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  • FIRST POST
    • Former MSE Wendy
    • By Former MSE Wendy 9th Jun 11, 2:39 PM
    • 868Posts
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    Former MSE Wendy
    Student Loan 2015 Discussion
    • #1
    • 9th Jun 11, 2:39 PM
    Student Loan 2015 Discussion 9th Jun 11 at 2:39 PM
    This is the discussion area for the




    Please let us know what you think below.
    Last edited by Former MSE Wendy; 21-10-2015 at 10:52 AM.
Page 2
  • Oldernotwiser

    Our eldest is in the middle of his A2s so he just gets in before the old regime closes its doors.

    We are in the fortunate position of having an endowment plan which matures on 1st Sept so have made the decision not to apply for a student loan for him.
    Originally posted by realaledrinker
    Just to point out that it isn't you who applies for the student loan and it isn't your decision to make if your son does.
    • setmefree2
    • By setmefree2 15th Jun 11, 5:48 AM
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    setmefree2
    FAQ 17 - Let's see this based on the full 9,000 that the majority of universities are going to charge.
    Originally posted by nmtd
    I can't understand why there is an assumption of 7500k pa when it's now obvious that tuition fees for the majority are going to be 9k pa.

    The MSE figures are understated by a further 4500k? Plus all that interest!
    Last edited by setmefree2; 15-06-2011 at 6:08 AM.

    • setmefree2
    • By setmefree2 15th Jun 11, 6:04 AM
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    setmefree2
    Thanks Andrew,

    We've worked on this a bit more now, and have changed the assumptions to be nearer what you discuss (was always the plan to get one version up then refine in time for the weekly email)

    We now do grad earnings rising at RPI+2% yearly, and the payment thresholds going up at RPI+1%.These both closely match the best ONS stats we could find - though earnings statistics have always been bizarrely hard to pin down

    What's struck me during the process is how marked the changes caused by a tweaked assumption have been. It will be really interesting to eventually find out the levels set by government, and how they affect repayment amounts and timescales.

    Dan
    Originally posted by MSE Dan
    So maybe you need to consider what is going to happen if inflation is high?

    Your inflation forecasts in the near term seem way too optimistic.
    Last edited by setmefree2; 15-06-2011 at 6:08 AM.

  • Renters
    Thanks for this guide. Apart from all those on the thread, apparently more fiscally knowingly than me, raising certain points and muddying the waters, it has really helped me put it all into perspective. My son starts at Bath Spa in September and I didn't know that he would be on the old system throughout. Of course, none of us want to saddle our children with debt but what's to do? If you are not able to stump up the money yourself, which we are not (nor for his sister in the near future), then isn't it moot? The fees have to be paid....

    Did anyone applying have this happen to them. Being fairly intelligent and capably with regard to on-line stuff, I applied for my son's loan on his behalf as this seemed to be a facility that was open to me on the .gov website. I ended up getting the loan. Paperwork came through with my name on it. Really, not sure what I did or how it came about and I certainly did not show myself as going to uni (his NI number, his UCAS number etc...) but to remedy the situation another application had to be entered (after 31st May.....) from him which, I was told, he has to do. Why is there the option to apply on someone's behalf if you can't? Shame I had to give it back though....
  • tog22
    Myths on both sides?
    Excellent article Martin. In your email you say "I'm no fan of the English student finance changes, but the political spittle from both sides is just as damaging; promoting myths & confusion while little's written of the practical impact on students' pockets." But this guide illustrates myth-making by the reforms' opponents - their advocates, not so much. The changes make the system more progressive, and as you say are equivalent to the graduate tax the NUS claims to want.
    • setmefree2
    • By setmefree2 15th Jun 11, 7:14 AM
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    setmefree2
    The changes make the system more progressive, and as you say are equivalent to the graduate tax the NUS claims to want.
    Originally posted by tog22
    Can you explain to me how you think the new system is equivalent to a progressive tax please?

    Can I direct you to the following:-

    A progressive tax is a tax by which the tax rate increases as the taxable base amount increases. "Progressive" describes a distribution effect on income or expenditure, referring to the way the rate progresses from low to high, where the average tax rate is less than the marginal tax rate. It can be applied to individual taxes or to a tax system as a whole; a year, multi-year, or lifetime. Progressive taxes attempt to reduce the tax incidence of people with a lower ability-to-pay, as they shift the incidence increasingly to those with a higher ability-to-pay.
    http://en.wikipedia.org/wiki/Progressive_tax

    and then direct you back to FAQ 17 in the guide.
    Last edited by setmefree2; 15-06-2011 at 7:17 AM.

    • setmefree2
    • By setmefree2 15th Jun 11, 7:20 AM
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    setmefree2
    Myths on both sides? A Response.
    But this guide illustrates myth-making by the reforms' opponents - their advocates, not so much.
    Originally posted by tog22
    This guide is based on the biggest myth of all - that student tuition fees will be 7,500 pa.

    and the further myth that the RPI will be 3% in the near term

    So some might argue that it just reinforces the coalition myths? and has little to do with reality?
    Last edited by setmefree2; 15-06-2011 at 7:33 AM.

