Student Debt on MoneyBox Live BBC4 RUBBISH!!

iclaudius_2 · 19 November 2011 at 9:15AM

I am a regular podcast subscriber to moneybox but felt like unsubscribing after this week's show on student finance.
At best, Paul Lewis sounded ill informed as a financial expert, at worst, BBC would appear to be colluding with the government's new policies.
I am American by birth but settled in the UK for 10 years now and have 2 toddlers. The new tuition hikes confirm that the country is on a one way track to the US model of high fees. Citizens can keep their heads in the sand or need to get serious today about their kids' future.
My beefs with the show:
1. Utter propoganda from Govt that young people should feel 'comfortable' with 9% salary debt repayments because these are stretched out over 30 years and not to worry about the size of the debt. A debt is a debt and nobody should plan for a future of 30 years indebtedness. These loans are not mortgages! People need to get wise and plan to repay them as fast as possible. You are going to struggle to achieve any life goals with that size of millstone dragging on you.
2. Paul and panel underscored this fallacy with some nonsense advice to a girl who was concerned she had signed up to a more expensive university. Not to worry about the size of the debt again?? University financial aid officers are little better than used car salesmen in my experience. Of course the total cost is a factor to consider.
3. The government spokesperson intimated that only few very strange people were already saving for babies universities. The government has pulled the boat away from the dock without getting the population on board. Parents with young ones like me today need to get serious about saving for Uni or else there will be a terrible inheritance. What is rate of fee inflation since they were introduced in 1997? Work that out for another 18 years time. If the government is in fact moving to the american model of uni fees than they need to be straight about it and educate parents and students. I feel lucky to have 18 years notice but feel bad for those kids who have to go next year and were only given 6 months notice that their lot will be 30 years of debt.
4. Finally, the advice to the student confused about budgeting was quite confusing. Young people (like their parents) often have very little financial nouse and are destined for the trap of consumer debt over these 3 key years. Nobody can focus on classwork if the issue of paying for food is weighing heavy. The system and parents have to do more to equip kids to undertand budgeting.

Time to up your game Money Box. You should really do a replay of this episode with some proper advisors on board.

This is from someone who got totally trapped in the student debt pit in the US (where huge student debt is normalised), graduating from 2 degrees with 80k in student loans!

Lokolo · 19 November 2011 at 10:56AM

1. Why do you think that? The 9% payback is infact pretty small. For me, on the 1998-2011 whereby my repayments are £135 on a takehome of around £1.8k. What sort of effect does it have on me? Pretty much nill.

2. The size of the debt is pretty irrelevant, as its not like a commercial debt whereby what you borrow is what you pay back. The amount you pay back is determined by how much you earn. So effectively, its more like a tax. For example, I could earn £20k for 30 years, not have paid back a single penny and my debt gets wiped.

3. The government before us introduced CTFs, which weren't great I will admit. We have now got Junior ISAs which are infact a lot better. But I agree, not much notice has been given, but then again, who would have thought the countries debt problem would get as bad as this 20 years ago?

4. Thats what this site, and the internet, can be used for. Although I didn't listen to what was said exactly so can't say much about it!

In the US - you owe £80k in student loans, do you have to pay all this back? Or is it like the UK system whereby it gets wiped after a certain period.

Oldernotwiser · 19 November 2011 at 11:18AM

I'm afraid that you seem to be confusing the US system with the UK system; they are very different from each other.

melancholly · 19 November 2011 at 1:36PM

overpaying a student loan is rarely a good plan - the interest rate is linked to inflation and repayments are linked to income rather than the amount of debt.

picking a uni course because it's cheap is also not a good plan. now picking between a selection of courses using cost as one factor might make more sense, but even then, most people won't pay off the full debt even with fees of £6K, so picking Uni of West London over Oxford as you'll save money would almost always be a really stupid idea as one degree will be worth a lot more than the other in terms of what you gain from doing it.

here are some articles that may help clarify what uk student debt is. i don't like the idea of these huge totals, but for most people, the total is irrelevant as the repayment terms are fixed. confusion over what this means is common, but there is info out there to separate a gut reaction of 'big debt' from the reality of what this means. i do worry that if people who are listening to programmes like moneybox can completely miss the point, there must be a staggeringly huge number of people who just simply don't get it. the message about what student loans mean (from people who objected to the rises who seem to be the most keen to talk facts not myths btw) isn't getting through. this is a failure from the government, universities and the media.

http://www.moneysavingexpert.com/students/student-loans-tuition-fees-changes
http://www.moneysavingexpert.com/students/student-loans-repay
http://www.bbc.co.uk/news/education-14785676

Voyager2002 · 19 November 2011 at 1:57PM

There are two ways to respond to the post by iclaudius (surely should be I_Claudius?):

Firstly, a political discussion:the suggestion that the UK is moving towards a US-style system of student loans. Under such a system, student debt would be "bad" debt, with commercial interest rates being charged, repayments starting once the course has finished (whether the student is earning or not) and debt being aggressively pursued no matter the financial position of the student. I would not put anything past the Tories, but to date I have not any evidence that such a move is being considered. However, we could have an interesting conversation about whether or not this is likely to happen, or indeed is part of what the government hopes to achieve.

Secondly, if we assume that the system that exists at present is not going to face radical change, then the BBC gave excellent advice and the OP is refusing to listen.

kayr_2 · 19 November 2011 at 3:19PM

melancholly wrote: »

overpaying a student loan is rarely a good plan - the interest rate is linked to inflation and repayments are linked to income rather than the amount of debt.

