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  • FIRST POST
    • Former MSE Helen
    • By Former MSE Helen 15th Aug 11, 2:20 PM
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    Former MSE Helen
    'Students – lower earners deferring to 2012 could pay LESS' blog discussion
    • #1
    • 15th Aug 11, 2:20 PM
    'Students – lower earners deferring to 2012 could pay LESS' blog discussion 15th Aug 11 at 2:20 PM
    This is the discussion to link on the back of Martin's blog. Please read the blog first, as this discussion follows it.





    Please click 'post reply' to discuss below.
Page 1
    • bluenose1
    • By bluenose1 15th Aug 11, 3:15 PM
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    bluenose1
    • #2
    • 15th Aug 11, 3:15 PM
    • #2
    • 15th Aug 11, 3:15 PM
    I think it is scandalous that those who lend £43,500 and earn approx £40,000 a year will end up paying back £133,000 when you factor in interest.
    Typical of Britain that we say oh well they are only paying it back at a very low rate. In my mind it is more important to look at the amount repaid over the full period.

    Gosh, I feel so sorry for kids nowadays
    Money SPENDING Expert

    • Lokolo
    • By Lokolo 15th Aug 11, 3:22 PM
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    Lokolo
    • #3
    • 15th Aug 11, 3:22 PM
    • #3
    • 15th Aug 11, 3:22 PM
    I think it is scandalous that those who lend £43,500 and earn approx £40,000 a year will end up paying back £133,000 when you factor in interest.
    Typical of Britain that we say oh well they are only paying it back at a very low rate. In my mind it is more important to look at the amount repaid over the full period.

    Gosh, I feel so sorry for kids nowadays
    Originally posted by bluenose1
    There's no will about it, they MAY end up paying back £133k, depending on earnings and interest. Of which would be over 30 years.

    I also wonder where you got £133k from.
    Last edited by Lokolo; 15-08-2011 at 3:25 PM.
    • ViolaLass
    • By ViolaLass 15th Aug 11, 3:46 PM
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    ViolaLass
    • #4
    • 15th Aug 11, 3:46 PM
    • #4
    • 15th Aug 11, 3:46 PM
    And I imagine they'll be borrowing it, not lending it, otherwise one would question why they are paying it back.
    • bluenose1
    • By bluenose1 15th Aug 11, 5:24 PM
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    bluenose1
    • #5
    • 15th Aug 11, 5:24 PM
    • #5
    • 15th Aug 11, 5:24 PM
    And I imagine they'll be borrowing it, not lending it, otherwise one would question why they are paying it back.
    Originally posted by ViolaLass
    Apologies to the grammer police.
    Money SPENDING Expert

    • bluenose1
    • By bluenose1 15th Aug 11, 5:28 PM
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    bluenose1
    • #6
    • 15th Aug 11, 5:28 PM
    • #6
    • 15th Aug 11, 5:28 PM
    There's no will about it, they MAY end up paying back £133k, depending on earnings and interest. Of which would be over 30 years.

    I also wonder where you got £133k from.
    Originally posted by Lokolo
    My understanding is that they WILL pay back £133k based on the repayment graph published by Martin. Could be a little more / less depending on interest rate. No matter how many years it is over it is a hell of a lot to pay back.



    http://www.moneysavingexpert.com/family/student-loans-tuition-fees-changes#17
    Money SPENDING Expert

    • tyllwyd
    • By tyllwyd 15th Aug 11, 6:09 PM
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    tyllwyd
    • #7
    • 15th Aug 11, 6:09 PM
    • #7
    • 15th Aug 11, 6:09 PM
    The other piece of information I'd like to see in that table would be the length of time over which the students would be paying in comparison between the two systems.
    Last edited by tyllwyd; 15-08-2011 at 6:16 PM.
    • MSE Martin
    • By MSE Martin 15th Aug 11, 9:12 PM
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    MSE Martin
    • #8
    • 15th Aug 11, 9:12 PM
    • #8
    • 15th Aug 11, 9:12 PM
    The other piece of information I'd like to see in that table would be the length of time over which the students would be paying in comparison between the two systems.
    Originally posted by tyllwyd
    That was the original plan - unfortunately it is a massive job to change the model we've got and due to my position as head of the taskforce - i really didnt want to come out with something that wasn't accurate enough.