    • MSE Martin
    • By MSE Martin 15th Jun 11, 8:13 AM
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    MSE Martin
    A great guide. I have one concern. The assumption that RPI is 3%. The problem is that RPI is currently 5+%. Barclays Capital is predicting RPI at 6.4% by October.

    Maybe over 30 years 3% RPI is a valid assumtion but right now it doesn't reflect reality. At RPI 5% plus 3% these loans will have racked up interest of c8,000 before students graduate. That's another 8k that will be attracting interest for 30 years.

    Surely this should be taken into consideration when weighing up the cost of one of these loans?

    Maybe this wouldn't be an issue if wage rises were keeping up with inflation but they aren't.
    Originally posted by setmefree2

    Hi - we've gone with a long term average of RPI - which was deliberate as this is a long term repayment - so we didnt want to get pulled by today's current highs (also govt target is roughly 2.5% (roughly as its on CPI and we're talking RPI).

    Also in truth the actual level of RPI is relatively commutative throughout the assessment which is why we converted it into real prices too - which negates much of the effect of our RPI assumptions.

    Sadly this table is impossible without assumptions - we thought hard and discussed long what they'd be. In the long run we hope to build a calculator where people can change these assumptions but for launch we had to pluck something and I hope I sufficiently caveated the whole thing to make people realise its far more about scales of magnitude than the actual numbers.
    Last edited by MSE Martin; 15-06-2011 at 8:30 AM.
    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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    • MSE Martin
    • By MSE Martin 15th Jun 11, 8:16 AM
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    MSE Martin
    This guide is based on the biggest myth of all - that student tuition fees will be 7,500 pa.

    and the further myth that the RPI will be 3% in the near term

    So some might argue that it just reinforces the coalition myths? and has little to do with reality?
    Originally posted by setmefree2
    No its based on a mid-point a 7,500 fee. Plus we've based it on the living away from home loan. While some will pay bigger fees, many will get much smaller loans (due to living at home and grants). So again we chose a balance figure (and while many universities are listing 9,000 fees lots aren't especially higher education institutes that get no publicity)

    I refer you to my note above. This was done to give scales of magnitude and very strongly tells people what to do in different circumstances. This spreadsheet was not an easy one to build - it took a lot of work - so we had to take assumptions.

    Again we hope to produce a calculator long run.
    Last edited by MSE Martin; 15-06-2011 at 8:31 AM.
    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.

    Don't miss out on urgent MoneySaving, get my weekly e-mail at www.moneysavingexpert.com/tips.

    Debt-Free Wannabee Official Nerd Club: (Honorary) Members number 000
  • tog22
    Can you explain to me how you think the new system is equivalent to a progressive tax please?

    Can I direct you to the following:-

    http://en.wikipedia.org/wiki/Progressive_tax

    and then direct you back to FAQ 17 in the guide.
    Originally posted by setmefree2
    Well the table in FAQ 17 makes the point, although admittedly it breaks down at very high income levels. The fact remains that all payments come from above-average income earners (21,000 having been chosen as an average), whereas on the old system poorer people who never went for university paid for those who did (who generally, especially in those days, went on to become distinctly well paid).

  • catinthehat
    What about parents who DO help out - at what level/time can they make the most impact?

    I'm just looking at the 35-40K earners in the table and feeling quite faint at the ENORMOUS totals wasted on interest rollups
    Surely it would make sense to get a bit of parental cash in there to reduce it - OK, it potentially reduces the ultimate inheritance to the child - but 107k repayment for a 39K loan is staggering
    • wdyw
    • By wdyw 15th Jun 11, 9:56 AM
    • 959 Posts
    • 585 Thanks
    wdyw
    Your article mentions how Foundation Years and Access courses will be affected, but not how the new regs will affect those on Foundation Degrees wishing to top up to Honours after completing.

    The answer is - the government haven't decided yet!....so in the section on NHS bursaries, you may want to also add the foundation degree uncertainty.
  • tog22
    What about parents who DO help out - at what level/time can they make the most impact?

    I'm just looking at the 35-40K earners in the table and feeling quite faint at the ENORMOUS totals wasted on interest rollups
    Surely it would make sense to get a bit of parental cash in there to reduce it - OK, it potentially reduces the ultimate inheritance to the child - but 107k repayment for a 39K loan is staggering
    Originally posted by catinthehat
    That's what you'd expect from inflation though - your money might grow more in a good savings/investment account, so (though I'm no expert) you should check that won't ultimately benefit your sprog more...

