Exactly. I really can't understand why MSE Martin has taken such pride in his campaign to convince kids that leaving Uni with £27-36k of debt is nothing to worry about. Quite aside from the burden this causes, if you give people such a cavalier attitude to debt at the beginning of their working career, it's inevitably going to lead to huge problems down the line. Really disappointed with this site's attitude to this issue, they seem to be cheerleading the government line for some reason.
How about a blog on the fact that the government still haven't disclosed what the penalties will or won't be on overpaying 2012 student loans and what a disgrace it is ?
Or a blog on the fact that none of the Student Loan Terms and Conditions are binding on this government or any other government?
Or a blog on why it is a disgrace to tax graduates at a marginal tax rate of 40% on income of just £15k?
As an alternative, he could have been seen to have stayed completely independent, and not got involved in the task force in any shape or form. That would have given him the freedom to have explained the pros and cons of student loans, and also to have highlighted other options.
For example, I've read a lot in the press about studying abroad where fees are much lower - that is the kind of alternative you would expect Martin to have been explaining on his MoneySavingExpert website, but there are no articles at all on it. Why not?
Exactly. I really can't understand why MSE Martin has taken such pride in his campaign to convince kids that leaving Uni with £27-36k of debt is nothing to worry about. Quite aside from the burden this causes, if you give people such a cavalier attitude to debt at the beginning of their working career, it's inevitably going to lead to huge problems down the line. Really disappointed with this site's attitude to this issue, they seem to be cheerleading the government line for some reason.
But it's a debt that many will never pay back and it's debt that doesn't affect your credit history and you pay no interest on it, only in line with inflation. So for example if you borrow the cost of 50 shopping baskets in 2012, you'll only pay back the cost of 50 shopping baskets in 2030, for example, but it will be more because the price of living will probably be higher (or less if the price of living decreases).
Yes, it's completely disgusting that students are being expected to pay this much, but at least they're offering student loans rather than forcing students to take out expensive bank loans with high interest.
... and you pay no interest on it, only in line with inflation. ...
No, that's not true for the 2012 loans. From Martin's student loan guide
"...Under the new system, the interest is as follows:
While studying: Accrue RPI inflation plus 3% on the outstanding balance. This continues until the first April after graduation when it changes to…
After studying earn under £21,000: Accrue RPI inflation.
After studying earn £21,000 - £41,000: The interest rate will gradually rise from RPI to RPI plus 3% the more you earn (the interest rises 0.00015% for every extra pound you earn or, put another way, if you earn £1,000 more you accrue 0.15% extra interest).These thresholds are likely to will rise with average earnings from 2017.
After studying earn over £41,000: Accrue RPI inflation plus 3%."
The DFW boards are full of people who will never pay back their debts. I don't think that's something you should aspire to.
and it's debt that doesn't affect your credit history
Depends what you mean. Most mortgage companies will take into account student loan repayments when calculating affordability, so massive loans could affect your chance of getting credit.
and you pay no interest on it, only in line with inflation.
Of course you pay interest on it. The interest is currently linked to the RPI inflation rate plus 3% - an eye-watering 8.2% at present, far higher than most commerical loan rates. Pay rates are not going up by anywhere near as much as RPI at present, and with the way the economy is, it's unlikely that we can expect pay rises to keep up with inflation for the forseeable future.
This is a rotten deal for students, and MSE Martin shouldn't be promoting it to kids as if it was free money with no repercussions.
What needs to be focused on is whether or not the loans are a good business decision.
I am a student and I see my student loan in the same way I would a mortgage. A massive expense, but if it means I earn about £2-3k pa more than I would without the degree, it was worth it.
£9k doesn't automatically make them terrible, it just pushes that £2-3k to say £3-4k.
Said Aristippus, “If you would learn to be subservient to the king you would not have to live on lentils.”
Said Diogenes, “Learn to live on lentils and you will not have to be subservient to the king.”[FONT=Verdana, Arial, Helvetica][/FONT]
EdgEy, I see setmefree2 liked it, which means maybe I should look harder at what you have written, but wasn't that another one of your dodgier posts? Don't you think your take on this is all a bit limited by your own experience? You consider your student loan like it was a business decision and a mortgage all in the same small post. Have you ever run a business ? Have you ever had a mortgage ?
Tuition fees have broadly trebled to £9,000pa, yet your estimate of the necessary measure of additional success in terms of salary commanded (to make the decision to have taken the loan worthwhile) which was worryingly modest in the first place, has increased by less than 50%.
Didn't you say you were reading Maths up country somewhere? Who are you trying to convince - prospective students without a clue, or some others of us ?
Do you want to tell us how your post was supposed to add up?
Tuition fees have broadly trebled to £9,000pa, yet your estimate of the necessary measure of additional success in terms of salary commanded (to make the decision to have taken the loan worthwhile) which was worryingly modest in the first place, has increased by less than 50%.
Tuition fees don't make up all of the cost of going to University.
Take a three year degree - so three years' lost earnings. Let's say 20k as a fair estimate for a salary commanded straight out of sixth form college. Feel free to switch that for whatever number you feel is valid.
That gives £60k + ~£30k tuition fees after inflation. So a net loss of £90k.
Over 40 working years, you need to make up around 2.2k a year plus any interest on the loan. So my £3-4k estimate gives room for a margin of safety given that you don't know where interest rates will be in ten years' time.
The difference between before (three years lost earnings plus ~£10k), and now (three years lost earnings plus ~£30k) is nowhere near a 50% increase.
edit: For clarity, I've excluded living costs as you'd be paying them whether at University or not. If you included them, I suspect the figure would favour going to University even more - working generally gives you commuting costs.
