MSE News: Student loan deferment threshold to fall: Q&A on why it's happening

anna2007

Firstly, thanks to MSE for following up on the previous article, and seeking clarification from BIS on the calculation.

However, I'm even more confused as a result of this article - the figures just don't add up if all the calculation is based on is average earnings and earnings growth. I'm no expert at reading stats, but there is no way that earnings growth is negative to the tune of 7%, as far as I can tell it was up 0.7% in April 2014 on the previous April (see table 15, page 63 of 73 here):

http://www.ons.gov.uk/ons/dcp171778_363998.pdf

The 0.7% is the growth figure for total pay (regular pay + bonus pay), but if you check the table 15(1) on page 64 showing the earnings growth for bonus pay only, this shows -7.4% - if BIS used this figure in their calculation, rather than the 0.7% for total pay, that doesn't seem a very accurate calculation of earnings growth? The reason given for the unusually low growth figure for bonus pay is on page 18 of the above pdf file:

"The single month growth rate for total pay for April 2014 (minus 1.7%) was the lowest since March 2009. This reflects an unusually high growth rate for April 2013, due to some companies which usually paid bonuses in March paying them in April".

BIS also said in the MSE article that they've taken the average earnings figure from the Annual Survey of Hours and Earnings (ASHE) for April 2013 - April 2014, but going by previous years' releases, this isn't due to be published until the end of this year. The latest ASHE, released 12 December 2013, covers the period to April 2013:

http://www.ons.gov.uk/ons/rel/ashe/annual-survey-of-hours-and-earnings/2013-provisional-results/stb-ashe-statistical-bulletin-2013.html#tab-Annual-earnings

Would MSE be willing to ask for the actual figures used by BIS to calculate the latest deferment level, along with the figures for the previous year's calculation, and the ONS source of these figures? I think that would go a long way in helping us to understand this year's 7% reduction in the deferment level.

anna2007

cluelessfish wrote: »

granted more lower paid new jobs would bring the average down( also any reduction in massive bonuses ) but does 7% still not seem like a big drop.

if ons gives 0.2% drop then why 7% drop in deferment threshold.

also deferment threshold is gross income so shouldn't be affected by tax cuts/rises.

ok typing that last bit i think i figured it out.

deferment threshold is based gross income including certain benefits

but government has been busy capping benefits and is switching to universal credit .

Something else has to be included, if you look at the average earnings figures over the years, they're below the deferment level (and the deferment level's set at 85% of average earnings).

Benefits would seem the obvious answer - I suppose it might include all of the benefits declared on the deferment application form, which I think is pretty much everything except disability-related benefits?

anna2007

Lungboy wrote: »

It stinks because it's only the 2nd drop in deferment threshold in the history of these loans, and it's a huge drop too (~£2k)

I noticed when trying to figure out the calculation that the ONS changed its measure of average earnings in 2010:

"AWE was accredited as a National Statistic in late 20094, and replaced the Average Earnings Index in January 2010 as ONS’s lead measure of changes in earnings"

That could well be the reason for the only other drop in deferment level, in 2010, i.e. a change in the way average earnings are measured?

cluelessfish

but there is no way that earnings growth is negative to the tune of 7%, as far as I can tell it was up 0.7%

there's also outside possibility that someone at bis hit "+/-" in stead of " . " button on calculator when doing the sums.

patanne

As I believe it is based on figs estimated for Jan 15 could it be based on a much higher increase in unemployed youth than the norm. If under normal circumstances you get say 80 people reaching state retirement age & actually retiring and 100 young people leaving school/college/uni for full time work. That leaves 20 struggling to find a job.

If you change things such as state retirement age that could leave still 100 young people looking for work but 60 only reaching state retirement age leaving 40 young people struggling to find a job on very low job seeking benefits. That would weight the system.

If you then factor in the number of women most affected by retirement age changes at the moment that may reduce their hours without an employer taking on more staff it would weight it even further.

wxm123

I appreciate that I will need to pay my mortgage style loan back, but I cannot believe they are lowering the earning threshold by £2k. Erudio now include ALL your income including CHILD BENEFIT! Your average person is still in the midst of austerity, and with this £2k drop, my repayments will be £185 per month, which is a huge jump!
It might be worth my while to take a £500 pay cut come April!

ffacoffipawb

wxm123 wrote: »

I appreciate that I will need to pay my mortgage style loan back, but I cannot believe they are lowering the earning threshold by £2k. Erudio now include ALL your income including CHILD BENEFIT! Your average person is still in the midst of austerity, and with this £2k drop, my repayments will be £185 per month, which is a huge jump!
It might be worth my while to take a £500 pay cut come April!

What is the repayment method for these, eg 9% of income above a threshold or is it some other method?

anna2007

ffacoffipawb wrote: »

What is the repayment method for these, eg 9% of income above a threshold or is it some other method?

Once earnings are over the threshold, you pay the outstanding amount over 60 months (84 months if you have more than 4 loans).

rizla_king

On Radio 5 Martin said even he and his team can't get a straight answer from BIS and ONS on the maths and figures used for this.

Martin thinks it's a "horrible coincidence" this year.

Maybe it is (doubt it), but until it's properly justified and explained which the actual calculations, it smells like a 5 years old barrel of rotten kipppers.

ffacoffipawb

anna2007 wrote: »

Once earnings are over the threshold, you pay the outstanding amount over 60 months (84 months if you have more than 4 loans).

Wow. A big incentive to be £1 below the threshold. What a stupid repayment method that is.

Increasing pension contributions is a good way to avoid repaying this loan!!!