'Students – lower earners deferring to 2012 could pay LESS' blog discussion

2sides2everystory wrote: »

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?

It's not a flat screen tele though.

Lokolo wrote: »

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

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?

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?

melancholly wrote: »

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!).

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.

Stryder wrote: »

"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

But theres no point looking at the amount of debt when you may only pay back half of it..... theres a big difference between commercial debt and student loan debt and looking at the one figure of the balance is pointless.