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  • FIRST POST
    • Former MSE Wendy
    • By Former MSE Wendy 9th Jun 11, 2:39 PM
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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 3
  • catinthehat
    I work in a Univ admissions office and we are really in the dark about how the scheme will work in practice. E.g.

    1. Can you repay early or are you locked in for 30 years?

    2. May a student pay their own fees for (say) one year and then take out a loan for the remainder?

    We have, however, noticed a sharp increase in people telling us that they are not coming, or that it "is not worth it" because of the fees
    Originally posted by property1925
    Would like to know the answers to these as well, as I really do think that early payment and contributions by family members may be a big deal
    • setmefree2
    • By setmefree2 15th Jun 11, 11:46 AM
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    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.

    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.
    Originally posted by Lokolo
    There is every point in looking at inflation if it adds an 8k to the initial loan in the first 3 years.

    Any financial advisor would/should look at the "worst case scenario" not the rosiest picture possible - Fees of 7.5K and an RPI of 3%. We can dream I suppose.

    • Lokolo
    • By Lokolo 15th Jun 11, 11:50 AM
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    Lokolo
    There is every point in looking at inflation if it adds an 8k to the initial loan in the first 3 years.

    Any financial advisor would/should look at the "worst case scenario" not the rosiest picture possible - Fees of 7.5K and an RPI of 3%. We can dream I suppose.
    Originally posted by setmefree2
    No they would look at the realistic scenario. 3% is realistic, although I think fees of just 7.5k isn't.... But I believe Martin did they say they will be bringing out a tool to be able to change values?

    If we all looked at the worst in life there would be a much higher suicide rate
  • tog22
    Tom direct me to a savings account paying RPI + 3% and I will be your best friend forever
    Originally posted by setmefree2
    OK, it may be a stretch - but as others having pointed out, 3% inflation isn't an unreasonable longterm expectation, and there used to be savings accounts out there paying 6% (not sure what inflation was like then though). To stand a better chance you'd probably have to invest in shares (I think?)

    • setmefree2
    • By setmefree2 15th Jun 11, 12:02 PM
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    setmefree2
    No they would look at the realistic scenario. 3% is realistic, although I think fees of just 7.5k isn't.... But I believe Martin did they say they will be bringing out a tool to be able to change values?

    If we all looked at the worst in life there would be a much higher suicide rate
    Originally posted by Lokolo
    Thank you.

    • MSE Martin
    • By MSE Martin 15th Jun 11, 12:02 PM
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    MSE Martin
    Dear Martin

    I think you need to revise your repayment model for FAQ 17.

    1. The government's 'intention' (I use this term advisedly) is to index link the thresholds to general wage inflation not graduate pay. Wage inflation is currently around 2-2.5%. I think it is best to assume it as a similar level to RPI. Otherwise, what becomes apparent from your scheme is that the government could not afford this scheme - too few people would repay the loans.

    2. The interest rates and thresholds will not be set in primary legislation but treated as administrative matters. Until we see the terms of the loan agreements which individuals sign, it is not clear what protection there is for individuals against future governments changing the terms or, indeed, selling off the loans to third parties. (Loans can be sold without consultation and without consent - see 2008 Sale of Student Loans Act).

    3. The 2011 Education contains a section allowing the government or third parties to set commercial rates of interest (or higher in certain cases) on student loans.

    Part of your campaign for financial education needs to involve reading contracts and understanding how and when terms and conditions might change.

    Yours

    Andrew
    Originally posted by Andrew McGettigan
    In point 1. I think you've misread the assumptions.

    We assume an individual graduates growth at RPI+2% of salary (this incorporates the fact that graduates tend to gain in seniority as they age - but factors in that some won't and some will take time off)

    Yet we assume the thresholds go up with average earnings which we have as RPI+1% which is historically roughly right (actually slightly higher)

    In point 2. While you are technically correct this is an extremely unlikely scenario.

