[Closed] Graduate tax threshold changes

There is a whole raft of problems with education and employment. Using a financial stick to beat young people is the worst solution.

Already young people now feel forced into further education (and therefore debt) not because it is suitable for them or because they need it to do the jobs on offer, but because they have to compete for jobs that the education they are paying for makes them overqualified to do.

It is a recipe for lifelong disappointment, unhappiness and misery being foisted upon generations.

I don't mind paying it back, it's the interest that they're charging on the debt that gets up my nose. The first few years I was paying back I think I paid about £5 off the actual debt after the interest. Either it's a loan, or it's tax. Feels a bit off having an insurmountable tax-loan, forever.

The notion that arts and social science degrees are 'soft' is deep-fried bullshit if you ask me.

There is a whole raft of problems with education and employment. Using a financial stick to beat young people is the worst solution.

Education is great and should be available to all, but the way we fund it is a nightmare

The notion that arts and social science degrees are ‘soft’ is deep-fried bullshit if you ask me.

Complicated subject.

Given that taking, say 50% of the population, out of the workforce for 3 years and paying for their education costs a lot, there has to be a balance struck. The money that pays for it could also pay for homelessness, social care, NHS etc.

Funding degrees which lead to high paying future careers makes fiscal sense, HMRC gets the money back plus extra and we're all better off for it, more tax revenue for HMRC which raises everyone's standard of living.

Funding degrees with no fiscal payback is less obvious. You can argue it's great to have lots of baristas in costa with degrees in poetry, contempory media studies etc, but that money could also have paid for knee/hip ops or housing for the homeless etc.

Student loans are one of my bugbears and this a disgrace.

I've got a type 1 loan, which I'm still paying off at the age of 42 (partly due to some financially imprudent life choices!) - but this one really stinks.

The average student debt on graduation is thought to be around £45K. Interest depends on salary, but is up to RPI+3%. Which is about £2,250 a year. Which means you'd need to be earning something in the region of £51,000 pa (or £47,000 pa after this change) just to cover the interest.

The vast majority of graduates will never pay back the full capital. This is just a tax hike on lower earners.

And let's not forget the poor unfortunates who go on to study at Postgraduate level, and have to pay 15% (9% for the UG loan and 6% for the PG loan) of their earnings over £23K.

So someone who is just into the top tax bracket will be paying a marginal rate of 55% in tax and loans, with no expectation of ever paying off the loan.

And the Tories abolished the 50% tax rate for those on £150,000, because it was 'unfair'. Unless you're young, in which case you can get to ****.

The money that pays for it could also pay for homelessness, social care, NHS etc.

It could , but the government wouldn't. Especially the scum in power at the moment. Just feels like another dog whistle to placate the ****tards who they want to vote for them.

Student loan repayments are not - and can never be redesigned as - a true tax, because HMG doesn't have powers to levy taxes on people who live abroad. So making it a graduate tax would be a massive brain drain incentive.

The government believes too many students are racking up debts studying “soft” three-year university courses in arts and social sciences, and is looking to funnel more 18-year-olds towards technical training that is cheaper and will pay a faster economic dividend.

What user bullshit.
Are the Government saying that such degrees have no merit?
You can't 'funnel' students to technical training if they aren't technically-minded or competent.
Students study different subjects for many different reasons and that is how it should be.

How about the Government leave students and graduates alone and have a go at getting cash back from the shysters that pretended they could produce PPE and the big companies that don't pay tax?

I read a good article saying that the most progressive way to improve it is to put both tuition fees and the repayment threshold UP.

Currently, very high earners (100K+) pay their loans off quickly and don't incur too much interest. Medium-high earners (50-70K) will pay back a lot of interest for 30 years but never quite pay back the capital, so will pay a lot more than someone on 150K.

So if you don't pay off the full loan, and that's basically everyone on less than £70K, it doesn't actually make any difference to you whether tuition fees are £9,000 or £9,000,000. You won't pay any more back.

If you put loans up AND the repayment threshold up, high earners would pay more, low earners would pay less, people in the middle wouldn't be affected.

It won't happen though, as today's headlines show. We'd rather soak the nurses and social workers for a bit more, while ranting about avocados and baristas.

The money that pays for it could also pay for homelessness, social care, NHS etc.

It could , but the government wouldn’t. Especially the scum in power at the moment. Just feels like another dog whistle to placate the **** who they want to vote for them.

Well they have just raised NI to pay for the NHS...

