Student Loans

Kmh120 · 28 May 2016 at 8:43AM

Morning all

Sorry if this is in the wrong place ( please feel free to move it) but I saw the article (linked below) and panicked.

I thought student loans ( whilst horrendous compared with what we had to pay back in the day - ie nothing/not much) weren't a bad deal and I have seen Martin say that we should stick with them and not pay them off quickly by using savings.

Hence this article scared me.

Any thoughts please?

Thanks

Kmh120 · 28 May 2016 at 8:45AM

Ok so I'm not allowed to post the link. So it makes a bit of a mockery of my post. Pah! lol...

May I message the link to someone to add it please?

DCFC79 · 28 May 2016 at 9:12AM

You can still post the link but it won't be a clickable link.

Kmh120 · 28 May 2016 at 9:20AM

Oh ok...thank you so much...not sure how..I'll figure it out

Kmh120 · 28 May 2016 at 9:22AM

Ok I'm way too blonde for this.

Its the Guardian's money pages

have-student-loan-interest-rates-really-shot-up

Can anyone help please?

andyfromotley · 28 May 2016 at 12:21PM

I'm guessing its this one or something similar.

http://www.theguardian.com/money/blog/2016/may/28/student-loans-next-mis-selling-scandal

which has all been prompted by a fella, Simon Crowther, posting on facebook about how he was mis-sold his loan, he expected the interest rate to be 0.5% and is shocked to find it is actually around 3.9%. His loan is growing by to the tune of around £180 per month and he thinks it is a scandal that the terms of his loan were changed retrospectively. His letter to his MP went viral on facebook.

Sadly for the hapless Mr Crowther his post was innacurate in almost every point that he raised. The terms were never changed. It was always clear interest would be charged at RPI plus 3%. The terms were written and he signed to say that he understood them. His interest has been calculated correctly. His beef basically amounts to, i signed up, i didnt read it properly, i dont understand it, its a lot of money WAH WAH WAH!!!

With supreme irony he failed to mention the one legitimate beef that he has in that the govt has frozen the threshold at £21000 which is a disgraceful change and one that Matin and others have shouted from the rooftops.

It brings us now to the wider point about student loans. If you go for the full kahuna and max out all of your loans then you are going to leave uni with a HUGE debt. Around £50k +++ will be the norm. This will keep growing and for the vast majority of people will mean that you will pay an extra 9% on everything you earn over £21000 pa for the next 30 years. That can be a big chunk of change and people arent too happy about it when it comes to actually making the repayments. (certainly less happy than they were when they took the money!) There are two groups this wont affect. Low earners or no earners who will most likely never repay a penny. High earners who will work out that it makes financial sense to repay their loans or they will get clobbered for loads of interest.

So what does this all mean? Well its quite clear, when you go to university you are BUYING your degree. The cost will be reasonably clear, but lets avoid all doubt, it gonna be VERY expensive. So like all financial transactions you now have to consider is it worth it? If you are determined to go to uni for the experience come what may, good luck you are paying £50k for that experience. If you are going to increase your earning capacity get your calculator out and start crunching ther numbers. There are a number of factors which will determine your financial return.
1. Subject choice - Maths, engineering, medicine etc GOOD French, english art music NOT SO GOOD. 2.Grades - first or 2:1 good - anything else BAD. Lots and lots of top companies where you will earn top top money absolutely demand a first class degree as a minimum requirement to consider you for recruitment. Nothing else will do.
3. University choice - partly because plenty of employers still rate a good degree from a good uni. So russell group is the way to go. But that apart, lower ranked uni's have horrific drop out rates. So you end up with no degree and a heap of student debt. Good luck with that.

Finally you need to consider the 'graduate premium' that simply having a degree will cause you to get better jobs and earn more. This was always a significant factor when only 5% of people went to uni. With getting on for 50% of kids now going this is disappearing fast and will be gone fairly soon altogether imo.

You have to make all of these potentially life altering decisions as a 17 year old. Sometimes without any help at all. Its a dreadful system and is royally shafting the young people of this country. But we are where we are. I am currently at uni as a mature student and dont have to worry about loans. When i talk to the young people on my course i am astonished by how little thought they have put into this and despair of them ever making a return on this investment. IMO people will soon cotton on and we will see a significant drop in the numbers of kids going to uni, which may not be a bad thing.

Thats my take on it, other opinions are available.

Kmh120 · 29 May 2016 at 7:24AM

Wow what an awesome response. Thank you very much indeed.

I am concerned about my very talented and smart daughter having £50K's worth of debt. But she says....there's no other way Mum, it is what it is, we have to live with it.

She's not stupid with money, in fact she's savvy. But I hate the thought of her having that amount of debt.

There's a small chance that she might be able to be helped a little at some stage by a grandparent.

Any thoughts on when that help would be best accepted?

What I mean is....is she fine until the interest hike AT THE END OF THE COURSE?

Any further thoughts would be gratefully received. :T

Pixie5740 · 29 May 2016 at 7:46AM

What interest hike at the end of her course? Student loans start accumulating interest the moment you take them out.

I'm lucky in that I was under an earlier student loan scheme (graduated 2008). If I were facing £9k tuition fees and I was really wanted to university I'd seriously be looking at studying in Europe instead of England or Wales. Places like The Netherlands, Scandinavia, Germany where many course are offered in English as it would be cheaper and you'd pick up another language.

Kmh120 · 29 May 2016 at 7:55AM

Oh ok...my bad. I thought that the interest wasn't charged immediately.

Kmh120 · 29 May 2016 at 8:01AM

I've re-read Martin's stuff ( he really is very good isnt he?) and I can see why I thought no interest would be charged til the kids left Uni. They don't start paying off the debt til then, so i assumed charging interest when they werent even paying off the debt would be a bit mean. Silly me , eh? ;-)

Smedders11 · 29 May 2016 at 9:23AM

It's really for the best to not think of this as a 'debt'. Technically speaking there is indeed a sum of money given that you're required to pay back, but the devil is in the details.

If you don't earn enough you don't pay anything. If you never pay a penny for 30 years you'll not get a final invoice. If you are a median earner for 30 years you'll pay some back and then it's written off. No debt collectors, no minimum payments. It's effectively an additional tax bracket over £21,000.

I'm on the old system where fees were capped at around £3,000, and I 'owe' just over £10,000. I earn between £22,000 and £25,000, and my payments are about £50-£90. Your daughter would pay lesson the same income. If the grandparents insist on helping, that money would go much further and well spent going towards a deposit for a house.

It's off-putting seeing such a staggering amount of money loaned to your children, but don't let it influence their decision to go to university. If it's what they want it'll be costlier to not go. IN addition, don't be tempted to pay off the balance for them as you'll more than likely paying money that your child would never have had to pay anyway.

Student Loans

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