    I think it is perfectly possible the scheme will be changed for new starters in the future. Yet we have never seen previous versions of student loans changed from their outset position (ie pre 1998 students still pay that version, post 1998 pre 2004 their version etc). So I disagree that this is likely going forward, the policy has always been that they stick with what was said at the point of study start.

    In point 3. Same answer as above - that legislation is to enable future schemes to change - it is not about changing conditions for those who have already contracted their course.
    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
    • setmefree2
    • By setmefree2 15th Jun 11, 12:06 PM
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    setmefree2
    I suppose in the end, like many, a scenario involving fees of 7.5k has no relevance to me and therefore I'm sure how useful this guide is to the majority?

    • MSE Martin
    • By MSE Martin 15th Jun 11, 12:06 PM
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    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?
    Originally posted by setmefree2
    I think this is getting rather spurious - the data isn't out yet on course fees. As noted the graph is not just tuition fees but living loans - we have taken what we assumea rough average of the two. Taking a mid point on allowable tuition fees and a higher point on living.

    The graph is full of assumptions - the idea is to give people the rough pattern of repayment not to give direct answers as that's impossible.

    We are building a calculator that will be ready far in advance of anyone committing to anything.

    So I do feel the chart is appropriate for its purpose and full of warnings including in large above the graph saying "if your fees are bigger than 7,500" look up the table.

    The point the graph is being used to illustrate is "Many won't repay in 30 years" with bigger fees "Even less will repay in 30 years" - its not a material difference, the point is made.

    However as there is strong feeling on this, and it really isn't an issue for us, we can happily put in another option at 9,000 and will have it added in there in a day or two.
    Last edited by MSE Martin; 15-06-2011 at 12:10 PM.
    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
    • setmefree2
    • By setmefree2 15th Jun 11, 12:13 PM
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    setmefree2
    However as there is strong feeling on this, and it really isn't an issue for us, we can happily put in another option at 9,000 and will have it added in there in a day or two.
    Originally posted by MSE Martin
    Great Thank You.

    Now I must go and do some work....

    • kayr
    • By kayr 15th Jun 11, 12:18 PM
    • 131 Posts
    • 255 Thanks
    kayr
    I think this is getting rather spurious - the data isn't out yet on course fees.
    Originally posted by MSE Martin
    No, but the Guardian estimated an average of about 8.6 K and my own experience is that none of the universities my son is considering have set their fees at less than 9k. So I think setmefree2 is quite sensible to suggest that a table based on 9k fees would be more helpful.
    • nickyhellard
    • By nickyhellard 15th Jun 11, 12:18 PM
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    nickyhellard
    what happens to your student debt/loan on marriage
    Lots of questions around marriage/partnership. E.G. If a graduate gets married, works for awhile, pays off some of the loan (perhaps) ,but then gives up work to have a family, what happens to the rest of the loan. Is the working partners salary taken into account when considering if the income is sufficient to qualify for repayment. (years ago both partners income was considered when applying for a mortgage). Are they then liable to pay off that loan as well as perhaps their own loan in the case of two graduates marrying.
  • sclufc
    30 year debt clearance
    I think this is a really useful guide and would have loved this before I went to uni.

    One quick question, does the 30 year point about the debt being cleared, apply just under the new changes or all graduate post 1998 when the student loan rules changed?

    Cheers
  • Andrew McGettigan
    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
    Dear DanThanks for your reply. Could you explain why you've modelled the thresholds at RPI+1%? Currently wage inflation is 2-2.5% and RPI near 5%. ONS change in average earnings isn't any good? If not, then why not have 'wage inflation = RPI' that seems less contentious to me over 30 years.I built my own model a few months ago and realised that tweaking the variables had such an impact on the model that I was reluctant to put anything into the public domain. I think the scheme is inherently volatile - this may be a general problem with 'income-dependent repayment loans' rather than the kind with which people are more familiar.I notice Willetts himself called it a graduate tax on Monday - 9% over 21K but with this complicated mechanism to curtail the length of its imposition. I would also stress that the government is changing the primary legislation to lift the restrictions on the interest that can be charged on student loans - the new limits will be 'commercial' rates or better in certain circumstances. This gives future administrations the flexibility to shift the thresholds and interest rates if the scheme looks like being too costly for the government. This legislation also allows the loans to be sold to 3rd parties who would also be able to charge commercial rates. This is why the terms of the agreements that people will be asked to sign are so important.I think sites like this one should be campaigning for a simpler system.Andrew
  • melancholly
    No, but the Guardian estimated an average of about 8.6 K and my own experience is that none of the universities my son is considering have set their fees at less than 9k. So I think setmefree2 is quite sensible to suggest that a table based on 9k fees would be more helpful.
    Originally posted by kayr
    but that's half the equation; it's living costs plus fees. as has been already said, one is probably an overestimation and one is a probably an underestimation. making both more accurate won't change the total very much. for a ball park prediction of the fees and the state of the economy over 30 years, it's probably pretty fair!

