'Student loans aren't a debt – change the name to avert a...' blog discussion

sopaz

Excellent blog post and very relevant in my case.

I did pretty poorly at A-level, and planned on doing an extra year of study before Uni. Then "top up" fees were announced in ~2004, and I "decided" (was persuaded by staff at my A-level college) to get into the system early and avoid higher "debt". (This in itself was a bit of a mistake as I would have got a place at a better Uni with the extra year of A-levels.) It's also worth mentioning that non of my family has ever gone to Uni.

The issue came when it was time to apply for a student loan. My parents (who are terrible with money anyway) told me I couldn't apply and get myself into "debt". Many arguments ensued and my parents literally couldn't understand the system (and probably still don't!) but the outcome was I would live at home for free and work part time for my living expenses and beer money. Obviously the downside to this was I had to go to a Uni in my home city - limiting my course choice and Uni experience.

I very quickly realised I wouldn't be able to manage with a part time job (I did an engineering degree, so there wasn't enough time left in the day). I persuaded my mother to fill in and sign the loan application form (which requires proof of parents earnings to work out loan amount etc) and completely forged my fathers form to get my "loan". I really couldn't have managed without it and did better in my degree by not having to work part time or worry about money (although I still worked full time during the summer to earn a bit extra).

Since then I moved Uni's during my undergraduate degree (to a better one after doing well in first year) and I'm now just about to start writing my PhD thesis in Electronic Engineering. Obviously Uni was a good choice for me!

As a parent you need to understand and educate yourself so you can point your children in the right direction. University might not be right for everyone, and it's true that some courses aren't worth the time/cost. But the Uni experience itself is worth it - Your children will come out of it better off, even if they do have a bit of extra tax to pay.

fishybusiness

It is still a choice as to whether or not a person decides to go to university.

If said person chooses not to, and are not currently employed, what should they do? Hope that in the next 3 years they will get a job, maybe a well paid job? Brush up on their job hunting skills and interview techniques?

If after their 3 years job hunting they are not employed, what should they do? Look back at 3 years of JSA, empty bank accounts, and look forward to another 3 years of the same, considering those that are well educated probably have a better chance of most jobs than they do?

The student loan system is a necessary evil in a world that demands ever increasing standards from employees. Those of us that remember the grant system may look back and feel glad their education was free. Or was it? Someone had to pay, and lots of people didn't ever get the chance to study at higher education level. I remember my parents world in the eighties, and how they struggled, really struggled whilst my mum studied.

Now, we are given loans and grants, and yes we have to pay some of that back, but we do have an ok life whilst studying, and those people from low socio economic backgrounds can also study. Social mobility is much better than it used to be.

After incurring the 'debt', what then? Some people find jobs, some do not. Are a graduates chances of obtaining employment greater, of course they are, if they were not, most of us wouldn't do it.

The academic challenge may mature younger students, give them insight, drive them to start their own business, and bring them in to contact with other people that are like minded. All positive outcomes.

That fact that we have to repay our loans and fees is in my opinion a small price to pay for being able further our own education, job prospects and life experiences.

Trevorw8

I (kind of) accept the argument about the tuition fees but would like them to be scaled according to some kind of measure, rather than letting them all charge the same amount. All Unis are marked now in a variety of ways, it ought to be possible to ensure that the 'best ones' can charge the top whack because they're good (as measured by the students themselves) and the poorer one are forced to charge less until they can prove value-for-money.

But the thing that really worries me about my son going to Uni is covering his living costs. We've been to 3 Open days so far and the cheapest accommodation is about £3,500 pa (rising to over £5,500 in places). We sit above the threshold for maintenance grant (but not by much) and so the loan he can get will also be reduced to not much more than this - what will he live on?. I have 2 other children to send to Uni in the next few years and 4 other dependents to provide for - I can't do it all.

Now that sounds like a moan (and it is a bit :-) but the real issue is where the caps on borrowing are set....they will force students like my son to either starve, or work so many hours there's no way he'll be able to study effectively and so his Uni experience and the government's ability to re-coup the costs through taxation later in his life will also be reduced. I would like the maintenance grant and loans to be means-tested taking into account the number of dependents as well as residual income and for the caps to be set higher so that the students can at least afford to study when their parents cannot help.

I went to Uni many years ago, got a full grant but still left in debt. I think we're fast approaching the point where only the very rich and the very poor can afford to go

Thoughts? Comments? Help? Advice?

Catapa

Tuition fees were imposed upon people with no right to vote (those affected were 17 or younger at the time the Tories increased the fees). The burden lies in the future and the interest rate (currently 6.6% from day one) tends to be under estimated. Until people start earning enough after a four years Masters they will have accumulated about £50,000 in debt (including interest), causing about £3,300 in interest p/a. Those earning less than £60k p/a will be paying interest for much of their best, family forming years: ¡yes! £82,500 in interest without even paying capital!. In contrast really high earners (above £150k) or people from wealth backgrounds like D. Cameron or G. Osborne will be able to pay their e.g. £50k loan off quickly, avoiding most of the punishing interest payments.

This effects the mostly those with incomes between £30k and £90 adding another 9% tax on their incomes. While it will reduce in future the official debt levels of government, it will not reduce the overall indebtedness of the British economy. And because the 9% reduces the incentive to work and private households (unlike governments) can't print money to get rid of their debt it will make the British economy less dynamic.

Dunroamin

Trevorw8 wrote: »

But the thing that really worries me about my son going to Uni is covering his living costs. We've been to 3 Open days so far and the cheapest accommodation is about £3,500 pa (rising to over £5,500 in places). We sit above the threshold for maintenance grant (but not by much) and so the loan he can get will also be reduced to not much more than this - what will he live on?. I have 2 other children to send to Uni in the next few years and 4 other dependents to provide for - I can't do it all.

Now that sounds like a moan (and it is a bit :-) but the real issue is where the caps on borrowing are set....they will force students like my son to either starve, or work so many hours there's no way he'll be able to study effectively and so his Uni experience and the government's ability to re-coup the costs through taxation later in his life will also be reduced. I would like the maintenance grant and loans to be means-tested taking into account the number of dependents as well as residual income and for the caps to be set higher so that the students can at least afford to study when their parents cannot help.

If your son's loan covers his accommodation (which will include bills) he'll only need to work 10/12 hours a week at NMW to cover his food and basic spending. Unless he's unrealistic, he really shouldn't need to work excessive numbers of hours.

In addition, might you not be able to make him a small allowance as you'll no longer be covering his expenses at home? People often forget that their own costs will go down when a child leaves for university.