Student load repayment guide is confusing and possibly wrong

setmefree2

TurnUpForTheBooks wrote: »

Student Loans are a short term means of kicking the can down the road with regard to what should be being paid out of substantially increased tax revenues from the rich (but isn't) and which instead has actually been transferred onto the shoulders of those most incapable of shouldering it. They are also the least likely to understand it or even complain about it as they are too young to know better.

That paragraph sums the situation up so well.

Your posts are right on the money.

However, whilst I agree that the cost of higher education should be paid out of current tax revenues, I don't believe that the current higher rate tax should be raised beyond the current 45%.

In addition to the points you made, it should also be added that the current system is unsustainable. It will create a terrible problem for future generations, irrespective of whether that tax burden is an individual one or a collective one. It really does suck that baby boomers are doing this to our kids.

The outstanding loan debt is £46bn and will rise to £200bn in the next 30 years, the National Audit Office said.

That is about a sixth of national debt, which stands at £1.21 trillion.

About 50% of students are not expected to earn enough to repay all their loan.

It says officials are overestimating how much money will be recovered each year, and is not securing value for money for tax payers.

The expected level of debt to be written off had been set at 28% in 2010, which had risen to 35% by 2013.
Labour's university spokesman, Liam Byrne, said figures from the House of Commons library showed this had risen to more than 40%

http://www.bbc.co.uk/news/education-25121145

setmefree2

agrinnall wrote: »

Who is this "we"? Your collected body of posts are starting to sound like the manifesto for a lunatic fringe party. I don't believe they have any place on boards aimed at money saving, and if you must continue to air your view on MSE then this is the appropriate rule for you:

Discussion Time is for discussion of current affairs and issues.

So who do you think will pay off the £200bn of debt racked up by 2040?

I will give you a clue - I am unlikely to be alive in 2040 (or I will be a very old pensioner).

TurnUpForTheBooks_2

atypical wrote: »

Please do provide a broader and more careful answer, including an explanation of what RPI does to loan balances.

I created a clever spreadsheet (if I say so myself as someone with better maths than 95%+ of all undergraduates) for the undergraduates I know who are on repayment plan 2 where they can easily play around with annual RPI scenarios and loan instalments received by amount and expected date of receipt.

I am sure that I mentioned it some weeks ago. The loan balance for one of them (not a medical student) could easily bust £100,000 by graduation date if RPI should reach into double figures before graduation. It would not have to dip far into double figures for that to be a real possibility. You might dare to say that is unlikely but I dare say that I think it is at least as likely as not in the next 5 years which is the period before graduation for that particular student.

I wonder what RPI projections HMG have used for the leaked numbers on their likely cumulative student loan book balances in future years. Will they have dared to look at double-figure RPI %ages?

We are, after all, now on clear warning of BofE base rate increases starting as soon as unemployment improves and drops below the published but immeasurable 7% level (Carney's first message to us).

When do you think that the UK economy will have "improved" sufficiently for HMG to get away with a headline claiming that the 7% figure has been reached (from our supposed current position somewhere around 7.5% measured in ways I cannot even begin to fathom anymore) ?

What do you think will come next after that threshold is reached and lending rates increase? Is your maths and economics knowledge good enough for you to be advising our young people that my caution may be thrown to the wind, atypical ?

I think most might have preferred that you hadn't bounced my question back so glibly. What do you say to our young people about the effects of compounding the several unknown variables of which RPI is just one that affects student loan balances?

GeneHunt_2

TurnUpForTheBooks wrote: »

What do you say to our young people about the effects of compounding the several unknown variables of which RPI is just one that affects student loan balances?

Nothing it would seem

atypical

TurnUpForTheBooks wrote: »

What do you say to our young people about the effects of compounding the several unknown variables of which RPI is just one that affects student loan balances?

I would say it's an irrelevant point. They should ask themselves if university is worth 9% of their future earnings above £21,000 (rising with average earnings from 2017) for 30 years.

This is the real and very clearly defined cost to them, not the total loan amount.

GeneHunt_2

Originally Posted by TurnUpForTheBooks
What do you say to our young people about the effects of compounding the several unknown variables of which RPI is just one that affects student loan balances?

atypical wrote: »

I would say it's an irrelevant point.

