Student load repayment guide is confusing and possibly wrong

TurnUpForTheBooks_2

Thanks for sharing atypical. Yours is of course a perfectly valid view that will be shared by a not insignificant peer group I imagine - if they were lucky enough to secure jobs. You represent a kind of transitional set of loan customers. I am not wholly familiar with the likes of those of you who may have been charged £3,500pa tuition and took maintenance loans too? I apologise for assuming you were an older taxpayer but you do nevertheless seem to be both

• a kind of fan of the erstwhile low interest repayment plan 1 loan scheme, and
• a kind of fan of the current repayment plan 2 scheme ?

If you graduated last year then I guess your loan balance is not out of sight ? Nor will it easily become so under the effect of any unusually high surcharged rate of interest (like repayment plan 2's RPI + 3%).

Do you mind telling us how much you had borrowed by the time you graduated and how quickly do you think you will be free of it ? I think many readers would be very interested to know if you feel that even your own loan balance is too far out of sight to be relevant ? I detect that you are urging that the higher repayment threshold expected to be enjoyed by repayment plan 2 customers is a significant advantage over your own situation?

Sorry to pry, but in order for us to try to understand your view better, does that mean that you are earning a lot or a little over the threshold? I guess it is the latter, because if you were earning say £35K which is what I reckon good recent graduates in STEM subjects deserve to expect, then the difference in the two thresholds would be pretty insignificant? In your case I think you are arguing that it is significant?

atypical

I wouldn't mind answering your questions, they've probably all been answered in my post history here, but this thread wasn't about my situation or views. It was about more clearly representing the current reality of the student loans system. I think it's run its course now.

TurnUpForTheBooks_2

atypical wrote: »

I wouldn't mind answering your questions, they've probably all been answered in my post history here, but this thread wasn't about my situation or views. It was about more clearly representing the current reality of the student loans system. I think it's run its course now.

Now I do find that response rather presumptious. You may think that my views are somewhat presumptious, but do you really think you as a student one year out of university have the best understanding of "the current reality of the student loans system" (as you put it) - one which is good for recommending to young people or parents of young people who find themselves with little choice but to use repayment plan 2 facilities as they stand ?

You have already said that you did not use the current system. You used its forerunner, the repayment plan 1 system.

Do you have a mortgage ? Do you aspire to one ? When I was your age, a year out of university, I already had my first mortgage.
I was otherwise completely free of debt. My parents were I think probably below average wage earners but they had a very strong save as you earn ethic. Their first and only mortgage started just seven years before mine and it was paid off early!

I think if you wish to lay out your own strong views on this, I think you at least need to indicate where you are coming from. You have broadly recommended to your readers that Student Debt Loan Balances are irrelevant (broadly I think you are arguing it is simply a choice that leads directly to liability to a special marginal rate of income tax and that is the only decision a budding undergraduate needs to take on the affordability front - i.e. do they make themselves liable to the special "tax" or not?).

If the loan balances are irrelevant to that decision, does that mean that a student should take all the Student Loans they can get and spend it all in the same year that it is received? Or should a poorer student attempt to save some of the loan money for a rainy day? If they manage to do that, is there any point (or points) in time either before graduation or after, when they should consider paying some of it back ? Or should a student who manages to find a job which subsidises their life as an undergraduate seek to spend their job earnings before their maintenance loan money?

Might even you,atypical, be tempted to say "It depends"?

My point of course is that of course it depends (on SL scheme variables and on other variables), but the current Student Loan Guide does nothing to avoid confusion on that topic when it uses such general and perhaps false assumptions to promote a one-size fits all recommendation.

I think the big question that so many opinionated commentators dismiss to easily, is in what ways is a Repayment 2 Plan Student Debt like a mortgage debt?

I think you would probably strongly argue that it is in no way like a mortgage debt?

I would however strongly advise that although the system was designed to look and initially operate as one that is de-linked from ultimate liability for the entire capital borrowed plus interest, it only becomes delinked after a mortgage style period. Furthermore, no matter what commentators might try to assert, what happens in between times (over that 30 years) is far from certain and could indeed be dangerous to your wealth. There may even be an obvious historical pointer to the sort of thing that may happen.

When I was your age, I was advised strongly that I should take something called an endowment mortgage. Almost every potential new mortgagor was advised to structure their mortgage that way. It was in the current vogue and you were like as not seen as a bit daft to attempt to finance your mortgage any other way. The principle advice was that the lender would worry about how much you could afford to pay (if there was any doubt then they would patch up the affordability doubts with something called Mortgage Guarantee Insurance). So the moment you took the loan, could forget about paying off the original loan balance. The repayments were just about paying variable loan interest plus a fixed further percentage (sound familiar?)

The "low cost" (everyone can afford it) house purchase endowment "scheme" would take care of it.

Do you know what happened ? I will simply say that over the course of many of those endowment mortgage periods, a particular word entered common usage in the English language, first in relation to rail company wage promises to its workers, and then in relation to all manner of contractual promises.

Now, almost two generations later, we have some much more volatile scheme which is not one which suggests that you as a new graduate should consider buying a house as soon as you can, but it starts much earlier, when you are completely wet behind the ears financially speaking. Today's great idea is that you borrow a mortgage-sized amount of capital to pay for your education. How you finance where you live after you graduate is now of secondary importance. Apparently that's dropped off the number one spot in terms of appropriate aspirations at least until you become a winner with one of those great jobs we baby-boomers used to have but which only public servants now seem to have for a little longer yet which of course is one which you must against all the odds now be expected to keep! Until you make it to such a job, then maybe you will be part of the statistic which says the average age of a first time buyer is now 38!

Meantime, education,education,education! You need not worry about how much they are prepared to lend, nor how much the total is at your graduation date. What you have purchased on what used to be disparagingly called "the never never" is an education which some would say you can live in, but I might argue differently. You know what those that sold to you were urging you to believe when you entered into it, but the big question is, what is it going to look like down the line ? Do you care ? You may not, but I say to those particularly in Repayment Plan 2 that they should care.

Edit: To be perfectly blunt, with regard to this whole question, I think most people could do worse than to go back and read the first page of posts (up to post #20 or so) under Student Loan 2012 Discussion. It does rather interestingly now start with a relabelled link to a supposed 2013 article but I see further down the linked to page it has been futureproofed further to take you to

Join in the Forum Discussion:
Student loans 2014, which rather unhappily, should you have been hoping for a forward-looking or even simply an updated take on the whole thing, is back where you started if you followed this (my Edit) paragraph's instructions to the letter!

Plus ça change, plus c'est la même chose, n'est-ce pas?

I also find it rather conspicuously worrying now that the
Independent Taskforce on Student Finance Information website (hosted by MSE) has not been updated for over a year.. No news perhaps means "phew, we managed to keep the lid on public dissent" or was it "actually our rushed out 2011 website was spot on the money from the outset and after a year of tweaking up to the point the first new Repayment Plan 2 freshers became immersed in their courses, it could not be improved upon - even for 2013 starters."?

(Removes tongue from sadly resigned cheek)