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

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In his report, Mr Willetts played down fears that the funding system is not sustainable in the long run but said the £9,000 maximum fees – which universities want to see raised – could not be frozen indefinitely.
He proposed that the £21,000 earnings threshold for loan repayments is frozen for the five-year parliament. These questions are expected to be addressed in the government-wide spending review this autumn.

http://www.independent.co.uk/news/uk/politics/budget-2015-maintenance-grants-for-poorer-students-to-be-scrapped-in-next-round-of-cuts-10373507.html

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As expected, from 2016/17 student maintenance grants will be replaced by loans, payable on incomes above £21,000. The government will consult on freezing that threshold for five years. This is "fairer" on tax payers, Mr Osborne says.

http://www.bbc.co.uk/news/live/business-33383657

Apparently lying to students can be justified by the fact that it's "Fairer to Tax payers"

You couldn't make it up.

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Come on MSE / MARTIN LEWIS update the "Student Finance Calculator" and let us see the impact!!!

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23 September 2011 #53

tyllwyd wrote: »

These are the assumptions used in the table here

Figures based on the following assumptions:

• Interest is accrued daily and applied monthly.
• Inflation will be 3% each year (Bank of England statistics show inflation for 2000-2010 to be 2.7% and we have rounded it up).
• Graduate salary increase will be RPI + 2% (based on ONS figures 2000 - 2010). This factors in some of an individual's potential pay increases, through promotions or skills as they get older or more experienced. This differs from overall average earnings increase, which is across the whole population regardless of age.
• Tuition Loan and Maintenance Loan are £7,500 and £5,500 respectively.
• Employment will be gained from Sep 2015, but repayments start April 2016.

And the following facts:

• Debt grows by inflation plus 3% until April 2016.
• Debt increases annually by RPI plus 0.00015% for every £1 you earn above £21,000. From April 2017, this £21,000 threshold begins to increase.
• Income thresholds will grow annually from 2017 in line with earnings (which we've assumed as RPI + 1%, based on ONS figures 2000 - 2010).

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

[/LIST]
I can't find it now, but I'm pretty sure the government is not committed to increase the threshold, only to review it. In that article, Martin says "These thresholds are likely to will rise with average earnings from 2017." which doesn't clarify things much.

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Freeze to student loan repayment threshold to hit middle-class graduates hardest, report says

George Osborne’s proposal to freeze the student loan repayment threshold will hit middle-class graduates hardest and increase the overall cost of higher education

The IFS estimated that a student on median graduate earnings “will repay over £6,000 more in total in 2016 money”.

http://www.telegraph.co.uk/education/educationnews/11751525/Freeze-to-student-loan-repayment-threshold-to-hit-middle-class-graduates-hardest-report-says.html

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Those on median graduate earnings – earning around £23,000 in their early 20s, rising to £34,000 in their early 50s – will end up repaying over £6,000 more in total over their lifetimes.
This increased cost works out higher than that faced by poorer and richer graduates.

http://www.dailymail.co.uk/news/article-3168889/Middle-class-graduates-pay-6-000-student-loans-Better-hit-Osborne-s-decision-freeze-salary-people-start-paying-money-back.html

By not raising the amount in line with inflation, the Chancellor will collect an extra £1.4bn a year from graduates by effectively reducing the threshold to near its 2012 level of £15,000, the IFS said.
That would be equivalent to £3,800 per student and represent an extra demand of £6,000 for people who go into middle-income careers.
The IFS said a graduate earning £23,000 per year in their early 20s, rising to the equivalent of £34,000 in today’s money by the time of their early 50s, would see their annual repayments rise from £900 to £1,100 with the threshold freeze. The amount they would be expected to repay would rise from £27,000 to £33,000

The think-tank said the best-paid graduates are not expected to be hit so hard because the level at which they repay their debt at a higher interest rate is also expected to be frozen, enabling them to pay it off more quickly.

http://www.independent.co.uk/news/education/education-news/cost-of-some-degrees-will-rise-by-6000-after-george-osborne-freezes-the-threshold-for-student-loan-repayment-in-budget-10403244.html

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George Osborne says increasing student debt by £6,000 is 'perfectly reasonable'

http://www.mirror.co.uk/news/uk-news/george-osborne-says-increasing-student-6111675

