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

setmefree2

Ed-1 wrote: »

This just proves that the terms and conditions are variable on these loans.

So true...and so wrong...

DAISYDOG

I think the why not a graduate tax question is simple. That would be fair and democratic. The Eton mess who run the county do not want their privilaged and future high earning children to pay increased taxes. They will avoid the SLC. Toff high earners will pay 40% tax. Any one else who does well will pay 40%+9% for up to 30 years.

setmefree2

DAISYDOG wrote: »

I think the why not a graduate tax question is simple. That would be fair and democratic. The Eton mess who run the county do not want their privilaged and future high earning children to pay increased taxes. They will avoid the SLC. Toff high earners will pay 40% tax. Any one else who does well will pay 40%+9% for up to 30 years.

That's all true. It's also true that a toff who has a daughter or a son who is likely to be out of the work force should take the student loan....

mucgoo

The complaints here against the higher tuition fee's and the burden they place on the young.
The actual loan is still on superb terms. I'd pay £10,000 in order to be allowed to borrow £9,000 on the terms it offers.

Ed-1

mucgoo wrote: »

The complaints here against the higher tuition fee's and the burden they place on the young.
The actual loan is still on superb terms. I'd pay £10,000 in order to be allowed to borrow £9,000 on the terms it offers.

The million dollar (pound?) question is will these terms still look as attractive in, say, 10 years time?

When the original threshold was uprated to £15000 in 2005 that looked a good deal. 7 years on and that threshold was still at £15000 and obviously with a value a lot less than had it being uprated each year. So it was a good deal one year, but several years later maybe not such a good deal.

These loans last 30+ years from when the first loan is taken out. That's a hell of a long time for terms so generous to last. There will no doubt be many twists and turns and debates to come over this time with several governments!

GwylimT

I am paying my sons tuition fee's, he is at Durham, however as we are Welsh and were living in Wales when he started university his fee's are £3,450 not £9K. His mum and myself also give him a monthly allowance as we prefer it if he doesn't work while at university so he hasn't had to take out a living cost loan.

It does seem a lot if you look at it in one sum, but really its the equivalent to his mum and myself saving £500 a year, and a lot of people could tighten their belts to save that if they wanted. There is no way I could afford to pay £9K tuition fees and if my younger two decide to go to university I will be encouraging them to go abroad where it will likely still be cheaper than the UK.

mucgoo

Ed-1 wrote: »

The million dollar (pound?) question is will these terms still look as attractive in, say, 10 years time?

When the original threshold was uprated to £15000 in 2005 that looked a good deal. 7 years on and that threshold was still at £15000 and obviously with a value a lot less than had it being uprated each year. So it was a good deal one year, but several years later maybe not such a good deal.

These loans last 30+ years from when the first loan is taken out. That's a hell of a long time for terms so generous to last. There will no doubt be many twists and turns and debates to come over this time with several governments!

Now is basically the worse case scenario for the loan. Fairly high inflation but very low wage growth and interest rates.

If anything the terms will improve. A real yield of 3% is half the historical average return so if you just save prudently it then your almost certain to break even over a 30 year period. I'd place a 25% premium on a loan totalling £50,000 based on the fact lowish wages whether, through choice (career and babies) or bad health, mean your'll only ever repay a fraction of it. Try using the calculator with a teachers or nurse wages of roughly £22k starting and RPI+2% wage growth a year. As it stands your'll only be repaying if your earning more than enough to be comfortable.
Then minus 15% for the risk the terms could be adversely changed which is the huge downside.

Something else to consider is how much in total your be borrowing. Its more favourable the more you borrow due to the increased chance of getting to 30 years with debt left.

DAISYDOG

Response from SLC to my questions in red below.
Im not sure what they mean by non profit with 7+%interest for 30 years,
I suspect the Government takes the profit each year and manipulate the variables in the loan to max the interest.