Really?...Let's analyze why you think that...

atypical wrote: »

They should ask themselves if university is worth 9% of their future earnings above £21,000 (rising with average earnings from 2017) for 30 years.

How on earth do they know their future earnings? Surely, this is one of those unknown variables that you have just stated is irrelevant?

atypical wrote: »

This is the real and very clearly defined cost to them, not the total loan amount.

It so isn't a "very clearly defined cost". Indeed, it's the antithesis of a clearly defined cost.

setmefree2

TurnUpForTheBooks wrote: »

I think most might have preferred that you hadn't bounced my question back so glibly. What do you say to our young people about the effects of compounding the several unknown variables of which RPI is just one that affects student loan balances?

atypical wrote: »

I would say it's an irrelevant point. They should ask themselves if university is worth 9% of their future earnings above £21,000 (rising with average earnings from 2017) for 30 years.

This is the real and very clearly defined cost to them, not the total loan amount.

Seriously?

You argue the effects of unknown variables are irrelevant.

Then you argue that instead a student should ask themselves if a degree of their choosing is worth 9% of an unknown variable - lets call the unknown variable y - the unknown variable being their unknown future earnings...

atypical

The unknown variables I said were irrelevant are those that affect the loan balance.

A student does not need to know their future earnings unless they want to calculate an exact pounds and pence figure of what they will pay for university. I don't think students need to know this figure.

More relevant, because it determines affordability, is a student knowing they will pay 9% of their future earnings above £21,000 for 30 years.

TurnUpForTheBooks_2

Oh dear. You are saying that the loan balance is irrelevant, atypical.

We are talking about the Student Loan Company here - just to focus for a moment - that's the outfit that is securitising cumulative loan balances and selling them off. So was that £860M which was just announced as the latest tranche of loans sold off, also an irrelevancy ?

Perhaps you would instead argue that the £160M HMG will receive for it is the truly relevant part ? What about the original loans paid ? How much would they have been ? Irrelevant too ? Irrelevant to whom ?

It is all in the eyes of the beholder, is it not?

How about £21,000 a year - how soon will that be irrelevant ? Is it already irrelevant ? And that 9% ? If the £21,000 is not increased (and it has not been increased yet, has it?), then the 9% becomes steadily more relevant, does it not ? And it will become especially relevant if some government of the day feels it must increase the 9% to some more suitable lure for future privatisation/securitisation.

What do you behold?

I take it you don't want to pay more tax than you already do. You prefer to stick it to students? Why are you daring to wish it upon students? As you get older (and no doubt will then be kicking around for rather a lot of years not working), then why do you think it is fair to hit our youngest and brightest with the double whammy of

• a student loan repayment of the type never seen before and which you never suffered, and which for most shackles them to a regular wage-deducted burden just like a substantially increased marginal rate of income tax, plus
• an additional tax burden that will obviously become necessary to keep you in the style to which you believe you have become fairly accustomed? Unless we start bumping off the oldies a la Logans Run!

atypical

TurnUpForTheBooks wrote: »

So was that £860M which was just announced as the latest tranche of loans sold off, also an irrelevancy?

It's irrelevant for a student choosing whether to go to university.

TurnUpForTheBooks wrote: »

How about £21,000 a year - how soon will that be irrelevant ? Is it already irrelevant ? And that 9% ? If the £21,000 is not increased (and it has not been increased yet, has it?), then the 9% becomes steadily more relevant, does it not ? And it will become especially relevant if some government of the day feels it must increase the 9% to some more suitable lure for future privatisation/securitisation.

As far as a student can know currently, university will cost them 9% of their future earnings above £21,000 (rising with average earnings from 2017) for 30 years.

All conjecture suggesting otherwise does not help a student make a decision about whether to go to university or not.

TurnUpForTheBooks wrote: »

I take it you don't want to pay more tax than you already do. You prefer to stick it to students?

You seem to have assumed a lot about me. I'm 23 having graduated last year and I'm currently repaying 9% above the lower threshold of £15,795.

I used to be against the tuition fee hike, but the more I think of it as a graduate tax, the more I think it's a fair contribution.