    one of the biggest issues with the new student loans system is when there is an overemphasis on one particular part, rather than considering the whole package (which don't get me wrong, i'm not in favour of), but concentrating on only some details while ignoring the others isn't going to make anything more accurate.
  • Andrew McGettigan
    In point 1. I think you've misread the assumptions.

    We assume an individual graduates growth at RPI+2% of salary (this incorporates the fact that graduates tend to gain in seniority as they age - but factors in that some won't and some will take time off)

    Yet we assume the thresholds go up with average earnings which we have as RPI+1% which is historically roughly right (actually slightly higher)

    In point 2. While you are technically correct this is an extremely unlikely scenario.

    I think it is perfectly possible the scheme will be changed for new starters in the future. Yet we have never seen previous versions of student loans changed from their outset position (ie pre 1998 students still pay that version, post 1998 pre 2004 their version etc). So I disagree that this is likely going forward, the policy has always been that they stick with what was said at the point of study start.

    In point 3. Same answer as above - that legislation is to enable future schemes to change - it is not about changing conditions for those who have already contracted their course.
    Originally posted by MSE Martin
    Dear Martin

    Your man, Dan, changed the assumptions after my post - see up the thread.

    And, we have never seen a student loan scheme this big before so I would set precedents in that context. Plus, the government has had difficulty selling off the post-98 student loans precisely because of the 'income-dependency' of them.

    As I said, the government 'intends' to do this with regard to thresholds and rates, but it uses this word but it recognises that the scheme is so large and potentially volatile that things may have to change. Given this is a political decision, the public, and you, perhaps ought to be campaigning for a simpler solution.

    A.
  • sharpz111
    Unfortunately I don't think the guide has anything on those opting for second undergraduate degrees, who will still be expected to pay up front (and other students studying Equivalent or Lower Qualifications - ELQs). In this respect it is like most material provided by the Government.

    For most second degree students they receive no help from the Government and will now be expected to find 9,000 a year in cash, up front.

    The situation is more complex for those who do get partial funding for second degrees, for example in medicine or veterinary science.

    These people would benefit from guidance because most staff at Student Finance England are utterly clueless about the special arrangements for these courses - any enquiry usually has to be elevated to a supervisor for someone to recognise what a GEM (Graduate Entry Medicine) course even is.

    In these cases maintenance loans will still be available on the same conditions (as well as grants for dependents etc.) and they will be income assessed, but no maintenance grants, and no tuition fee loans.

    On a standard medical course that will amount to 36,000 cash for tuition in the first four years, and for those on 4-year courses they will be expected to find 9,000 for the first year (before the NHS payment of tuition fees kicks in in years 2-4).

    There have also been rumours that the NHS bursary provision for special 4-year accelerated Graduate Entry Medicine courses in years 2-4 and standard courses in years 5 onwards are under review.

    There are 15 universities that teach medicine in England, all have announced plans for 9,000 fees, yet back in 2004 over 20% of medical students were graduates.

    According to the Executive Director of the Medical Schools Council (the council of the heads of all the medical schools in the UK), they are working to try and secure loan provision from commercial providers on a similar basis to the loans offered by the Government. How likely that is, I don't know.

