MSE News: Government sells £900m of 1990s student loans

Dunroamin

To TUFTB (who I have on ignore but I can read when quoted) .

69% of pre 1998 loans have already been repaid which I think isn't bad. This tranche is the remaining 17% so, in fact, less than 7% of these loans are not being repaid correctly and these are, presumably, the people who the private company will be going after.

Also, the repayment threshold is much higher than for the current loans so it is perfectly possible for people to have reasonably paid graduate level jobs and not be eligible to repay the loans, not allowing for those ex students who are not working (or working part time) because they have caring responsibilities or because of illness/disability.

HTH

TurnUpForTheBooks_2

Dunroamin wrote: »

To TUFTB (who I have on ignore but I can read when quoted) .

69% of pre 1998 loans have already been repaid which I think isn't bad. This tranche is the remaining 17% so, in fact, less than 7% of these loans are not being repaid correctly and these are, presumably, the people who the private company will be going after.

69% = what exactly in this case ?
17% = what exactly ?
7% = what exactly ?

Sometimes I think a license should be necessary for anyone wishing to regurgitate statistics in a public place.

Also, the repayment threshold is much higher than for the current loans ...

For clarity please tell us what it is,

... so it is perfectly possible for people to have reasonably paid graduate level jobs ...

Please tell us your definition of reasonably paid.

...and not be eligible to repay the loans, not allowing for those ex students who are not working (or working part time) because they have caring responsibilities or because of illness/disability.

That's a lot of "nots".

It should perhaps be noted that there is a 17% and a 69% mentioned in this Independent article on the same subject. They also talk about "some" 300,000 (not 250,000). It all begins to sound a bit like some net immigration statistic i.e. perhaps no-one knows!


PS Someone might have to quote me in full in order to wake up the Ostrich!


PPS And to remind ourselves where he's coming from ("Let me be clear: and all that...") here's a little background reading on the back of an envelope politics of the minister who announced the sale, Martin's mate Willetts: https://www.gov.uk/government/speeches/ron-dearing-lecture-universities-and-social-mobility. Maybe someone should write a poem for him.

atypical

Martin's (sensible) take on it here:
http://blog.moneysavingexpert.com/2013/12/10/student-loan-sell-off-should-you-be-worried/

Freaky_Beaky

In the link above from atypical the repayment for pre-1998 loans was £28,775 as of 10/12/13 (article date). I understand that the interest rate in April of each year is fixed for that year each September (so to see average perhaps) and the interest rate is fixed for each year - 2013-14 it was 3.3% as indicated in the article.

2014-15 I understand has recently been set (as of September 2014) at 2.5%.

Question - WHY has the amount you need to earn before repayment suddenly appear to have dropped - by a whopping 7%???

The MSE guide about whether to repay student loans for pre-1998 loans states "you must make repayments if you earn over £26,727 per year". This was also confirmed by a letter from Erudio today stating if I earned more than £2,227.25 per month I would need to repay (which has led me to MSE & the forum).

My calculations led me to believe repayment would be the £28,775 + 2.5%.

So not only WHY has the amount you need to earn before repayment suddenly appear to have dropped, but also HOW has this decreased by over £2,000?

Many thanks for your help with my understanding.

PS I've also posted this is the 'Student loan sell-off – should you be worried? ' blog discussion

Freaky_Beaky

I think I understand better from my telephone call to Erudio:
The interest rate set is what the amount you borrowed goes up.
The income level is set at the UK average - obviously changeable each year.
So whilst annual inflation affects how much I pay back, the income I earn is set against the national average - which I'm not quite sure Martin Lewis actually explains in his MSE guide "student loans and whether you should pay back" - I believe this info regarding average income should also be clearly explained to promote a fully informed decision. Thanks

Ed-1

Freaky_Beaky wrote: »

I think I understand better from my telephone call to Erudio:
The interest rate set is what the amount you borrowed goes up.
The income level is set at the UK average - obviously changeable each year.
So whilst annual inflation affects how much I pay back, the income I earn is set against the national average - which I'm not quite sure Martin Lewis actually explains in his MSE guide "student loans and whether you should pay back" - I believe this info regarding average income should also be clearly explained to promote a fully informed decision. Thanks

The government released the calculations used to determine the deferment threshold in 2013/14 and 2014/15 as a result of some Freedom of Information requests. The deferment threshold is set at 85% of average earnings for full-time workers.

Essentially, the additional rate tax cut from 50% to 45% in April 2013 distorted the April 2013 earnings figures (as workers delayed pay to take advantage of the cut), making them unusually high. The knock on effect of this is that when compared to April 2012 (for the 2013/14 deferment threshold) the percentage change is skewed to the upside (3.85%) resulting in a disproportionately higher threshold last year but when compared to April 2014 (for this year's 2014/15 deferment threshold) the percentage change is skewed to the downside (-1.65%) resulting in a disproportionately lower threshold this year. This can be easily seen by comparing the January 2014 projected earnings figure of £33853 which was much higher than the actual April 2014 earnings figure of £32370.

Now that the April 2013 tax cut has fallen out of the calculations this 'threshold turbulence' should vanish considerably and I'd expect next year's threshold to come out closer to the figure in the previous years at £27500+.

2013/14 threshold calculation:
https://www.whatdotheyknow.com/request/224685/response/559682/attach/6/2013%2014%20Mortgage%20Style%20Deferment%20Threshold%20calculation.pdf

2014/15 threshold calculation:
https://www.whatdotheyknow.com/request/224685/response/559682/attach/5/2014%2015%20Mortgage%20Style%20Deferment%20Threshold%20calculation.pdf

Freaky_Beaky

Many thanks Ed-1 - that is perhaps one of the easiest to understand explanations I have ever received in relation to finance. Roll-on next year!

Pookienuffnuff

This guy explains it.
Not allowed to post link so google Andrew McGettigan mortgage style loans and its his 3rd October 2014 page
Note he says there is scope for consumer action.
"Prima facie that looks unreasonable and ought to be open to challenge under consumer credit legislation."
I wonder if MoneySavingExpert will be initiating such a move? Please? As I dont think the rest of us would know where to start and a class/group action might be better?