'The argument over student loans could kill the next generation's...' blog discussion

I know a few of the key students from UCL involved in the protests, including the one outside Top Shop on Oxford St this week. I think, overall, the protests are about more than just tuition fees but I think this blog has been incredibly helpful for explaining issues to Joe Bloggs.

The 'bad' debt that the government is so keen to get future generations into is terrifying, especially, I'd imagine for many DFWs like me who know only too well the implications of bad debt.

On Facebook the other day, unrelated to the student fees debate, a friend posted that she's just worked out that it'll take her 200 years to pay off her student debt. Another friend commented that it she finished uni 10years ago and is still paying off hers.

The point for me is not necessarily the fees- I understand *some* need to be levied and I never had a problem with taking my loan. IT's the fact that those on the lowest wage that can start repaying will be doing so forever. Those, like some of my friends, who go to work in the city or as solicitors, will be able to pay it back fairly quick, incurring minimal interest.

Those, like my boyfriend, who has yet to reach a threshold to start paying his back are simply incurring more and more interest as each pay day passes.

It's terrifying how much social workers, for example, who need a degree but are poorly paid, will end up owing yet they are a vital part of our society.

I work with vulnerable children and regardless of reassurances of the help they will receive, when you don't necessarily have a home to return to during the holidays (fostering provisions stop at 18), the additional barrier of unending bad debt would simply be the final nail in the coffin. I know young people who have taken GCSEs early and achieved As and A* and other that have 10 A*. Just because they are vulnerable children does not mean they do not deserve a chance to have a degree. Yet these fees, combined with the current hurdles they face, would- in my opinion- reduce the already low figure of looked after children who attend uni (9%) to the figure it has been for decades before the Labour government (1%).

Oops- bit off track there.

In summary- great blog!

Hi,

Absolutely great blog, totally agree with your points.

What's scary is definitely the interest rates as you say. I don't really have any smart ideas for how to tackle this other than keep the message narrow - all I hear on the news at the moment is about the level of fees being charged, and this is really a separate issue, and means the interest implications are lost.

At a time like this when so many people have bad debts and the economy is the way it is, the last thing we should be doing is lumping people with potentially toxic debts when they're just trying to improve themselves.

Unfortunately this is something of a political battlefield - it doesn't seem possible to separate out the arguments about whether there should be tuition fees or how many people are entitled to go to university with the more important thread of what are the debt / interest implications on people taking out loans under the new / proposed system. Maybe this is where you come in Martin......but surely if you fight against them removing the cap on interest, wouldn't the first query be what's your alternative?

What would the cost be of introducing fees but keeping the cap on rates when it comes to loan repayments? Does anyone know?

IW x

Thank you Martin, for posting an assessment of the situation, free of the histrionics that come from both sides of the debate.

Many of my American friends have (or had) student loans to fund their higher education, and although no-one actually wants debt, they took it, as an investment in higher incomes later.

I think, too, that forcing students to think long and hard about what they are signing up for may reduce the number of seemingly pointless degrees that do not lead to work.

As for how to move the debate forward, I think the previous suggestion is a great place to start. Publish your blog in the weekly email please. Let us get this discussion going, properly, without all the screaming, shouting, name calling, graffiti and fire extinguishers.

I think Martin needs to communicate a clearer and simpler message on the proposed student loans if he wants the masses to understand it.

The proposed system can be broadly summarised in the following sentence: you pay a real rate of interest on your student debt and make repayments of 9% of the portion of your income over £21k, until the debt is cleared or 30 years have passed, with no facility for overpayment.

What this will mean is...

- Students who end up on low incomes won't pay much back, if anything, because of the £21k repayment threshold and because their debts will be written off after 30 years (despite possibly running into six figures by then).

- Students who quickly become higher rate taxpayers and top earners will pay a bit more than the true cost of their borrowing due to a real rate of interest being levied for a couple of years without a facility for overpayment, but their debts will be paid off relatively quickly (within 10 years).

- Yet for everyone else, the majority, those with starting salaries of £20-£30k and 5% annual pay rises, the policy is a 30 year graduate tax (at a very punitive rate) on all earnings above £21k and they are likely, due to the real rate of interest and no facility for overpayment, to repay the true cost of their borrowing many times over.

All in all, the proposed policy will mean that it is the so-called 'squeezed middle' that will end up subsidising the debt write-offs elsewhere. The more prosperous graduates will, on the other hand, get away relatively lightly.