MSE News: 'We need war against student fee confusion'

flimsier

I hate this assumption that by graduating, people will earn more, and that's why they go to uni.

A degree is no guarantee of an increased salary - and shouldn't be - and if that's why people are going to uni they're often wrong to being doing academic degrees and should be looking at vocational level 4 qualifications.

In any case, my other half (no degree) works in Events Management. She manages three other people, two with degrees and one without (ironically the one without is on the highest salary of those three anyway). They're all over the threshold for what they would have to pay, but the ones who have more experience would be asking for far more money to "stand still" if they had to pay an additional tax.

There's all sorts of implications there - implications not considered by anyone.

setmefree2

wozearly wrote: »

...it might be worth thinking about, in any case.

The trouble with hanging around and "waiting to see" is that the student will clock up RPI+3% worth of interest for 3 years. If RPI stays high on a £9k + maintenance loan that is roughly £7.600 worth of interest in 3 years. So the student is effectively adding all that to their loan, which they will then be charged interest on for a further 30 years......

You see, what we are actually examing here is different attitudes to risk. It would bother you more (presumably) to pay upfront and find out you shouldn't have than vice versa. Whereas for me not avoiding the £7,600 and all subsequent interest when I had the chance would be an opportunity lost and I might kick myself .... difficult decisions...

kayr_2

That could potentially be very expensive on your part without necessarily resulting in any actual gain for your second son.

Assuming the course fees are £9,000 per year, that's £21,000 you'd need to put forward to negate them, then there's the living costs (and any other expenses associated with the degree).

Also bear in mind that the loan may never need to be repaid in full, as its totally dependent on your son's future salary over 30 years. But if you put the money forward up front then its definitely lost for good.

Sort of grasped that as have been reading this forum for a bit!

It might be worth considering an alternative, such as taking the full student loan, but act if and when your son hits a salary point where its clear that he's going to come close to paying off the whole loan (or near enough) rather than only some of it. Bear in mind that this could require a high salary - for a £9,000 fee course and around £5,500 in maintenance loan (both per year) then you'd need a 30-year salary averaging around £41,000 (in today's terms). If that happens, then support him in paying it off early at that point to avoid further interest buildup.

True - which is what we are doing with 2011 son - but the problem with the new system is that they will be paying around 8% interest as opposed to the current 1.5%. Also son #2 could realistically have very high earnings (less likely with first one!). That's why the decision is tricky. Personality wise I think both of them would prefer not to be paying the extra "tax". And I do know one or the other might be struck by lightning etc. Depends on your attitudes to money and risk; I would rather possibly lose out a bit financially and feel peaceful inside.

What you say would possibly be plan A (no question about it with current deal) but that will become clearer when decision on repayment penalties is announced.

If the worry is the catch that the t&cs of the loan might change and mess about with that alternative

Not actually a big worry for me.

Thanks for your thoughts. Unfortunately I'm no nearer a decision, which doesn't matter as there's plenty of time to consider things including as yet unreleased details. He has to get the A levels too!! Not to mention choosing a course.

kayr_2

setmefree2 wrote: »

You see, what we are actually examing here is different attitudes to risk. It would bother you more (presumably) to pay upfront and find out you shouldn't have than vice versa. Whereas for me not avoiding the £7,600 and all subsequent interest when I had the chance would be an opportunity lost and I might kick myself .... difficult decisions...

Couldn't agree more.

setmefree2

MSE article here on the rise in young people's debt.

http://www.moneysavingexpert.com/news/mortgages/2011/11/rise-in-mortgage-debt-forecast?utm_source=forum&utm_medium=sidebar&utm_campaign=box

It's funny but they seem to have missed this bit.

