MSE News: PM pledges to raise student loan repayment threshold

silvercar

setmefree2 wrote: »

Too many people don't understand the SL system, for that reason they should probably move to a graduate tax.

Too many issues with existing students for that.

What do you do about people who didn't take the loans or who have made lump sum repayments in part or full?

zagfles

setmefree2 wrote: »

It's because most people don't understand the SL system and all the uproar is around the post-2012 system....I even heard Jeremy Corbyn say that he would help students by extending the amount of time students have to repay ! WTH that would cost students more.


Read more at http://www.nme.com/news/jeremy-corbyn-will-deal-already-burdened-student-debt-2082478#WIaV5wFHpZsXiZfQ.99

Unbelievable, and some people want this clown to run the country!

zagfles

Looks like the govt are starting to listen to Martin!

https://www.moneysavingexpert.com/news/loans/2017/10/student-loans-must-no-longer-be-called-a-loan-universities-minister-says?_ga=2.137272440.917094922.1504560936-134932888.1451414882

A change in name is probably what it needs for some people to get their thick heads around how the system works!

silvercar

Martin Lewis posted this on facebook today:

PLS SHARE WITH ANYONE WHO STARTED UNI BEFORE 2012.
Many people are asking me "why aren't the govt increasing the student loan repayment threshold for those with type 1 (pre 2012 starters) loans as well as newer students?"
The obvious answers are 1) as that's not the current political hot potato and 2) as they hadn't breached their promise on type 1 loans and gone back on their word by freezing the threshold, as they did last year with the type 2 (post 2012 starters) loans.
Yet ignoring the politics and just looking at the finances upping the threshold for type 1 loan holders may not be such a good thing. Here's why...
When you increase the threshold, people repay less each year. To spell it out. If you are repaying 9% of everything above £21,000 and earn £26,000 you repay £450/year, increase the threshold to £25,000 and you repay just £90/year.
With type 2 loans as most people won't fully repay the loan and interest within the 30 years before it wipes increasing the threshold means they pay less each year for 30 years - so it saves them money - an average £15,000ish less during the 30 years.
With type 1 loans as the initial borrowing was substantially lower (both tuition and maintenance) most will repay in full before the loan wipes. As upping the threshold means you repay more slowly, that means you're borrowing for longer so will repay more interest.
While interest rates on type 1 loans is currently low, as it depends on inflation, they may not be in future, so its no where near as clear cut if people would gain from raising the threshold as with type 2.

setmefree2

silvercar wrote: »

With type 1 loans as the initial borrowing was substantially lower (both tuition and maintenance) most will repay in full before the loan wipes. As upping the threshold means you repay more slowly, that means you're borrowing for longer so will repay more interest.
While interest rates on type 1 loans is currently low, as it depends on inflation, they may not be in future, so its no where near as clear cut if people would gain from raising the threshold as with type 2.

40% of pre-2012 don't pay off their loans. So 40% would be better off with a higher threshold. 40% would be better off under the post-2012 system.

Furthermore, 40% of the post-2012 students are also better off than they would have been under the old system (See post below).

And to think some students went to Uni a year earlier to avoid "higher fees".

setmefree2

From Paul Johnson's (Institute of Fiscal Studies) Tweet.

New HE loan policy raises cost of HE to govt by 40%, leaves 40% of graduates better off than pre-2012 system. This is a BIG change

Ed-1

silvercar wrote: »

Martin Lewis posted this on facebook today:

PLS SHARE WITH ANYONE WHO STARTED UNI BEFORE 2012.
Many people are asking me "why aren't the govt increasing the student loan repayment threshold for those with type 1 (pre 2012 starters) loans as well as newer students?"
The obvious answers are 1) as that's not the current political hot potato and 2) as they hadn't breached their promise on type 1 loans and gone back on their word by freezing the threshold, as they did last year with the type 2 (post 2012 starters) loans.
Yet ignoring the politics and just looking at the finances upping the threshold for type 1 loan holders may not be such a good thing. Here's why...
When you increase the threshold, people repay less each year. To spell it out. If you are repaying 9% of everything above £21,000 and earn £26,000 you repay £450/year, increase the threshold to £25,000 and you repay just £90/year.
With type 2 loans as most people won't fully repay the loan and interest within the 30 years before it wipes increasing the threshold means they pay less each year for 30 years - so it saves them money - an average £15,000ish less during the 30 years.
With type 1 loans as the initial borrowing was substantially lower (both tuition and maintenance) most will repay in full before the loan wipes. As upping the threshold means you repay more slowly, that means you're borrowing for longer so will repay more interest.
While interest rates on type 1 loans is currently low, as it depends on inflation, they may not be in future, so its no where near as clear cut if people would gain from raising the threshold as with type 2.

But of course Martin overlooks the fact that there were broken promises on the pre-2012 system and threshold:

See comments:

https://twitter.com/MartinSLewis/status/915638993252966402

setmefree2

Institute of Fiscal Studies. 2 further bullet points at the bottom. See the increase in the RAB charge to 45% - that's what the government are not going to get back (or the government subsidy inherent in the student loan system).

Ed-1

Mogley wrote: »

I think even a competent government will realise the impact on the country will be too far in the future for a 5 year tenure to concern themselves over ruining their popularity. I can see state pensions being wiped in 25 to 30 years time (for the post 2012 era) to pay for the levels of write-off.

My worry is they'll turn to increasing the repayment rate from e.g. 9% to 12% which would probably have to apply to pre-2012 loans too.

But I can envisage a world in which if these ever get sold off to the private sector there could be massive discounts offered on paying off the account in one lump sum.

silvercar

setmefree2 wrote: »

40% of pre-2012 don't pay off their loans. So 40% would be better off with a higher threshold. 40% would be better off under the post-2012 system.

Furthermore, 40% of the post-2012 students are also better off than they would have been under the old system (See post below).

And to think some students went to Uni a year earlier to avoid "higher fees".

If 40% would be better off with a higher threshold, that means that 60% wouldn't. So it isn't clear cut.

I have 2 children, one with a pre-2012 loan and one post 2012; it was the younger one with the post-2012 that I thought was hard done by - now I'm not so sure.