I would agree with that statement up until the 2012 system - the trouble is the interest rates are pretty high whilst studying given current high inflation (RPI + 3%) and we haven't been told yet about possible overpayment penalties. For current and past students like Lokolo it's not worrying but I don't feel it's quite so clear cut now. The new system may turn out to be OK but for me the jury is still out - the general economic situation is so unclear and full details haven't yet been divulged. And being told "it's all OK" when the sums involved are so high now does make people feel they are being patronised and possibly deceived, even if they aren't. The tone of various explanations I have heard is not helpful: the system is complicated so being given a simplistic version makes the hearer feel someone is trying to pull the wool over their eyes. I think that's one reason people aren't buying the pronouncements of people like ML. They are suspicious! They don't trust the government not to move the goalposts - after all remember the lib dems and tuition fees. I'm not worried about changes to T&Cs but I can understand the views of those who are - not totally unreasonable.

mountainofdebt · 19 November 2011 at 8:21PM

Of course this totally ignores that english,scottish and welsh students all face differing levels of fees with the poor english student getting the worst end of the deal - and I speak as a welsh person.

melancholly · 19 November 2011 at 11:55PM

kayr wrote: »

I would agree with that statement up until the 2012 system - the trouble is the interest rates are pretty high whilst studying given current high inflation (RPI + 3%) and we haven't been told yet about possible overpayment penalties. For current and past students like Lokolo it's not worrying but I don't feel it's quite so clear cut now. The new system may turn out to be OK but for me the jury is still out - the general economic situation is so unclear and full details haven't yet been divulged. And being told "it's all OK" when the sums involved are so high now does make people feel they are being patronised and possibly deceived, even if they aren't. The tone of various explanations I have heard is not helpful: the system is complicated so being given a simplistic version makes the hearer feel someone is trying to pull the wool over their eyes. I think that's one reason people aren't buying the pronouncements of people like ML. They are suspicious! They don't trust the government not to move the goalposts - after all remember the lib dems and tuition fees. I'm not worried about changes to T&Cs but I can understand the views of those who are - not totally unreasonable.

i do agree up to a point - i think the increased interest rate while studying is bad and does change things slightly. however, with the totals being so much higher than in previous years, i honestly doubt it makes much different to the vast majority of graduates - they won't be paying off the debt in full whichever you swing it! the extra 3% at the start won't be a major factor in that except for those earning big money immediately and constantly throughout their careers.

the early repayment fees are, imo, a bad idea, but they would also indicate that early repayment isn't a wise plan.

i don't think people should feel patronised, but when the information is being presented and being so badly misunderstood, what can you say? the OP wasn't even talking about changes in T&Cs or anything more complicated than understanding (or not!) the basic principles of how student loan repayments work. thinking that the total amount must be repaid and that the repayments will be a millstone is fundamentally missing the point. i'm happy to debate the finer points, where things are less clear cut, but the basic issues need to be clear first.

setmefree2 · 20 November 2011 at 2:53PM

iclaudius wrote: »

Time to up your game Money Box. You should really do a replay of this episode with some proper advisors on board.

The owner of this site is Martin Lewis. He is a journalist (he has no background in finance). His first job was at the BBC, during which time he worked for.... guess what? Money Box!...they are all singing from the same sheet I'm afraid, so you'll get short shrift on this site with your collusion/conspiracy theories about the establishment stitching up an entire generation of young people

Funny how Paul Lewis and Martin Lewis share the same surname ....

http://en.wikipedia.org/wiki/Martin_Lewis_%28financial_journalist%29

Martin Lewis is also heading up the "Independent" Student Finance TaskForce which has been warmly welcomed by the Universities minister David Willetts.....so it's "whoop whoop" for Student Loans 2012! They Rock!

For all the above reasons few us will feel free to give an honest reply to your orginal post as we are all way to scared of being banned.....

setmefree2 · 20 November 2011 at 3:00PM

iclaudius wrote: »

The government spokesperson intimated that only few very strange people were already saving for babies universities.

You'll get no joy on this site with this either. For some peculiar reason it is the general feeling on this board/site that you shouldn't lift a finger to help you're kids financially. This isn't a peculiarly British thing I hasten to add, it's just peculiar to this board/site and those people wanting/encouraging young people to take out student loans

.

The_One_Who · 20 November 2011 at 4:25PM

setmefree2 wrote: »

You'll get no joy on this site with this either. For some peculiar reason it is the general feeling on this board/site that you shouldn't lift a finger to help you're kids financially.

And yet you still don't seem to understand that for the vast majority of people the loan will be their only option. If you can afford to pay up front and feel that is the best for your family situation then great, but you have to realise that you are in a minority.

No one here says that you shouldn't help your children, but we do say that students should learn things by themselves. There is no need for parents to be talking to the SLC or trying to register their child for their graduation. As adults they should be able to do these things by themselves.

2sides2everystory wrote: »

We in the UK are soft in so many ways, and most of us haven't a clue where we are going, but they do and they are not knocking on the doors of our universities for further qualifications that's for sure, not at the soon to be American style rates ours charge.

Funny how a lot of international students come over here precisely because they are able to get a cheaper education (and a perceived better value one in terms of reputation of the institution) than they can in their home countries. However, the internationalisation of UK higher education really isn't the issue here.

Student Debt on MoneyBox Live BBC4 RUBBISH!!

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