    When we launch the calc (in a couple of weeks) you'll be able to do a rough version of this yourself (ie lower the fees but under the new loan conditions) which will give a very rough indication (or to be more accurate just add 6k to the salary)
    Martin Lewis, Money Saving Expert.
    Please note, answers don't constitute financial advice, it is based on generalised journalistic research. Always ensure any decision is made with regards to your own individual circumstance.

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    • Lokolo
    • By Lokolo 15th Aug 11, 9:51 PM
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    Lokolo
    • #9
    • 15th Aug 11, 9:51 PM
    • #9
    • 15th Aug 11, 9:51 PM
    My understanding is that they WILL pay back £133k based on the repayment graph published by Martin. Could be a little more / less depending on interest rate. No matter how many years it is over it is a hell of a lot to pay back.
    Originally posted by bluenose1
    Exactly, its not for definite.

    And the number of people coming out of university earning £40k is very few, I would say less than 1%.

    You are also looking at the real terms which include inflation changes. So infact that £133k being paid back is only £77k in todays prices. If you want to look at the fact you will be paying back £133k which may seem a lot, by that time you will be earning £165k a year..... hardly a massive impact is it
    Last edited by Lokolo; 15-08-2011 at 10:03 PM.
  • 2sides2everystory
    I see there are still some wild numbers being banded about in, or left out of, this argument.

    If a University Education was a Flat Screen TV, about to double or treble in price next year due to scarcity of the right kind of chips, then what would MSE advise all those who had set their heart on getting one this year or next and could in fact stretch to ordering it now instead of waiting?
    • ViolaLass
    • By ViolaLass 16th Aug 11, 9:42 AM
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    ViolaLass
    Apologies to the grammer police.
    Originally posted by bluenose1
    1. You don't think the difference between 'borrowing' and 'lending' is important? They're opposites.

    2. It's not grammar.
  • alexlyne
    So the advice is that kids going off to university can get a free ride if they're not willing to do any work, come out of it with a fully enriched experience of spending 3 years in the bar (and a 3rd if they're lucky) and going on to having a 'career' in a call centre or supermarket - so what if they are not better off, they have still sucked 30K+ from the rest of us for their 3 year party.

    For those willing to work to make the most out of university (and choosing to go for this reason) are the ones who will have to pay for it - before 2012 they could reasonably expect to pay it off, but now they will have that money going out of their pay packet for practically their entire career.

    Hmm, this is very fair.
    • Lokolo
    • By Lokolo 16th Aug 11, 10:22 AM
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    Lokolo
    I see there are still some wild numbers being banded about in, or left out of, this argument.

    If a University Education was a Flat Screen TV, about to double or treble in price next year due to scarcity of the right kind of chips, then what would MSE advise all those who had set their heart on getting one this year or next and could in fact stretch to ordering it now instead of waiting?
    Originally posted by 2sides2everystory
    It's not a flat screen tele though.
    • JimmyTheWig
    • By JimmyTheWig 16th Aug 11, 10:24 AM
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    JimmyTheWig
    Martin,

    If you are expecting teenagers to make sense of this then you need to put the salaries into perspective.
    A 17/18 year old probably has no concept of whether they'll be earning £15k or £40k in 5 years time.

    I think you need some real examples (e.g. supermarket graduate programme, secondary school teacher with promotions to head of department over 20 years, financial adviser in a bank with a career break of tem years to bring up children, professional footballer with a League Two club, nurse taking on no extra responsibilities or promotions, etc, etc, etc). Then we'd be able to see where it is really worth defering.
    • tyllwyd
    • By tyllwyd 16th Aug 11, 11:03 AM
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    tyllwyd
    Exactly, its not for definite.

    And the number of people coming out of university earning £40k is very few, I would say less than 1%.

    You are also looking at the real terms which include inflation changes. So infact that £133k being paid back is only £77k in todays prices. If you want to look at the fact you will be paying back £133k which may seem a lot, by that time you will be earning £165k a year..... hardly a massive impact is it
    Originally posted by Lokolo
    For the majority of graduates who won't ever finish paying back their loans before they are written off, the monthly payment is a percentage of salary, so that will be linked to wage inflation. Doesn't that mean that inflation won't help to reduce the impact of a student loan on their lifestyle in the same way that it would for a mortgage debt?
    Last edited by tyllwyd; 16-08-2011 at 11:09 AM.
    • Lokolo
    • By Lokolo 16th Aug 11, 11:18 AM
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    Lokolo
    For the majority of graduates who won't ever finish paying back their loans before they are written off, the monthly payment is a percentage of salary, so that will be linked to wage inflation. Doesn't that mean that inflation won't help to reduce the impact of a student loan on their lifestyle in the same way that it would for a mortgage debt?
    Originally posted by tyllwyd
    No because the threshold also rises with inflation, the difference you pay will be the difference between wage inflation and inflation. (obviously if wage inflation ends up being double inflation then you will pay back more in real terms, but I don't think theres this much of a difference and I believe ML's calculator has inflation at 3% and wage at 4.5%?)

