it can be saved to be used later, for example as a house deposit. even if you have the means to get by on a month by month basis, that doesn't often include the ability to save up a lump sum....

it swings both ways!

Fair comment, although there are not many students that are thinking about mortgages or even past the 3-4 years at uni. Those that do, would be shrewd to do as you mention.

melancholly

GeorgeOld wrote: »

I've never heard of people not paying it back, you have no control, unless you a) move country and are untraceable (run away from it) b) declare yourself bankrupt or c) pass way. None of which are desirable.

No I wish, my mortgage repayments dropped due to the low interest rates. What I was trying to say was that the student loan repayment is sizeable.

as fees increase, the numbers paying it back in full are dropping - it'll be a lot fewer at £9K than it is now!

as interest rates are low, it's probably best to try and overpay so that you make big inroads into the balance as opposed to just the interest! (or save the extra somewhere else!)

Oldernotwiser

GeorgeOld wrote: »

I've never heard of people not paying it back, you have no control, unless you a) move country and are untraceable (run away from it) b) declare yourself bankrupt or c) pass way. None of which are desirable.

You seem to have missed the most obvious reason for not paying it back - earning below the threshold!

Also, repayments have to be made when you move abroad and they're not wiped out by bankruptcy.

You seem to be rather misinformed, I'm afraid.