I do have some sympathy for the Chancellor, huge Covid debt to pay off, calls for 10s of billions for the NHS, running a fiscal defecit before Covid, and no new taxes (ok, the NI rise). Anyone in his place would be looking for ways to raise revenue and curb expenditure.

the government believes too many students are racking up debts studying “soft” three-year university courses in arts and social sciences,

Seem odd to me given most of the government will have studies some sort of social science degree...

and is looking to funnel more 18-year-olds towards technical training that is cheaper and will pay a faster economic dividend.

mmm... not sure that makes much sense - do they really think most 18yr olds are weighing up studying history v's some sort of engineering apprenticeship? or criminology v's chemistry? psychology v's physics?

if they hadn't introduced fees they could have managed the supply side of the equation - by limiting the number of funded places on courses they value less. They could presumably still do the same with some former of bursary for in-demand subjects?

£27.3K does seem a bit high to be honest, and I believe it is surprisingly hard (impossible?) to pay off early / overpay compared to when my generation had them, which seems unethical.

I think there should probably be some form of incentive for employers to be able to pay off loans for people. e.g. tax/NI benefits for employers who repay the loan for the employee at an enhanced rate.

Government believes too many students are racking up debts studying “soft” three-year university courses in arts and social sciences

Yeah, we know that reading Classics leads to incompetent ****wits running the country.

So someone who is just into the top tax bracket will be paying a marginal rate of 55% in tax and loans, 

Aww bless. I feel so sorry for all these people in the higher tax brackets

Student loan repayments are not – and can never be redesigned as – a true tax, because HMG doesn’t have powers to levy taxes on people who live abroad. So making it a graduate tax would be a massive brain drain incentive.

If I do a degree in the UK and fund it with a student loan but emigrate to US/Can/Aus afterwards is it repayable? I know the main mechanism for repayment is via PAYE.

If I do a degree in the UK and fund it with a student loan but emigrate to US/Can/Aus afterwards is it repayable? I know the main mechanism for repayment is via PAYE.

In theory yes. How vigorously they pursue those who bugger off and then default is another matter. Same as if uou are self employed, repayable but not through PAYE

Have to say I agree with this bit….

The government believes too many students are racking up debts studying “soft” three-year university courses in arts and social sciences, and is looking to funnel more 18-year-olds towards technical training that is cheaper and will pay a faster economic dividend.

Unfortunately, the government has no way of defining which are the 'bad' university courses. They keep trying, but once you put the Daily Mail / Telegraph predjudices aside, you can't actually come up with any hard data. As noted, just look at the current government cabinet - full of people who studied humanities and ancient greek plays.

Here is one attempt to identify 'low value courses'. "Creative Arts at Brunel or Education at King’s College, London? – the former gets you better pay"

They should lower the threshold and lower the interest rate. The rate should be BoE base rate or 0.5% whichever is lower. Government borrowing is cheap. They should also cap the forcible repayment amount at £2500/year otherwise when you move into the 40% tax bracket you lose 40% tax, 11(or more)% NI, 9% Student loan and up to 10% pension. It doesn't inspire people to progress when they only see 30% of it, and that usually for a shed load more responsibility.

In theory yes. How vigorously they pursue those who bugger off and then default is another matter.

Couldn't have put it better myself 😀 . Australia and NZ do a much better job at this I believe and make it fairly likely you'll get in proper trouble when you re-enter the country if you've missed repayments.

A lot of social science degrees are, on their own, almost useless, but they're a necessary stepping stone to Psychiatrist, Criminologist, etc.

I have no personal experience of Arts degrees.

Funding degrees with no fiscal payback is less obvious. You can argue it’s great to have lots of baristas in costa with degrees in poetry, contempory media studies etc, but that money could also have paid for knee/hip ops or housing for the homeless etc.

BS

I know several of the country's top computer scientists that have Philosophy as their first degree. It underpins everything.

Make everyone study same high paying field. Supply & demand will do its job and it will become another low paying field.

Better off making everyone do a year national service as a truck driver to wipe out their student loan.

Seeing the state many soft skill and hard skill students come out of lower tier unis I won’t be recommending any youngsters down that route. Especially where many would be better suited to apprentice / manual trades that won’t hit them with a tax on their barista wages.

Another shifting of the tax burden onto the lower paid. No surprise there then.

Education for its own sake isn't for our kids, it's only for their kids. Our kids need training instead, preferably ready to go down the mines like the good ole days.

Boris Johnson : Classics
Jacob Rees-Mogg : History

Obviously lots of PPE graduates in the cabinet as well, along with degrees in English etc, and many more in Classics and History. We need to use fear of debt/tax to keep the plebs away from those degrees though, get them doing something "useful" (and arguably less transferable, despite that fact they're going to need several careers in our fast changing world).

Funding degrees with no fiscal payback is less obvious.

What worthy technical degree does Boris have?

