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MSE News: Guest comment: How banking bonuses have hit student loan repayments
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While I don't have access to a demographic graduate v income database, it will be a lot more.
They will, however, benefit from reduced debt.
On what basis? As per my other post, these are people who have potentially been in employment for at least 12 years, and who have a degree, yet are only earning £26700-£28700 (a relatively narrow salary band). This is below the average salary for teachers, nurses, and pretty much any graduate level job you could name. Average graduate starting salaries were around £20k at the time these people graduated and they are now in their mid-30s. I don't buy into the idea that this affects any more than a small handful of people.
Going to university does not mean you have a degree.
Having a degree does not mean you got graduate placement earning £20k
Average wage is not the wage which most people earn.
10% of post tax income is a lot if you are already spending it on feeding your children.
The PRP scheme was withdrawn around 1999, alas. Fortunate for me, as they made me redundant in 2000, but my final salary is still based on £32k. Phew.
Might still work, though, if the employer confirms your salary is below the threshold, be it £26k or £28k, plus a conditional bonus.
The average salary for teachers, nurses, or any graduate job is just that - an average - many in deferment (particularly for the jobs you mention) could be women working part-time and raising a family, so might not be earning the full-time average for their profession, but something closer to the national average wage. And not every degree course has a graduate salary attached at the end, some people are motivated to learn by things other than money.
There are many reasons why a graduate might be earning the national average (or even way below it), so it seems likely that far more than a handful of people will be affected by the deferment level.
Personally I very much appreciate this article from MSE and the efforts of its author. Andrew McGettigan is doing an enormous amount to expose the flaws and deceptions in higher education student funding over the last 25 years. His efforts and analysis are extremely important to preventing the sale of the later Income Contingent loans. Check out his damning evidence to the BIS Committee in December 2013. I believe he is doing a far better job on this subject than the paid politicians who are taking these decisions or supposedly scrutinising them.
How the Government handle student loans and sell or plan to sell them to private buyers matters to anyone with a state provided student loan. That is a large number if people. It should also matter to anyone who cares about the relationship of government with the people it supposedly represents.
What is happening with these older loans shows what can and will happen with sales to the private sector. It shows how government works to serve its new customers, the debt purchaser, not its own citizens who were sold these loans on the basis of false promises.
It also shows what can happen as loans approach the cancellation guaranteed under their terms. The state holds loans it promised and planned would be written off. These were promises made for reasons of public policy and political expediency, with the costs accepted on taxpayers behalf by the government that issued the loans. But as cancellation nears, the opportunity to exploit remaining borrowers and the terms of their loans can be sold to private purchasers. They can buy the opportunity to bleed a profit despite the government that spent the money and issued the loans long ago accepting there would be none. It's the Devil take the hindmost.
The terms of all student loans, earlier and later, were agreed to satisfy the political, ideological and fiscal wishes of politicians at the time they were introduced. Their terms derived from public policy commitments and objectives and were not commercial. These state-provided student loans are incompatible with profit-making business. With the tranches sold in 1998 and 1999, the government in effect paid purchasers to buy them. What legitimate profit can there be for private purchasers from loans with zero or minimal interest rates, those that are properly deferred, or loans that are statistically certain to be cancelled?
'Moreover, it is important to note that the relevant legislation does not specify how to calculate the repayment threshold. The 1998 Education (Student Loans) Regulations only states that the threshold should be "85% of the lender's estimate of average monthly earnings of all full-time employees in Great Britain for the January when the level will apply based on figures published by the Office for National Statistics".
It was therefore a choice to use the particular method outlined above and the April figures every year. The calculation is not "enshrined in law", although it is not clear whether the sale of loans to private parties has affected the situation, since the terms of those sale agreements are confidential.'
Absolutely. The 1998 Regulations contain space for the 'lender' to interpret how to make this estimate. In 1998 the Labour government built plenty of room into this prescription.
Very interesting to read the quotes from BIS on this:
"We provide a transparent and consistent method of calculation based on the ONS statistics for the preceding 12 month period of April to April. This is the methodology that has been used since the calculation's inception and ensures a transparent, consistent approach, free from departmental, political or third party interference.
Any action by the department to artificially raise or lower the threshold would not only compromise the integrity of the calculation, but may also breach the legal framework to which we must adhere."
There is nothing in the 1998 Regulations to say the calculation method has to remain unchanged to maintain 'integrity', or that changing the calculation would 'compromise' this. It may 'breach' these regulations 'to artificially raise or lower the threshold', but I cannot see how changing the calculation is itself prohibited under the terms of the 1998 Regulations alone.
The 1998 Regulations define the lender as:
'"lender" means the Student Loans Company Limited and any person to whom that Company may transfer its rights and obligations under the loan agreement'
Under the 'legal framework' of the Regulations, it appears the 'lender’s estimate' would more correctly be an estimate by Erudio, Thesis and Honours. For BIS to retain the function of calculating this threshold after transferring the rights and obligations from the SLC appears to again be a choice, and under the 1998 Regulations alone is not a legal obligation to which it 'must adhere'. The retention of this function by BIS is therefore presumably governed by the terms of the sale agreements, rather as the 1998 and 1999 sale agreements ensured the deferment process would continue to be operated by the SLC.
Why is BIS calculating the deferment threshold for Erudio? Could it be, rather than the high-minded commitment that this 'ensures a transparent, consistent approach, free from departmental, political or third party interference', that the contractual terms of the previous sale agreements oblige it to do so? Like the 1998 Regulations, the 1998 sale agreement does not specify a particular calculation, but obliged the Authority, then meaning the Secretary of State, his Scottish counterpart and DENI, to produce the deferment figure each year based on the ONS figures. It seems that the 'legal framework' to which BIS refer here is not primarily the Education (Student Loan) Act and Regulations 1998, but the 1998 and 1999 sale agreements and their consequential effect on sales to other debt owners.
'This is the methodology that has been used since the calculation's inception'
This seems to say only that the calculation has remained the same for as long as it has been the same.
I’d be interested to know for how long both the calculation and its methodology have remained the same, including any adjustments or modifications? Has this been the case since 1990, or 1998? Or some other date?
And it shows that the calculations made sense, were fair, and are not really news, so hopefully we won't get any people talking about "deceptions", or unfairnesss as a result of it.
You simply need to account for it as a cost like any other. You are hardly on the breadline, and if you cannot afford the lifestyle you want in London then move out.
I`ll support resonable arguments but this article linking it to bankers is pathetic.