Thank you for your email dated 30 May 2013, regarding the terms and
conditions surrounding our student loans for new and existing customers.

I am sorry that you have had cause to complain.

I have addressed your points in the order they are set out in your email.

1. Due to the high volumes of calls being received at this time of year,
it has been necessary on occasion to hold telephone calls in queues.
We have taken measures to minimise delays, such as improving the
introductory messages and increasing the number of staff who answer
telephone calls. However, I am sorry that in this instance these
measures have proved to be ineffective and I do appreciate your
frustration over this matter.

At present our ability to support e-mail in a manner consistent with
service expectations is not fully in place, although we do provide
various email addresses, we cannot accommodate all areas of enquiry.
We do not have the facilities to deal with the volume of incoming
email which could be generated, based on the number of customers we
have. We do review our processes on an ongoing basis and we are
considering appropriate ways to implement facilities to handle all
forms of electronic communication.

In response in reference to The Electronic Commerce (EC Directive)
Regulations 2002, the provisions under Regulation 6 are applicable to
those providing an “information society service” which is defined in
the Regulations and is summarised in recital 17 of the EC Directive
as covering:

“any service normally provided for remuneration, at a distance, by
means of electronic equipment for the processing (including digital
compression) and storage of data, and at the individual request of a
recipient of a service.”

SLC is a non-departmental public body, operating on a not-for-profit
basis, and does not fall within the definition of an information
society service.
Accordingly, the provisions Regulation 6 of The Electronic Commerce
(EC Directive) Regulations 2002 do not apply to SLC.

2. This was a consideration for the Government, however it has been
decided that there will be no additional charge for repaying your
loan balance early.

3. I appreciate that you want to compare the costs for borrowing from
us, cash ISA’s and a mortgage, however I am unable to comment on the
costs incurred using cash ISA’s or a mortgage to fund your children’s
student finance. We can only provide information on the products
offered by us.

4. I have attached a copy of the Guide to Terms and Conditions for the
2013/14 (Plan 2) academic year below for your reference. With
regards to your concerns about a cap on the RPI, I can confirm that
the policy surrounding this states:

The Education Act 2011 states that interest rates on loans cannot be
higher than ‘those prevailing on the market’, a requirement which
stems from the EU Consumer Credit Directive. BIS have confirmed that
‘the interest rate prevailing on the market’ should be taken as the
average lending rate as published by the Bank of England for an
unsecured personal loan of £10,000. The maximum interest rate which
is applied to ‘plan 2’ loans should not exceed this rate.

For example, in September 2011, the average rate for unsecured loans
of £10,000 as published by the Bank of England was 9.17%, and the
comparable rate of RPI + 3% was 8.3%, therefore satisfying the
requirement that the maximum interest rate charged on student loans
is less than the prevailing market rate.

5. It is not possible to give you an exact amount that your daughter
will repay back for her student loan. The reason is that there are a
number of unknown variables that will affect this figure. Mainly, we
do not know exactly what she will earn, and the fact that this will
likely change over time, affecting her student loan repayment. We do
not know the exact interest rate that will be applied in the future,
although we can confirm that the interest rate for plan 2 customers
will be set at the RPI+3%. The base earning rate for customers can
also change in line with the UK average earnings, therefore this
would also have an effect on the student loan repayments taken.

6. The decision to obtain student finance would be up to the individual,
we can only provide you with the information that you require to make
an informative decision. We do have set terms and conditions for our
products, however as mentioned above, there are variables that can
change that, unfortunately at this time I am unable to confirm this
to you.

7. The 9% deduction will be fixed for the duration of the repayment of
the loan. This will be taken from the Gross income for the relevant
pay period. More information about how repayments calculated can be
found on our repayment website,

8. Again, this will depend on earnings, interest and amount borrowed. We
cannot confirm the exact amount of time it will take to repay a
student loan as we could only really talk in hypothetical scenarios.
If the loan has not been repaid after 30 years of it becoming
eligible for repayment, it will be written off.

