'Don't pay your kids tuition fees upfront' Discussion Area

setmefree2

setmefree2 wrote: »

This means on current thresholds, a typical graduate will face the following deductions from their payroll, while they still have an outstanding student loan.

Equivalent 'marginal' (1) tax rates for graduates under 2012 system

Assumes current tax thresholds remain

Annual earnings up to £7,475 No tax – as this is the typical 'personal allowance' the amount earnable before income tax starts.

Earnings over £7,475 up to £21,000 32% tax and national insurance

Earnings above £21,000 41% due to addition of student loan repayments

Earnings above £42,475 51% due to addition of higher rate tax, but drop in national insurance (2)

Earnings above £150,000 61% due to higher rate tax (2)

(1) 'Marginal' means you only pay the specified tax rate on that portion of salary.
For more see the Tax Rates guide.
(2) Earn above £100,000 and your personal allowance will also be affected.
It's in this guide here - quite far down the page.

http://www.moneysavingexpert.com/students/student-loans-tuition-fees-changes#18

Note this too

This £21,000 threshold will rise with average earning from 2017

setmefree2

At the end of his Article ML writes this.

Please don't take this as an essay on why you shouldn't save up for your children. That's not my point; it's whether the use of that cash is best served by paying their student loan. Of course, my focus has solely been on the clinical financial mathematics. However that isn't the be-all and end-all. People often say they don't like the concept of 'debt hanging over them'.

Anyone feel like this? Have you got any ideas on how you might help your kids out?

devildog

It is something that we will now have to seriously consider
Have just had one return from Uni(serious mis-givings about degree choice) They hope to 'go again' next year, hopefully with things thought out carefully! Going to have to do a lot of reading up now!!

PaulW1965

grizzly1911 wrote: »

Many people will never repay the loans. Many "professions" stagnate in the £40K mark and at this level massive right offs will occur.

There is no cast-iron guarantee that a future government will allow these loans to be written off, is there?

All the analysis in this guide rests on a fundemental belief - that a future government will write off these loans. Yet there is absolutely no guarantee that this will happen. Why doesn't the government give such a guarantee?

What if a future govenment refuses to write off the loans?

Oldernotwiser

PaulW1965 wrote: »

There is no cast-iron guarantee that a future government will allow these loans to be written off, is there?

All the analysis in this guide rests on a fundemental belief - that a future government will write off these loans. Yet there is absolutely no guarantee that this will happen. Why doesn't the government give such a guarantee?

What if a future govenment refuses to write off the loans?

There are no guarantees in life; one can only operate on the basis of normal levels of probability. People who own property never expect that a future government could take them all out of private hands but, theoretically at least, it's perfectly possible.

tyllwyd

PaulW1965 wrote: »

There is no cast-iron guarantee that a future government will allow these loans to be written off, is there?

All the analysis in this guide rests on a fundemental belief - that a future government will write off these loans. Yet there is absolutely no guarantee that this will happen. Why doesn't the government give such a guarantee?

What if a future govenment refuses to write off the loans?

I think you can be pretty confident that the government will write off the loans after 30 years - what is less certain is the thresholds above which loan repayments will be made, which could potentially make a big difference to the total payment.

But when you ask 'what if a future government refuses to write off the loans' - we are in a democracy, in the future a large number of influential and vocal members of the voting public, and probably the majority of MPs will have student loans under the new system, or children who have/will have loans - you would hope that it would be political suicide for a government to try to pass legislation to refuse to write off loans.

arsenalbarnie

tyllwyd wrote: »

-you would hope that it would be political suicide for a government to try to pass legislation to refuse to write off loans.

It's a shame we have to hope isn't it.

PaulW1965

Oldernotwiser wrote: »

There are no guarantees in life; one can only operate on the basis of normal levels of probability.

The MSE guide makes out that the terms and conditions are guaranteed. Correct me if I'm wrong but nowhere in the guide does it say that the government can change the terms and conditions. I've only learned this from reading threads. All calculations and advice in the guide are based on a fundamental assumption that loans will be written off and that the T & Cs are guaranteed. But they are not (as far as I understand it).

Why doesn't the government give such a guarantee? It must be because they are reserving the right to alter the T & Cs. Why doesn't ML "shiver with fear" that 2012 students aren't given any guarantees?

PaulW1965

tyllwyd wrote: »

I think you can be pretty confident that the government will write off the loans after 30 years

Why? It's not hard to imagine the son of David Cameron saying that the country can no longer afford to write off these loans and that they will continue until retirement (as was discussed on another thread on this board). In which case the scenarios painted in the guide are bogus.

PaulW1965

arsenalbarnie wrote: »

It's a shame we have to hope isn't it.

and it's a shame that that possibility isn't addressed in the guide.