    edit - inflation threshold is set at 4% and wage at 5% on his calculator, so you are paying back more in real terms each year, but as you can see, the difference isn't massive. I suspect if the threshold didn't rise then yes, there would be a lot of difference and infact by the end of the 30 year period you would be paying a hell of a lot.
    Last edited by Lokolo; 16-08-2011 at 11:24 AM.
    • tyllwyd
    • By tyllwyd 16th Aug 11, 1:46 PM
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    tyllwyd
    But what I'm trying to say is that if you take out a 30 year loan at fixed interest and you pay back, say, £30 per month, the end of the 30 years this monthly payment is a tiny amount in real terms because of inflation. If you take out a student loan, it is 9% of your salary above a certain threshold - at the end of 30 years it is still 9% of your salary above a certain threshold. I know that the calculators are assuming that the thresholds will rise along with your salary, but that percentage figure won't change so the repayments will still represent the same chunk out of your take home pay at the end as they did in the beginning, they won't become less significant because of inflation in the same way as a fixed amount would.

    Does that make sense - have I missed something?
    Last edited by tyllwyd; 16-08-2011 at 1:55 PM.
  • melancholly
    But what I'm trying to say is that if you take out a 30 year loan at fixed interest and you pay back, say, £30 per month, the end of the 30 years this monthly payment is a tiny amount in real terms because of inflation. If you take out a student loan, it is 9% of your salary above a certain threshold - at the end of 30 years it is still 9% of your salary above a certain threshold. I know that the calculators are assuming that the thresholds will rise along with your salary, but that percentage figure won't change so the repayments will still represent the same chunk out of your take home pay at the end as it did in the beginning, they won't become less significant because of inflation in the same way as a fixed amount would.

    Does that make sense - have I missed something?
    Originally posted by tyllwyd
    i see what you're saying and i think it makes sense (but then i also think Lokolo's point about rising thresholds is important too).

    the counter would have to be that if you took out a 'normal' loan, your repayments would have be made whether or not you were working and regardless of your income..... it really is swings and roundabouts (and right now, expecting at least some time out of work makes sense - and being female, that's hopefully more about maternity leave than being out of work!).
    • tyllwyd
    • By tyllwyd 16th Aug 11, 6:58 PM
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    tyllwyd
    i see what you're saying and i think it makes sense (but then i also think Lokolo's point about rising thresholds is important too).

    the counter would have to be that if you took out a 'normal' loan, your repayments would have be made whether or not you were working and regardless of your income..... it really is swings and roundabouts (and right now, expecting at least some time out of work makes sense - and being female, that's hopefully more about maternity leave than being out of work!).
    Originally posted by melancholly
    Yes - I agree that a lot depends on whether you are thinking of the new student finance system as being a loan or as being a graduate tax. It seems to me that inflation works in your favour if it is a loan, but is not so relevant if it is a tax.

    Going back to the original blog post, the basic difference as far as I can see between the current loans and the 2012 loans is that with the current ones you pay back more money per month and hopefully pay them off completely in a reasonable length of time (a 'loan'), and the 2012 loans you just keep paying a smaller amount each month and accept that you will be paying for 30 years (a 'tax'). If you are deciding whether to defer to next year for financial reasons, I guess it depends which you are more comfortable with.
    Last edited by tyllwyd; 16-08-2011 at 7:19 PM.
    • Stryder
    • By Stryder 16th Aug 11, 9:44 PM
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    Stryder
    "Those who start in 2011 stay on the current lower fee regime throughout their student life, so certainly the overall money you’re eligible to pay is larger for 2012 starters – however the real question is how much of it will you actually need to repay?"

    What a load of propaganda

    The issue is debt, and in the end a graduate should be able to aspire to earn as much as anyone else, even St Martin. Student debt is wrong and this kind of sugar coating is misleading. It is a burden this year and a bigger burden - no matter how you phrase it
    ............... Have you ever wondered what
    ¦OO¬¬ O[]¦ Martin would look like
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