Don't you think your take on this is all a bit limited by your own experience? You consider your student loan like it was a business decision and a mortgage all in the same small post.
Getting a mortgage is a business decision. You choose to put yourself into hundreds of thousands of pounds worth of debt, in order to save money long term and give yourself more security.
I see a student loan in a similar way. I chose to put myself into tens of thousands of pounds worth of debt, in order to improve my earning prospects long term.
Of course my views are limited by my own experience - but then so are anyone's.
Said Aristippus, “If you would learn to be subservient to the king you would not have to live on lentils.”
Said Diogenes, “Learn to live on lentils and you will not have to be subservient to the king.”[FONT=Verdana, Arial, Helvetica][/FONT]
So your "pushes that £2-3k to say £3-4k" was a statement about the necessary initial salary differential in order to break even on the decision and it also assumes 40 years of constant working?
The decision on whether it was worth it in your case is whether you will do better than break even ?
I worry about the unknowns such as the interest accruing (which could easily explode if the economy goes wrong) and the movable or deletable thresholds, and from there to movable retirement dates.
You've heard the word "wageslave", EdgEy - where's the protection against that ? It is not so long ago that the man in the street felt he was an unwilling slave to his mortgage company. I can remember when rates went as high as 15% - luckily I had fixed for 11.3% at that time for a few years.
Replies
What would you suggest as an alternative?
How about a blog on the fact that the government still haven't disclosed what the penalties will or won't be on overpaying 2012 student loans and what a disgrace it is ?
Or a blog on the fact that none of the Student Loan Terms and Conditions are binding on this government or any other government?
Or a blog on why it is a disgrace to tax graduates at a marginal tax rate of 40% on income of just £15k?
Take your pick.
As an alternative, he could have been seen to have stayed completely independent, and not got involved in the task force in any shape or form. That would have given him the freedom to have explained the pros and cons of student loans, and also to have highlighted other options.
For example, I've read a lot in the press about studying abroad where fees are much lower - that is the kind of alternative you would expect Martin to have been explaining on his MoneySavingExpert website, but there are no articles at all on it. Why not?
But it's a debt that many will never pay back and it's debt that doesn't affect your credit history and you pay no interest on it, only in line with inflation. So for example if you borrow the cost of 50 shopping baskets in 2012, you'll only pay back the cost of 50 shopping baskets in 2030, for example, but it will be more because the price of living will probably be higher (or less if the price of living decreases).
Yes, it's completely disgusting that students are being expected to pay this much, but at least they're offering student loans rather than forcing students to take out expensive bank loans with high interest.
Just my thoughts anyway.
No, that's not true for the 2012 loans. From Martin's student loan guide
"...Under the new system, the interest is as follows:
Depends what you mean. Most mortgage companies will take into account student loan repayments when calculating affordability, so massive loans could affect your chance of getting credit.
Of course you pay interest on it. The interest is currently linked to the RPI inflation rate plus 3% - an eye-watering 8.2% at present, far higher than most commerical loan rates. Pay rates are not going up by anywhere near as much as RPI at present, and with the way the economy is, it's unlikely that we can expect pay rises to keep up with inflation for the forseeable future.
This is a rotten deal for students, and MSE Martin shouldn't be promoting it to kids as if it was free money with no repercussions.
I am a student and I see my student loan in the same way I would a mortgage. A massive expense, but if it means I earn about £2-3k pa more than I would without the degree, it was worth it.
£9k doesn't automatically make them terrible, it just pushes that £2-3k to say £3-4k.
Said Diogenes, “Learn to live on lentils and you will not have to be subservient to the king.”[FONT=Verdana, Arial, Helvetica][/FONT]
Tuition fees have broadly trebled to £9,000pa, yet your estimate of the necessary measure of additional success in terms of salary commanded (to make the decision to have taken the loan worthwhile) which was worryingly modest in the first place, has increased by less than 50%.
Didn't you say you were reading Maths up country somewhere? Who are you trying to convince - prospective students without a clue, or some others of us ?
Do you want to tell us how your post was supposed to add up?
Tuition fees don't make up all of the cost of going to University.
Take a three year degree - so three years' lost earnings. Let's say 20k as a fair estimate for a salary commanded straight out of sixth form college. Feel free to switch that for whatever number you feel is valid.
That gives £60k + ~£30k tuition fees after inflation. So a net loss of £90k.
Over 40 working years, you need to make up around 2.2k a year plus any interest on the loan. So my £3-4k estimate gives room for a margin of safety given that you don't know where interest rates will be in ten years' time.
The difference between before (three years lost earnings plus ~£10k), and now (three years lost earnings plus ~£30k) is nowhere near a 50% increase.
edit: For clarity, I've excluded living costs as you'd be paying them whether at University or not. If you included them, I suspect the figure would favour going to University even more - working generally gives you commuting costs.
Getting a mortgage is a business decision. You choose to put yourself into hundreds of thousands of pounds worth of debt, in order to save money long term and give yourself more security.
I see a student loan in a similar way. I chose to put myself into tens of thousands of pounds worth of debt, in order to improve my earning prospects long term.
Of course my views are limited by my own experience - but then so are anyone's.
Said Diogenes, “Learn to live on lentils and you will not have to be subservient to the king.”[FONT=Verdana, Arial, Helvetica][/FONT]
The decision on whether it was worth it in your case is whether you will do better than break even ?
I worry about the unknowns such as the interest accruing (which could easily explode if the economy goes wrong) and the movable or deletable thresholds, and from there to movable retirement dates.
You've heard the word "wageslave", EdgEy - where's the protection against that ? It is not so long ago that the man in the street felt he was an unwilling slave to his mortgage company. I can remember when rates went as high as 15% - luckily I had fixed for 11.3% at that time for a few years.