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

Jigsaw220

Hmm a few things lacking in this article. Like someone has already pointed out the author does not talk about early repayment. However that is an interesting point because as far as i understand there is an early repayment penalty (think about all the interest payment forgone by people paying back early). This is ridiculous because as many commentators have already noted, over the course of the 30 year period only a few will pay back their loans in full and so i would have thought they would welcome full and early repayment by students.

Secondly just a quick note to say that it is the taxpayer forking out the money in the first place for students (which they then repay).

Finally those who argue that most people wont need to pay it back because they wont be earning above the minimum threshold fail to realise that university is mostly sold with the line 'you will earn more as a graduate' and so most would then be earning above the minimum threshold (if uni's are to be believed).

tom717

Jigsaw220 wrote: »

over the course of the 30 year period only a few will pay back their loans in full and so i would have thought they would welcome full and early repayment by students.

But the people that want to pay back early are going to be the few that would pay it all off anyway (ie the highest earners).

Oldernotwiser

tom717 wrote: »

But the people that want to pay back early are going to be the few that would pay it all off anyway (ie the highest earners).

That doesn't necessarily follow. Many people who would want to pay it back early would do so with money from wealthy families rather than from the fact that they're high earners themselves.

Oldernotwiser

WISHIWASRICH wrote: »

So he hasn't got a vested interest in keeping the higher educaton bubble a float has he?

Education is a bubble. It's totally unsustainable and like the financial system, is kept afloat by confidence. I speak to various students and they're all going to get £25k jobs after they graduate. There is some sort of reality gap between graduates and undergrads. As soon as they think "Actually, there is little chance of me getting hired, I'd rather not take on the debt" a lot of these institutions will literally carp themselves.

It appears that there is a bit of an oversupply going on here. The education establsihment need the bums on seats to keep this particular bubble inflated. I suspect that the situation today, for the latest batch of students is bleak indeed. I read a fair bit of "I didn't get a job" by various student's and I get the impression that there are rather a lot of them.


The government needs all these people in education in order to manage the unemployment figures (in addition to their statistics fudging/lying).


As for people who work in Higher Education, like Mr Nicholas Barr, well of course they're in the "business" of "educating" people. What happens to those people afterwards isn't their problem - their problem is to make sure there's a continual supply of new fodder as that new fodder is what's funding them!

So, do I care that Mr Nicholas Barr thinks that the coalition haven't explained the tution fees properly?

Well no actually.

I doubt that someone who works at the LSE is worried about needing bums on seats to keep his job.

Whilst I agree that we have over expanded the HE sector, those graduates who don't get graduate jobs or earn graduate salaries aren't going to be making much in the way of repayments, are they?

The_One_Who

Oldernotwiser wrote: »

That doesn't necessarily follow. Many people who would want to pay it back early would do so with money from wealthy families rather than from the fact that they're high earners themselves.

Or those who have savings. Don't necessarily need to be wealthy (or to have a good job) to have savings.

Oldernotwiser

dimbo61 wrote: »

So you leave university and pay 22% tax 11% national insurance and then 9% on top in repaying student loans.

Your figures are misleading; you no more pay 9% of your total income on student loan repayments than you pay 20% (NB. not 22%) of your total income in tax or 12% (NB. not 11%) of your total income in NICs.

tyllwyd

Jigsaw220 wrote: »

... Finally those who argue that most people wont need to pay it back because they wont be earning above the minimum threshold fail to realise that university is mostly sold with the line 'you will earn more as a graduate' and so most would then be earning above the minimum threshold (if uni's are to be believed).

Well, the maths is totally beyond me, but it's Martin Lewis' figures that suggest that most graduates won't repay the whole loan plus interest before the 30 years are up.

http://www.moneysavingexpert.com/family/student-loans-tuition-fees-changes#17

There are different figures here, but they also suggest that most graduates will be paying for 30 years.

http://www.candidmoney.com/articles/article170.aspx

Soubrette

This government has made it clear that it feels it is wrong to tax people at a top rate of 50% if you earn over £150,000 and will repeal this as soon as we can afford it.

Added to this the regressive nature of NI contributions where the 20% tax payer has to pay 12% and the 50% tax payer has to pay 2%.

Now some paying income tax, NI and student loan/tax has an overall top rate of tax of 41% and the other a top rate of tax of 52% - not much difference in the top rate of tax but a massive disparity in income.

If the 50% rate is done away with then the figures look even worse.
A 40% tax payers has a top tax rate of 42% on earnings of approx £38,000 whereas someone paying back their student loan has a top tax rate of 41% on an income of £21,000.

The bigger winners are the so called uneconomic degree takers, who borrow to the max and never earn enough to pay back a penny, ironic really as the governments claim to be trying to put a stop to these types of degrees. The big losers are those who finish paying off their debts just about the time it would have been written off ie those who earn in the middle range of graduate salaries.

gadgetmind

Soubrette wrote: »

This government has made it clear that it feels it is wrong to tax people at a top rate of 50% if you earn over £150,000 and will repeal this as soon as we can afford it.

I hope they address the claw-back of personal allowances and put the annual pension contribution cap back where it was at the same time.

old_grouser

Perhaps it is inevitable on a money-saving forum that everyone discusses the the cash cost to the individual of university education. However, the benefits of education are not always financially expressible, and they are not confined to the individual either.
We all benefit from living in a (relatively) safe, civilised and humane society, and higher education has played a large part in creating this. Typically, graduates also benefit (to varying extents) from the process of personal mental/moral/spiritual enrichment which education brings. This isn't a manifesto - but IMO it's a mark of a civilised society that it educates its citizens according to their capacity to benefit rather than their capacity to pay, now or in the future, because in the long run everyone benefits. So whether or not I benefitted from free higher education in the past, I'd be happy to pay my share of higher taxes so that higher education could be free to all capable of benefitting from it, just as further education still is.
Education is a social cost, like healthcare, and should equally be free according to need.