Higher student debts and lengthier student loan repayments will make it even harder for young households to save, invest or acquire other assets. Total student debt is expected to grow to £153bn in real terms by 2031, with loan repayments amounting to nearly £7bn a year.
The CCCS says this will leave younger generations unprotected should they suffer a fall in income.

http://www.guardian.co.uk/money/2011/nov/02/debt-younger-generation-buying-home?newsfeed=true


From the actual report

KEY FINDINGS

Student loans will also impact on the ability of
younger households to acquire wealth. There
are nearly 3.2 million student loans in place with
total debt outstanding amounting to £35 billion,
an increase of £13.25 billion over the previous
three years. Total student debt outstanding is
expected to grow to £153 billion in real terms
by 2031, with loan repayments amounting
to nearly £7 billion a year. With student loan
repayments reducing available income, future
generations will find it difficult to save or invest
in pensions until they are older, which will
impact considerably on their quality of life when
they reach retirement age (page 13).

http://www.cccs.co.uk/Portals/0/Documents/media/reports/additionalreports/Report_Debt_and_the_generations.pdf

I've no idea why MSE would have missed that bit? *Thinks*

SkyeKnight

wozearly wrote: »

£810 per year for 30 years is substantial - but Lokolo has a good point if you look at the flip side of this.

For the sake of simplicity lets assume that all taxes on salary are 20% for the 30 year period.

That means on the new system the £30,000 earner brings in £24,000 per year after tax, and £23,190 after student loans. After 30 years that's £695,700.

Lets say they didn't do a degree, and so only managed to get to a job paying £25,000. That's £20,000 after tax, no student loan deduction. After 30 years that's £600,000.

£95,700 greater earnings in favour of the graduate more than offsets the £23,400 not gained during that time.

You've missed some stuff out though. National Insurance at 12% would cost the graduate an extra £14,400 over the 30 years. The non-graduate would have an extra three years working which would be worth £60k. Then there are tax credits. With a couple of kids under the current rules, the person on £20k a year would qualify for about £4,000 a year more tax credits than the person on £30k. I think it's quite possible that the graduate would be worse off than the non-graduate in your scenario, or maybe better off but only after about 25 to 35 years working! It's certainly not clear to me that university is going to be worthwhile (financially anyway) for most people.

melancholly

SkyeKnight wrote: »

It's certainly not clear to me that university is going to be worthwhile (financially anyway) for most people.

i guess i see there being a massive benefit to being able to progress in a career that you want..... not everything is about the final financial calculation. if you are required to have a degree to work in some areas, then even if you are paid less or could get 10p more a year in a job you don't want by counting in benefits, then that's enough for a lot of people.

SkyeKnight

melancholly wrote: »

i guess i see there being a massive benefit to being able to progress in a career that you want..... not everything is about the final financial calculation. if you are required to have a degree to work in some areas, then even if you are paid less or could get 10p more a year in a job you don't want by counting in benefits, then that's enough for a lot of people.

Yep, agree 100% (that's why I put "financially" in there). There are a lot more interesting careers open to graduates than non-graduate I think - I hope most people's decision whether or not to study is not just about money.

melancholly

SkyeKnight wrote: »

Yep, agree 100% (that's why I put "financially" in there). There are a lot more interesting careers open to graduates than non-graduate I think - I hope most people's decision whether or not to study is not just about money.

well particularly since most students put in a UCAS application at 17...... how many people end up following the life plan they had at 17?! i wasn't even aware of the range of possible careers/jobs then. i think boiling it all down to money is just impossible. call me old fashioned, but there is a lot more to life than the size of someone's salary/take home pay!

cazpumpkin

ive got 3 kids, one is at university now, the other two arent interested in going, all of them reached their decisions regardless of the finances involved. there is no pressure on any of them to go, but the one who did go has my full support. my eldest girl who went to univeristy has 12 GCSES and 4 A levels and it would have been a crime to hold her back when she was passionate about going and further studying . I live on a council estate, have poor health and a husband who works 3 jobs to get by, the only benefit we get is child benefit , we arent rich and my daughter gets a full loan/grant, i work as a toilet cleaner and use the money to help my daughter with her rent and overdraft. I would do anything to help her whether i should have to or not, she is a great girl and also works at uni in a pub. i am determined that any of my kids who wants a university education and is doing well academically has the chance to go, why should the children of the wealthy get an education and the rest of us think twice about it? im firmly of the opinion education shoudl be free and thats a position ive held long before i had a family , i dont worry about whether she will pass or fail or whether its good value or whether she will get a job or not, one day at a time and i think positive, somehow or in some way her degree will benefit her as a human being and thats all that matters to me, that she reaches for the stars and lets nothing hold her back