9. Unfortunately, we are not in a position to offer the legal position
on this matter.

10. I appreciate your concern regarding this point, however as advised
it is very difficult to give a definitive answer to this question.
However, generally speaking, you child that falls under plan 2, will
likely have borrowed more than your child that falls under plan 1
(due to increase in fees etc). The interest charged will also be
higher for plan 2 customers, and therefore (depending on factors
mentioned above), will take longer to repay.

11. We do not operate the Money Savings Expert repayment calculator,
therefore it is not possible to comment on the figures that this has
provided you. In regards to the repayment calculator on the
DirectGov website, the key thing to remember is that the figures
provided are not definitive. The website confirms “This calculation
takes into account an estimate of future growth in inflation, the
interest rate, the repayment threshold and your salary".

12. Firstly, I think it may be helpful if I fully explain the student
loan repayment process. This is administered by us in partnership
with HM Revenue and Customs (HMRC) and employers.

The employer calculates and deducts student loan repayments from your
pay and, after the end of the tax year, your employer advises HMRC of
the total deductions they have made. HMRC then pass details of your
total repayments to us and we apply your repayments to your account
in twelve equal instalments. The interest on your account is then
adjusted and a statement issued to you shortly after this point, as
such you are not penalised for the delay in receipt of your
repayments.

We do not have access to HMRC systems therefore we do not know where
you are employed or how much you are earning. We also do not know how
much you have repaid in a tax year until we receive your file from
HMRC or you tell us.

The repayment taken from salary is defined as 9% of your gross
earnings over the repayment threshold. HM Revenue & Customs (HMRC),
will advise an employer how to calculate student loan repayments for
staff who have an existing student loan.

13. I am sorry if you are unhappy with our use of 0845 telephone
numbers. We do not presently use geographical numbers as they don't
allow us to use the flexible routing that we need to manage our
service. Our contact centres operate across several locations
throughout the UK (Glasgow, Newcastle, Darlington and Colwyn Bay).
Using non-geographic numbers allows calls to be routed to the next
available advisor at any location, ensuring they are answered as
quickly as possible. The caller is therefore less likely to encounter
a busy signal and have to re-dial. As our overseas customers cannot
call an 0845 number, we have to provide them with the 0141 telephone
number.

Charges paid by the caller for 0845 calls are set by each phone
company individually. These charges can vary greatly, especially when
the call originates from a UK mobile, payphone or a non-UK number. We
are therefore unable to advise what tariff would apply to any
particular call. Some telephone providers offer inclusive free calls
to 0845 numbers. This would however be something that you would be
required to check with your service provider prior to calling.
Therefore, it is not possible to advise how much it has cost our
customers to wait for their call to be answered.

I hope that my response has clarified your points. If there is anything in
my response that you would like to discuss, please contact me on the
details below.

Yours sincerely

Paul McGroarty
Customer Relations Officer
Student Loans Company
100 Bothwell Street
Glasgow
G2 7JD
E-Mail: customer_complaints@slc.co.uk
Telephone: +44 (0)141 243 3424






As the student loan company have no emails in 2013, I would like someone to
answer in writing my questions below.


1.The student loan company does not pick up the phones in a reasonable time
and do not have an e-mail even though
They have an obligation per section 6(c)of the The Electronic
Commerce (EC Directive) Regulations 2002 to list an email address.
This requirement is not optional. Why is this?


2. What does the info below mean if the loan is paid off early
, this is what you state in your current information

Repayment Plan 2

The Government has consulted on whether early repayment charges may apply,
and depending
on the outcome of that consultation and subject to Parliament, you may
incur an early repay]ment
charge.

3. I want to compare if its cheaper for me to get a mortgage for 10 years
at 2.2-3% or 3.9% fixed
or use my cash isas, or to take the student loan. How do i do this? If its
going to be cheaper to get the money by loans from elsewhere I want to know
and be able to calculate the difference.
Just like you can when you get a morgage.

