MSE News: Autumn Statement 2015: Hidden hike in student loan repayment a 'disgrace'

Paul_Herring

photome wrote: »

would you expect your bank/builiding society to make retrospective changes to your loan conditions or because you needed the loan that it is ok

So, having taken out a mortgage when base rate is 0.5% and the mortgage rate is 2.5%, you'd fully expect, 10 years down the line to still be paying 2.5% when base rate is (for hyperbolic example) 5%?


And, no - "interest rate changes were in the initial contract" is not the way out of this metaphor.

Far too many (50% was the target?) are being pushed into university when that is not the best for them. Someone has to pay, and it's either the tax payer (i.e. those of us working in the private sector) or the people actually using the service.

I'd prefer the latter TYVM.

dizzie

anselld wrote: »

Even Martin spins it as a tax rather than a loan ...
http://www.moneysavingexpert.com/students/student-loans-tuition-fees-changes#gradtax

... though I suspect he might be more cautious about joining any Government "taskforce" in the future!

The upside of this is that grads who can afford it will pay less of the extortionate interest rates by paying off their "loan" faster.

Hi Anselld,

Yes, I know exactly what Martin said. He said that although it IS a loan, the way it is repaid makes it more like a tax. But the product is definitely sold as a loan and is called a loan. And the government sold it on the basis that although it would be much higher than before, and would attract much higher interest rates, its saving grace is that the repayment threshold would be much higher than before and it would keep moving to keep pace with the cost of living by being uprated annually in line with average earnings. That was it's ONLY positive point and they made it a huge selling point, only to renege on this a few years later and effectively make retrospective changes to existing borrowers. That, in my opinion, is quite immoral.

Do you realise that by 2020, anyone over 25 working 8 hours a day, 5 days a week will be guaranteed an annual salary of at least £18720 under the new living wage. That will be the bare minimum. Meanwhile, the threshold for repayment of the graduate loan will still be £21,000 and will remain so for AT least one more year. So really, the threshold will be pretty low...

And for anything over £21,000, they'll be paying an effective tax rate of 42% (51% if they took out a postgraduate loan too). Now if we are going to look at this as a tax, do you think that the vast majority of the working public would be celebrating if the government told them that the higher rate tax threshold was more than halving to around £21,000? Because higher rate taxpayers have a net tax of around 42% on anything over £42,385 at the moment.

I hope this puts into perspective how low this threshold will actually be in 5 to 6 years time...and how the whole selling point of these loans having much more favourable repayment terms than before will pretty much have been a lie!

Paul_Herring

dizzie wrote: »

they'll be paying an effective tax rate

No. It's not a tax rate, effective or not.

It's a loan repayment. Most of which won't be happening anyway.

dizzie

@ Paul Herring:

I agree that "Far too many (50% was the target?) are being pushed into university when that is not the best for them". And sadly for many who end up in low paid non-graduate jobs, the taxpayer will pick up the tab anyway, which is why it makes sense for the government to stop this nonsense target of 50% and treating Higher Education like some consumer industry. That said, see my previous post for what the minimum living wage will be by law, and you'll see that really by 2021, you won't have to be earning much more than that before you have to repay!

In terms of calling something a loan, people generally understand that the terms and conditions are fixed. So for example, if you have a fixed rate mortgage, your rates are fixed no matter what happens to BoE Base rate. If you have a tracker, then you sign up understanding that your rate will change dependent on the BoE Base Rate. Actually my mortgage company would probably love to get rid of me because I'm paying only 0.5% above BoE BR - but they just can't change the terms! In Europe meanwhile, some banks are having to charge negative interest rates on loans because terms and conditions are fixed.

Anyway, these new loans have interest rates which change annually, dependent on the RPI in March plus between 0 and 3%. (i.e. Plus 3% whilst you are studying so that interest starts to whack up right from the outset, and "up to plus 3%" when you're earning dependent on your income)

I understood that these interest rates, along with the repayment term formed part of the whole agreement of the student LOAN. If the government can change the terms and conditions at a whim, then it is mis-selling to call it a loan, because everyone understands that a loan agreement has terms and conditions which are set out at the beginning, to which both the lender and the borrower agree to comply.

As far as it not being an "effective tax rate" how do you work this out? It is subtracted at a certain percentage on income over a certain threshold as part of PAYE along with Income Tax and NI. It is therefore applied like a tax, which gives deductions of around 42% in total on anything over £21k. This is similar to what the rest of us older people see from our pay when we are earning more than TWICE this amount.

Paul_Herring

dizzie wrote: »

As far as it not being an "effective tax rate" how do you work this out?

It's repayment for something that someone wasn't obliged to take.

Not tax:

Don't take a mortgage? You're not forced to make mortgage repayments regardless.

Don't take a student loan? You're not forced to make student loan repayments regardless (though if you don't even after taking one out, the rest of us end up doing so. See: Taxpayer's Wallet)

Is tax:


Have a wage? You're forced to pay income tax and national insurance.