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Bahram Bekhradnia, president of the Higher Education Policy Institute, said the government’s moves were “cynical and immoral”, after a consultation on the plans was published today by the Department for Business, Innovation and Skills.
In 2010, when the government was preparing to steer the trebling of fees to £9,000 through Parliament and trying to persuade Liberal Democrat MPs to back the changes, David Willetts, who was then universities and science minister, told MPs: “We will increase the repayment threshold to £21,000, and will thereafter increase it periodically to reflect earnings.”
But in this month’s Budget, George Osborne, the chancellor, said the government would instead consult on plans to freeze the threshold at £21,000 for five years from 2016.

The consultation outlines three options: to freeze the threshold for all borrowers, existing and new, for five years from 2016; to freeze the threshold for five years for new borrowers only at the level the threshold reaches in April 2020, when they would begin repaying their loans; or to go ahead with the government’s original plan to increase the threshold in line with earnings.
Freezing the threshold for all borrowers, existing and new, is the government’s “preferred option”, says the consultation.
Existing borrowers would have taken out loans from 2012 onwards, when £9,000 fees were introduced, in the belief that the repayment threshold would be increased in line with earnings, as pledged by the government. The move on existing borrowers would raise £3.2 billion for the government, it estimates.

But he said it was “a disgrace and not worthy of any government” that the changes would be imposed on those who have already taken out loans, adding that it set a “shocking precedent” for government financial offerings, including public sector pensions.
He added: “This is a cynical and immoral response to the original miscalculation [on the costs of the £9,000 system] – which itself was either incompetent or a politically motivated misrepresentation designed to bridge the gap between the coalition partners.”

Andrew McGettigan, author of The Great University Gamble and an expert on the student loans system, said on his blog that it was “fundamentally unfair to impose such changes after individuals have signed up for loans. The silence of the universities on this matter is worse than their craven behaviour in 2010.”

https://www.timeshighereducation.co.uk/news/proposal-force-current-students-pay-more-loans-%E2%80%98cynical-and-immoral%E2%80%99

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Consultation Document

The preferred option is to freeze the threshold for all plan 2 (post-2012) loans. This would mean that a borrower following a median earnings trajectory (£27,000 per year in 2016/17) would pay around £6 more a week in 2021 (in nominal terms). For those who would have eventually paid off their loan in full otherwise, they will now do so more quickly, incurring less interest and hence less overall cost.

Option 1:
The Government’s preferred option is to freeze the threshold for all Plan 2 loans, existing and new.

The first borrowers with Plan 2 loans start to repay under statutory terms in April 2016, when the threshold will be £21,000. Under this proposal the threshold will remain at this level for five years, for all English borrowers –
new and existing.

The threshold will be reviewed from April 2021.

This option will reduce government debt the most whilst still ensuring those who do not earn high wages are protected. This is the option that makes the largest savings. It will still ensure that higher education is free at the point of use, and that repayments are affordable for all graduates.

Option 2:
The second option is to freeze the threshold for new borrowers only. This will mean that only borrowers starting courses in academic year 2016-17 and subsequent years will be affected. These borrowers will generally expect to start repayment in April 2020. The threshold will be frozen from April 2020 for five years at the same level that the existing post - 2012 borrowers’ loan threshold has reached by then.This option reduces government debt, but considerably less than option 1. It constitutes a new student loan plan, and therefore has operational demands and administrative costs associated with it.

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/447565/BIS-15-445-student-loan-repayment-threshold-consultation.pdf

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A new day, a new development for student loans.
Or rather confirmation of something that’s been in the pipeline for a while. I first warned in 2012 that clauses in student loan agreements would allow governments to change the terms for existing borrowers.

The very highest earners may actually benefit from this change as they will repay their loans more quickly.

The government estimates that this retrospective price hike will raise £3.2billion from the four cohorts who have experienced the £9000 fee (those who started between 2012/13 and 2015/16 inclusive). And their examples show it will be middle and lower earners who take the hit.

This is consistent with the recent analysis published by Institute for Fiscal Studies.

It’s fundamentally unfair to impose such changes after individuals have signed up for loans.

http://andrewmcgettigan.org/2015/07/23/government-confirms-preference-for-retrospective-price-hike-on-undergraduate-study/