I do have some sympathy for the Chancellor, huge Covid debt to pay off, calls for 10s of billions for the NHS, running a fiscal defecit before Covid, and no new taxes

Yes, but there's barely a worse concievable way to solve this problem than taxing people who've just left uni having committed to educating themselves (how dare they?!) and are struggling with finding good jobs and housing. Why not tax the people who are already stinking rich? Is that not the obvious solution?

On a related topic... I was astonished to discover some of my comfortably well off friends were planning to fund their children through university so that they didn't have to take loans. This is in Scotland so we aren't talking £27K of fees but they are talking about £6/7K each year (for 4 or 5 years!) so they can leave debt-free. "Because we didn't leave university with debt so I don't think they should". Now I *did* leave university with debt because my parents household income would never have funded it all. So perhaps it seems more acceptable to me.

I also think the parents are being naive, as certainly some of my classmates could probably have managed without a loan if they were sensible but instead went and took it out to buy a shiny bike, climbing gear, car etc... Knowing their children I wouldn't be at all surprised to see them doing this anyway.

So wondering what is the norm these days? Our household income puts us in the non-means tested loan bracket, so what I've agreed to do is top that up to the level the government offers to "looked after children" on the logic that they think you can survive on this if you are sensible / prudent; and encouraging son to be frugal is an important part of the uni experience. Are there many students going to / leaving Uni with no debt round their neck and thus reinforcing the inequalities in society? That brings us back on topic - because if loans are not used fairly evenly by all that is different from if virtually all students are leaving with similar debts.

BS

I know several of the country’s top computer scientists that have Philosophy as their first degree. It underpins everything.

Who said anything about Philosophy?

There will always be exceptions anyway, I'm sure there's a top surgeon somewhere whose first degree was media studies. Doesn't mean it's the most efficient career path...

So wondering what is the norm these days?

You'd have to very well off to pay all your children's degree costs (fees and living costs), so I expect it's pretty rare. I'd guess at £20k plus per year. Two kids overlapping, that's £40k. Not many people have that sort of disposable income....

Why not tax the people who are already stinking rich? Is that not the obvious solution?

^^^^

And even moderately rich. Why not tax very highly paid graduates more, or stop cutting tax on the inheritance of the moderately and very rich, rather than drop taxation/repayment bands ever lower, shifting the tax burden onto the lower paid?

Who said anything about Philosophy?

here's the problem! 😆

They said 'soft university courses'. Which is in the eye of the beholder. The beholder is often a Tory minister with a BA in Classics or PPE, so obviously it's not those. Unfortunately for the 'common sense' brigade, people with degrees in film studies and Media Studies don't appear to earn much less than people with degrees in English and History.

as certainly some of my classmates could probably have managed without a loan if they were sensible but instead went and took it out to buy a shiny bike, climbing gear, car etc

That was the past.

Without a loan, or alternatively a parental income, how do you pay for accommodation and food?

Are there many students going to / leaving Uni with no debt round their neck and thus reinforcing the inequalities in society?

No idea. Ours will be taking the full non means tested loan amount each year. No alternative available to them/us. They'll be paying off full fees as well. And the interest on that. Same fees as the Johnson and Rees-Moog offspring will be paying... because that's "fair". I still think the government should fund education, and then tax us all based on our earnings and wealth, not on when we left education.

I work with a lot of graduates and some students and they need this like they need a bout of long covid.

housing ladder just got even more out of reach if the parents cant stump up a deposit

Why not tax very highly paid graduates more

We already do, they'll pay the graduate tax (9% IIRC) and then the 40% rate as they'll mostly be 40% rate payers, so 49% plus NI on top.

Interest points from poly. Our eldest starts uni on Saturday, expecting to rack up debt.

I'm also expecting him to be sensible on what that debt is racked up for though. We'll support on practical things he needs, but we expect him to work through holidays and earn more than he spends in that time.

I'm not convinced by the brain drain argument against a flat rate additional graduate tax, I still think it's a fairer way of repaying costs.

How are vocational courses/training routes funded? I genuinely don't know - does the employer fund it, does it come out of a general "education" pot? Seems harsh if graduates pay tuition fees while a plumber does not.

We already do

Ahh, a pendant.

Why not tax very highly paid graduates more than we currently do, rather than lowering repayment thresholds to increase the taxes of the lower paid? If the choice is being made to increase the revenue raised from graduates, why target the lower paid, and not those with higher earnings?

Maybe those who went to the Skool of Hard Knocks and the University of Life could also contribute more. After all, there's only so much tax you can take in from St George's Cross flags and Carling.

I'd struggle to argue that my social science degree has been economically useful and that was when tuition fees were £1100 a year.

