MSE News: Confusion reigns as student fees fear takes hold

Mike_J

My daughter is currently at university (thankfully she got in before the fees increases) and sorting her finance was straight forward BUT, and I have been saying this for many years, she currently shares a HofR where a couple of people get BIG grants "due to family circumstances". Now the government seem to always spout on about how you repay the fees when you get a job and nobody pays upfront. Therefore it would appear to me to be logical that all students should go into university on a level playing field.

How much of the poor communication of the finance rules is due to the following:-
1. The rules are complicated
2. Government bodies/university/student finance are bad at explaining the rules
3. The governments messages over university funding etc are deliberately intended to be misleading. I even complained about a government backed radio advert that has started to run saying that "FROM SEPTEMBER 2012 ...... student will be able to pay their fees with a loan". Hang-on, FROM september 2012!!! This situation has been running for year!

gadgetmind

dkmax wrote: »

if we want an expanded system with a 40+% intake

I really, really don't think we do as it seems we've only been able to get to this figure through a combination of drastically lowering standards for existing courses plus inventing new soft A-levels and degrees.

Madness.

Oldernotwiser

lynzpower wrote: »

I totally agree with you gadgetmind I really do.




I dont think they are mutually exclusive. Clearly if 70% of the population gets As at a level, and want to go to uni then unis will have to expand then.

However the expectation that you can go to uni, and get into debt ( and the resultant impact on living standards and cash to spend that impacts the whole economy) with 2 ns and a U is ridiculous.

But 70% of people getting As wouldn't mean that standards had been raised and universities should be expanded - it would just show how standards had dropped even lower!

Oldernotwiser

lynzpower wrote: »

May be paying it for longer? (

You take out 48k for 3 years. You get a 2:1. You are pleased and so are your parents

But when you graduate, you are dirt poor, there is no money left to borrow and you are broke.

You move home to your parents house. not a huge selection of jobs round there but you get a admin job for 16k your happy with for now.

You stick at that job for 5 years. You dont really have a lot of money once you paid your board and bought your food and paid your taxes and ran your car and paying off your credit cards and overdrafts that supplemented your living costs.

That 48k you borrowed is now 60733.94

Anyway, you move up to another job with the same employer the 20k bracket and stay there for 10 years. Theres nothing else, but its secure.

You still havent paid it off as you dont have to plus you have a partner and a child now, and really need the cash. You still need to run your car, buy groceries and pay taxes all of which has risen hugely over the last 15 years.

You take a look at your statement on your 10 year anniversary in this job and realise the amount you owe is now £86187.88

You are dreading getting promoted, but you need the money somewhere. Prices are rising and you can barely make ends meet.

You get offered a fantastic job a bit further away, exactly what your degree is in!! Finally!!! Yours getting somewhere!! you could be earning £26000.00 in your dream role?

But that would mean payback time :eek:

Do you take the job? Or do you stay earning under 21k forever to avoid the £86187.88 pound debt now hanging over your head?

If you dont, What sort of salaries will employers have to pay to coax excellent graduates out of the under 21k group?

Or is this a 'two-brains' way to bring down all our salaries


All calculation is based on 5.3% for the full termm, which seems to be optmistic.)

Sorry, but that's just a daft example. Who on earth would refuse a pay rise of £5k (approx £280 pcm net) because they'd have to pay (less than) £30 pcm back?

That just doesn't make sense.

ETA

Sorry Lokolo, just got to your post!

Oldernotwiser

SkyeKnight wrote: »

Finally, the £21k a year threshold is a salary in the year 2016 not for this year. By then it will be worth considerably less - and certainly less than the £15k a year threshold was when it was set several years ago, though it does at least go up by inflation from 2016 onwards. It probably won't be much more than minimum wage.

.

£21K to be close to minimum wage in 5 years - you must be joking. That would have to see NMW double!

gadgetmind

Lokolo wrote: »

Whats a butt load more?

Well, there's the rub. Firstly, the model is very sensitive to initial assumptions, and even worse, to assumptions that are hard to predict and impossible (for me) to control. Secondly, what's a butt load to one person won't be to another, but let's plug some numbers anyway.

Background assumptions: CPI and RPI 3% (big guess!), bands and interest rates as announced, three year course with fees at £9kpa and living expenses at £5.2kpa.

Salary assumption 1: Starting salary of £24kpa with a 5% pa escalator.
Result 1: Debt burden at end of course = £49.5k, max debt = £71.2k in 2034, final debt in 2045 = £50k, total repaid = £90k

Salary assumption 2: Starting salary of £30kpa, everything else the same.
Result 2: max debt = £69.6k in 2031, final debt = £23k, total repaid = £126k

Salary assumption 3: Starting salary of £30kpa, salary escalator tweaked to 8% pa.
Result 3: max debt = £64.7k in 2024, debt repaid by 2038, total repaid = £128k.

Note that in case 3, the salary at time of debt repayment is £176kpa, which is £81kpa in today's terms. A butt load? Yes, I think so.

Please feel free to fire some numbers at me and I'll run them through my model, or maybe use your own model. What's clear is that those earning vast amounts more than average *might* at a push be able to clear their debt sooner, but they will also be paying a *huge* amount of money for their education.

setmefree2

lynzpower wrote: »

You dont understand

Let me explain

If you never earn 21k

21k? but thats really low

No you dont understand

etc etc

Maybe ML "telling" prospective university students over and over and over that they will never earn a great deal, despite 3 years hard work at uni, is putting students off going to university....... unintended consequences and all that.....:cool:

The_One_Who

Mike_J wrote: »

Therefore it would appear to me to be logical that all students should go into university on a level playing field.

Students have never gone to university on a level playing field (socially, economically and education-wise) and never will be.

Lokolo

gadgetmind wrote: »

Well, there's the rub. Firstly, the model is very sensitive to initial assumptions, and even worse, to assumptions that are hard to predict and impossible (for me) to control. Secondly, what's a butt load to one person won't be to another, but let's plug some numbers anyway.

Yeh I agree, which is a big shame as everyones models will be different. As well as this, people could take time off to have kids etc.etc.

What I am unsure on your model is how you have calculated wage inflation? - EDIT sorry I realised you've said 5%.

Edit 2 (hope you notice this!) - I can't make my figures match yours. I am using 5% wage inflation. 3% inflation. And 9% above the theshold. I can get to £87k (starting on £24k) but with that method I haven't increased the threshold year on year. Did you do this in your calculations?

Lokolo

SkyeKnight wrote: »

I've read that around 40-50% of people will end up paying back all their loan - way more than the 1% you suggest. Less than a quarter of people will be better off under the new loans system.

And also I disagree with saying the loan is hardly expensive - it may look small when you look at a monthly payment but it adds up over the years to tens of thousands of pounds. That is money that won't be paid off your mortgage or paid into your pension and will leave you considerably worse off.

Finally, the £21k a year threshold is a salary in the year 2016 not for this year. By then it will be worth considerably less - and certainly less than the £15k a year threshold was when it was set several years ago, though it does at least go up by inflation from 2016 onwards. It probably won't be much more than minimum wage.

Not to say that the new loan payments/tax are awful. It's definitely got many plus points over a bank loan, but overall it's worse for students than the old system.

The 99% was more of a pun however, to suggest 40-50% will pay back their loan fully is laughable. You need to be earning quite a bit to start with and have large increases in salary (for examples, in gadgets you need to have started on £30k+ and have greater than 5%+ increases in salary). To say that 40-50% of gradutes have this is very much a false assumption. Can I ask where you got this information?

The 2016 date isn't that too far away, so £21k won't be woth considerably less at all. Less? Yes. Considerably less? No.