    Judging by the terminal decline of Personal Career Development Loans (PCDLs) - now only provided by two banks - which only allow for a maximum loan of 10k, and are only lent on a maximum of 3 years (if for a longer course, the last 3 years), I'm not sanguine about this prospect.

    Some graduates on the current system were working 2 or 3 jobs on top of a medical degree in order to pay 3k fees up-front. The availability of charity grants and scholarships is woeful to non-existant.

    There is in fact a campaign (and petition) among prospective graduate medical students at w w w . s a v e g e m . c o . u k

    It would be helpful if these caveats were made in the guide though. A good chunk of people were paying up front, and are still expected to. This is causing massive problems, and the Department for Business, Innovation and Skills, and the Department of Health have not given any indication that they will be providing a credible solution in the White Paper due this Summer.

    (This is despite the fact that doctors enjoy 99-100% guaranteed employment, and are therefore some of the least risky investments.)
    Last edited by sharpz111; 15-06-2011 at 1:10 PM.
    • MSE Martin
    • By MSE Martin 15th Jun 11, 1:24 PM
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    MSE Martin
    Hi folks just to say that we welcome any feedback on "what's missing" - though only about practical financial things not the politics behind it (ie we will leave the impact on universities own funding for others).

    It's only by publishing that we find out if there's anything we've missed - though I hope its pretty comprehensive as a start point compared to anything else that's been published.

    So keep the questions coming - and we will research and add them in when we find out (e.g 2nd time round undergrads as above)
    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
    • The_Baroness
    • By The_Baroness 15th Jun 11, 2:08 PM
    • 31 Posts
    • 34 Thanks
    The_Baroness
    Student Loan 2012 discussion
    Can someone pls explain why, if it is the student who is taking out the loan, parental income is taken into account when setting the amount of living cost loan they are eligible for?
    • Lokolo
    • By Lokolo 15th Jun 11, 2:25 PM
    • 20,219 Posts
    • 15,399 Thanks
    Lokolo
    Can someone pls explain why, if it is the student who is taking out the loan, parental income is taken into account when setting the amount of living cost loan they are eligible for?
    Originally posted by The_Baroness
    Because those with higher incomes are more likely to be able to contribute towards the childs educations.
  • lsur02
    Based on my own experience of the Student Loan Scheme, I would advise prospective students to be very careful indeed before signing up. The Scheme has been mis-sold since the outset. It is not clear, for example, how long the loan is meant to cover each year - is it a full calendar year or just 30 weeks of the academic year? How will you pay the rent for the rest of the year, especially with unemployment being so high for everyone, young people included. You will have no rights to any form of social security.

    Also, you don't necessarily know how much your rent and other expenses will be - the University I attended charged very high rents for so-called student accomodation to cover the costs of their recent building programme. Students unable to get their first choice had to hand over their entire loan cheque at the beginning of term and were left dependent on family to live.

    The deferrment of repayments is not hassle-free. You will be required to tell Europe's biggest debt collector a.k.a the Student Loans Company, where you are at all times and all details of your income and expenditure. If you move or travel when the repayments are due, they will first of all pester your next-of-kin for your wherabouts and then obtain a County Court Judgement against you and be able to send bailiffs round. This process will, in many cases, follow you for the next 30 years!

    Martin's Guide does not give these facts and seems, no doubt from good intentions, to play into the hands of the politicos behind the scheme. You should give the full reality, which is that study in Britain is designed now for those with money behind them and no one else need apply.

    If you are academically able, consider courses abroad (there are some in Holland, for example, set up for English speakers) or work for a while and have your own money behind you before studying. You don't need to get a degree straight from school. Indeed, part of the mis-selling has been to imply that all degrees are equally valuable - they cannot be if the market is flooded with graduates, that is basic supply and demand economics.

    Finally, has no one considered challenging the SLS legally on the grounds of mis-selling? It is a nasty scam and only suitable for a minority of students. Take care before you get caught with lifelong debt!
    Last edited by lsur02; 15-06-2011 at 2:38 PM.
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