Buy something? You're forced to pay VAT.

Smoke, drink or drive a car? You're forced to pay excise duty.

It is subtracted at a certain percentage on income over a certain threshold as part of PAYE along with Income Tax and NI. It is therefore applied like a tax,

My pension contributions to my own personal fund are subtracted at a certain percentage on income over a certain threshold. Should I now deem them to be a tax? Thought not.

Metaphors are fine, to a point, and while student loan repayments may resemble "a tax on income" that's as far as it goes - resemble. Vaguely. They aren't, however, a tax.

andyfromotley

Pensions are changed retrospectively. Now student loan repayments are chganged retrospectively. Why on earth is the goverment allowed to carry on like some dodgy car salesman whose word cannot be trusted?

What an immoral bunch these politicians are.

dizzie

Hi again Paul, I agree - it was sold as a LOAN - and loans have fixed terms and conditions, but the government are treating it like a tax (i.e. something that they can move the goalposts on).

I agree, no-one is obliged to take it. When it is offered, one considers the terms on which it is offered and makes a decision.

You can stop paying into a pension. You have a choice as to whether you opt to have this deducted from your pay. In times when you can least afford it, you can reduce your payments or stop them altogether. Not so with SLC repayments. The only thing that matters is what income you are on in a similar way to income tax, NI and any other sort of tax.

People other than students benefit from university education. When we need a doctor, a nurse, a teacher, an engineer....we all benefit from the fact that those people exist, which is why university education should be a collective responsibility (i.e. partly the student and partly the taxpayer) to fund.

If you neglect yourself through poor dietary choices, or smoking and you need NHS input, all taxpayers contribute (any tax you've paid on cigarettes and alcohol isn't likely to cover your care). In other words, you've made a choice to indulge yourself. No one forced you to do it, but it is not within the mindset of the government to say, "Why should we taxpayers pick up the tab"

Is there not some perversity in this? We taxpayers don't want to pay to educate people who can benefit us, but we continue to pay for the choices of the irresponsible whose decisions bring benefit to no-one?

The fact is that the government call this a loan, but when it suits them they treat it like a tax, and when it suits them they treat it like a loan. I think it's called "having your cake and eating it"

Also "repayment for something that someone wasn't obliged to take". One isn't obliged to buy a new car, but if you do then you pay VAT which is a tax. But you know how much VAT you will pay at the time you make a decision to buy it. With a student loan, once you've "bought it", no matter what they said about how much you'd pay and when at the TIME you bought it, they think they can change their minds later. That isn't moral. You can't "unbuy" a student loan by turning back the clock and making different life choices instead.

Paul_Herring

dizzie wrote: »

If you neglect yourself through poor dietary choices, or smoking and you need NHS input, all taxpayers contribute (any tax you've paid on cigarettes and alcohol isn't likely to cover your care). In other words, you've made a choice to indulge yourself. No one forced you to do it, but it is not within the mindset of the government to say, "Why should we taxpayers pick up the tab"

They don't, because that's another myth the righteous like to beat the proles who smoke and drink over the head with. Smokers and drinkers, rather than being a drain on the system, are actually subsiding the non-smokers and non-drinkers. For example:

http://www.iea.org.uk/in-the-media/press-release/drinkers-subsidise-non-drinkers-by-%C2%A365bn-each-year

Using the most recent health, crime and drinking data, this new report demonstrates that contrary to popular belief, drinkers are not a burden on the taxpayer. The net cost of alcohol to the state is minus £6.5 billion. Even if the Government halved all forms of alcohol duty, it would still receive more money in tax than it spends dealing with alcohol-related problems.

And that's not even considering the state pension and old age care costs that don't arise because they die earlier because they smoked or drank.

Ed-1

dizzie wrote: »

And for anything over £21,000, they'll be paying an effective tax rate of 42% (51% if they took out a postgraduate loan too).

Just to be accurate, it would be 47% with a postgraduate loan as they've announced the repayment rate will be 6% not 9% (20% basic rate income tax, 12% national insurance, 9% undergrad loan, 6% postgrad loan).

dizzie

That's interesting Paul, although I guess the key word is "NET". You see I am sure that people who drink in moderation DO subsidise non-drinkers. Indeed, red wine in moderation is proven to actually have health benefits.

I don't drink to excess. I don't cause drink-related crime. I don't cause lost productivity at work by absenteeism through my drinking habits. I'm not likely to get alcohol related diseases such as oesophageal varicosities, or cirrhosis....

But I'm talking about the people who really abuse their bodies through the poor lifestyle choices they make which may include excess alcohol, smoking, lack of exercise and poor dietary choices. Sadly, I have personal family experience of this, and the person I refer to has definitely had more financial input in terms of disability payments, healthcare costs and eventually nursing home costs than he has ever earned, let alone paid tax for.