I’d struggle to argue that my social science degree has been economically useful

Skills around research, critical thinking, etc, etc?

Funding degrees with no fiscal payback is less obvious. You can argue it’s great to have lots of baristas in costa with degrees in poetry, contempory media studies etc, but that money could also have paid for knee/hip ops or housing for the homeless etc.

I don't think that there is any demographic evidence of the 'Arts degree -> Costa' career path. In fact, I'm fairly certain that humanities graduates median income is the same as STEM graduates in the UK.

I'll have to dig out some of the reading I did a few years ago for some of my pupils. I was definitely surprised to find this, as I'd telling kids for years to study Chemistry to get on the cash train.

Student loan repayments are not – and can never be redesigned as – a true tax, because HMG doesn’t have powers to levy taxes on people who live abroad. So making it a graduate tax would be a massive brain drain incentive.

Ooh. Interesting. Is that why they set it up as a "loan"?

Never knew that.

Also, this talk of useful degrees and non useful ...
I did Physics. It was a complete waste of 3 years of my life, and taxpayers' money to fund it.

Ooh. Interesting. Is that why they set it up as a “loan”?

A cynic might say that the system is mainly designed the way it is - with very high loan amounts - because when it was devised (i.e. 2012 ish), loan outlay was not classed as spending in the national accounts at the time of loan issue, meaning it would only contribute to the deficit when unpaid loans were written off (i.e. 30 years hence). This was described by commentators as a 'fiscal illusion'.

The Office for National Statistics corrected that in 2019, so that now a prediction of the amount of loan that will be written off (c. 53% for loans issued to full-time undergraduates this year). is scored on the deficit at the time of loan issue.

Ironically the very people who don't pay back the loan are generally the same ones who didn't use the university education to under pin their career choices (I get that life doesn't always go to plan for some).

The arbitrary 50% into university was the start of this stupidity, we don't need 50% of the population with a degree, in fact suggesting that 50% of people are capable of getting a degree means the degree isn't the academic qualification it once was.

This whole policy was supposed to have increased social mobility, it's done the opposite, back in the 80s bright kids from low income families could actually afford to go and come out relatively debt free with a deserved leg up the ladder.

The trouble we have now is an overly bloated university sector which would also need scaling back which would be very unpalatable for any politician. What we do now is beyond me, but we need to get back to university being merit based, and think long and hard about what degrees we fund (this should be more based on the quality of the teaching rather than the subject, a well taught arts degree is probably more valuable to society than a poorly taught STEM degree).

I don’t think that there is any demographic evidence of the ‘Arts degree -> Costa’ career path. In fact, I’m fairly certain that humanities graduates median income is the same as STEM graduates in the UK.

I’ll have to dig out some of the reading I did a few years ago for some of my pupils. I was definitely surprised to find this, as I’d telling kids for years to study Chemistry to get on the cash train.

There is some evidence that humanities graduates earn less than STEM graduates. The link below gives chemistry median salary 5 years after graduation as £29k. The same for humanities is £22k. The gap is even bigger for 10 years after graduation - £35k vs £23k. Humanities graduates have the lowest median salary out of those presented.

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/790223/Main_text.pdf#page=26

There is a fundamental issue with our taxation approach at mid/high levels. Assuming post grad loan and a 12% pension:

on a high salary of £155k per year, you take home £70,867 (£5,905 per month).
on a still high high salary of £120,000 you take home £57,799 (£4,824 per month)
ona mid high level of £77,500 you take home £42,453 (£3,547 per month)
on a mid high level salary of £60,000 you take home £34,949 ((£2,912 per month).

If you are lucky enough to have 2 earners taking home £60k then you are approx £13k better off versus one earner on £120k. If you have two earners on £77,500 then you are approx £14k better off tahn one on £155k. And this does not take into account the loss of child benefit when one member of a household earns between £50 and £60k, which means an effective marginal rate of another 11% (for the first child) and a further 7% for the next). If added to tax (40%), NI, student loans and pension costs then pay rises are almost worthless in this band. Those that can afford to simply dump extra pay into a pension at this level, which avoids the taxation... Once you earn over £60k the marginal rate returns to a much lower figure. There are similar anomolies with the taper for the zero rate band between £100 and £125k which adds 20% to your marginal rate between these levels...but returns to a lower marginal rate between £125 and £149,999!

Why do we not do as many countries do and tax household income? Household income is used for child benefit clawback (see above), and for calculating how much a student can borrow.

A lot of social science degrees are, on their own, almost useless, but they’re a necessary stepping stone to Psychiatrist, Criminologist, etc.

Slight correction: Psychiatrists are medical doctors, so will have done a medical degree. I don't think even the tories consider those 'soft'?