4. Where are the exact terms and conditions for this financial product.?
Is it misselling if I cant understand how much I will have to pay back in
different scenarios. eg RPI averaged 9.92% over the last 50 years and was
up to 24% in a year in the 1970s, ? What protection is built into the loan
for rpi ? is there a maximum capped rpi rate? How is the interest
calculated? how is the 21k base adjusted over the term of the loan? why
does the govuk calculator not allow a variable RPI ?

5. I have assume my daughter will earn the higher amount currently at 6.6%.
I think she will pay back 60k over 9 years 20k interest? please confirm the
exact amount . or tell me how you are going to manipulate the variables so
I can do this.


6. The student finance seems a big risk in terms of the lack of fixed
interest rate, no variable loan calculator to show the true costs, and lack
of clear terms and conditions for a financial product. am I
misunderstanding the product?


7. Is the student loan payment of 9% taken out of the income over 21k
before tax or after tax. my understanding is that it is after tax which
means in real terms it is more like 13% of the gross income is this
correct?
is the 9% fixed for the term of the loan?


8. I do not need all the condescending waffle about if you earn less you
may never pay it off.
It does not take much to figure out that the priviledged will not take it
or will pay the 6+% loan off inside 10 years, a tiny minority will not pay
it off, but for the middle 20-40k earners will be paying the' brilliant' 6
+% loan at 9% of their net after tax income over 21k for 20-30 years. its
basicaly a 13% tax on middle earners for most of their working life..Is
this correct?

9. What is the legal position regarding inheritance tax if I take out a
mortgage or use cash ISAS to pay my childrens University costs.?

10. One of my children is in University on the 3k fees with 1.5% interest
on a total loan of 27k .the other will pay 9k fees
I want to be fair to each so I need to be able to calculate the exact costs
under the new and old loan system.
my thinking is I will pay all my daughters costs over 27k at base+1.5%
interest , but i find it impossIble to calculate the difference from the
info you provide. assuming they will both earn over 41k can you provide the
calculations for this?

11 The direct.gov.uk/ student loan repayment calculator gives a totaly
different result to the Money Savings Expert one, when you input the same
data. as below

1 Tuition fee loan amount borrowed this year £9000
2 Maintenance loan amount borrowed this year £3750
3 Course Length 3 Years
4 Expected starting salary on graduation £22000

GOVERNMENT ONE(undisclosed adjustments)

Repayment start datepril 2017 Time to repay: 29yrs 10mths
Total amount borrowed: £38,250
Total amount repaid: £124,21

MSE ONE (default settings)
Total amount borrowed: £38,250
Total amount repaid £25,750

It looks like the government/ SLC is going to retain the ability to
manipulate the variables such as the 21k base , without stating how it is
to be done over the term of the loan.
There is £100,000 difference between the two calculators which is correct?

12.How will anyone check that the payments taken are correct if the
variables are not defined?


13. Why do The student loan company use 0845 numbers which cost for uk
students. and an 0141 number for foreIgn students? how much has all the
waiting on the phones cost?

Lokolo

DAISYDOG wrote: »

Response from SLC to my questions in red below.
Im not sure what they mean by non profit with 7+%interest for 30 years,
I suspect the Government takes the profit each year and manipulate the variables in the loan to max the interest.

Do you mind expanding on that point? I am very interested to know how you think the government can manipulate the variables (RPI I assume you are talking about).

I am also confused as to why you think the variables aren't defined? I am pretty sure I explained how they are previously.

edit - I did in a couple of posts above this http://forums.moneysavingexpert.com/showpost.php?p=61572015&postcount=482

DAISYDOG

They have no requirement to increase the 21k amount , if its held down the payments will only ever pay off interest.
The Government can change the terms, and will just like the pensions