    HTH,
    Tom

  • catinthehat
    hmm not sure about that Tom WIthout breaking out the contents of the spreadsheet underlying Martin's graph, I'm assuming that it would be quite a feat to beat those levels of interest (OK - and inflation) rollups. AN early transfer from parents would cut it off at the pass and could reduce IHT exposure ultimately.

    Crumbs, I would rather lend a chunk to the child, take the same interest payment off them, and what I didn't spend they would get on my demise! Just hate the thought of interest like that going into a black hole if I had the cashflow available to prevent it. Parents often help out with mortgages similarly - investing in the next generation.

    I would still like to see an additional analysis of when and to what extent a family contribution could avert the worst of these added costs in a later version of the (excellent, timely and thought provoking) report.
    • setmefree2
    • By setmefree2 15th Jun 11, 11:21 AM
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    setmefree2
    No its based on a mid-point a 7,500 fee.
    Originally posted by MSE Martin
    Martin can you show me evidence (other than the government's assertions) that the mid point fee is 7,500? As far as I'm aware the majority of Unis are charging 9k.

    Even if your assertion is true most financial advisors would look at the "worst case scenario" when taking a loan out. 7.5k is way too optimistic!

    Maybe you could show 2 tables, one with fees at 9k and one with fees at 7.5k?
    Last edited by setmefree2; 15-06-2011 at 11:40 AM.

    • setmefree2
    • By setmefree2 15th Jun 11, 11:30 AM
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    setmefree2
    but 107k repayment for a 39K loan is staggering
    Originally posted by catinthehat
    and that may well be the "best case" scenario....

    • setmefree2
    • By setmefree2 15th Jun 11, 11:31 AM
    • 8,862 Posts
    • 19,041 Thanks
    setmefree2
    That's what you'd expect from inflation though - your money might grow more in a good savings/investment account, so (though I'm no expert) you should check that won't ultimately benefit your sprog more...

    HTH,
    Tom
    Originally posted by tog22
    Tom direct me to a savings account paying RPI + 3% and I will be your best friend forever

    • setmefree2
    • By setmefree2 15th Jun 11, 11:33 AM
    • 8,862 Posts
    • 19,041 Thanks
    setmefree2
    Hi - we've gone with a long term average of RPI - which was deliberate as this is a long term repayment - so we didnt want to get pulled by today's current highs (also govt target is roughly 2.5% (roughly as its on CPI and we're talking RPI).

    Also in truth the actual level of RPI is relatively commutative throughout the assessment which is why we converted it into real prices too - which negates much of the effect of our RPI assumptions.

    Sadly this table is impossible without assumptions - we thought hard and discussed long what they'd be. In the long run we hope to build a calculator where people can change these assumptions but for launch we had to pluck something and I hope I sufficiently caveated the whole thing to make people realise its far more about scales of magnitude than the actual numbers.
    Originally posted by MSE Martin
    Ok over 30 years that seems a reasonable assumption. Maybe.

    But what'll you do if RPI is 5%+ or 6%+ in March next year when the loan rate is set for September 2012? Would this change your view of these loans?

    • setmefree2
    • By setmefree2 15th Jun 11, 11:38 AM
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    • 19,041 Thanks
    setmefree2
    hmm not sure about that Tom WIthout breaking out the contents of the spreadsheet underlying Martin's graph, I'm assuming that it would be quite a feat to beat those levels of interest (OK - and inflation) rollups. AN early transfer from parents would cut it off at the pass and could reduce IHT exposure ultimately.

    Crumbs, I would rather lend a chunk to the child, take the same interest payment off them, and what I didn't spend they would get on my demise! Just hate the thought of interest like that going into a black hole if I had the cashflow available to prevent it. Parents often help out with mortgages similarly - investing in the next generation.

    I would still like to see an additional analysis of when and to what extent a family contribution could avert the worst of these added costs in a later version of the (excellent, timely and thought provoking) report.
    Originally posted by catinthehat
    If RPI is 6% next March (when I believe the rate is set for the following September) then these loans will be attracting interest of 6% plus 3% = 9% in the first year.

    I know it's an IF but surely we can't ignore the possibility?

    • Lokolo
    • By Lokolo 15th Jun 11, 11:41 AM
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    Lokolo
    Ok over 30 years that seems a reasonable assumption. Maybe.

    But what'll you do if RPI is 5%+ or 6%+ in March next year when the loan rate is set for September 2012? Would this change your view of these loans?
    Originally posted by setmefree2
    Tom direct me to a savings account paying RPI + 3% and I will be your best friend forever
    Originally posted by setmefree2
    As pointed out by Martin and myself in the other thread 100000 times, there's no point looking at today's inflation. The loans are going to be paid back over 30 odd years, so you should be looking at the longterm inflation. I doubt Sir Alan Sugar was making a lot in the shorterm from his telephone box! Think longterm, not shorterm.

    Yes it's high today, yes you won't make any money at the moment, but it's not going to be like this for the next 30 years. And even when there is long term high inflation, it will raise interest rates sky high like it did in the 80s.
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