Student loans – is this sustainable?

Is it still the case that higher paid people will pay it off quicker so pay back less than the nurse who will be paying for much longer?

What he said.

The new system with higher fees / more debt, means high earners pay back a lot more (there’s more debt to clear), but low earners pay back a lot less (the threshold is higher).

It’s not a perfect system, but it’s much better than the old one.

Back of a napkin calcs for myself (5 years at uni including tuition and maintenance loan, minus grants) are as follows:

Pre 2005 start – Payment plan 1 – Debt: £23k, earning £40k average – total repayment of £27.8k over 12 years

Post 2012 start – Payment plan 2 – Debt: £65k earning £40k average – total repayment of £67.1k over 30 years!!!

These aren’t my actual figures, but it gives a general gist.

yes. Well, sort of, although you have to be very much higher paid.

have a play with this calculator. bear in mind that the ‘salary’ is your starting salary and it is based on your wage increasing above inflation for your whole career…

http://www.moneysavingexpert.com/students/student-finance-calculator

Hopefully by the time my offspring (still in the planning phase themselves) reach such age, university courses will have ‘reset’ to how they were viewed pre-Bliar; neccessary for a small percentile who needed a qualification for thier vocation and few others. These courses in ‘meejia studies’ and ‘hair and beauty’ and whatnot are of little value, but sadly employers seem to expect a degree.

If I was a parent now, I’d offer my children equivalent training and lifestyle to a value of a university course, but in a huge variety of areas. They could get any number of real-world useful qualifications to ensure future employability (chainsaw use, yachtmasters, plastering, electrical installation, HGV and plant tickets, ski instructor… you name it) and then six months per year of ‘fun’ jobs – ski seasonairre, holiday rep etc to tick the ‘social life’ aspect that university may or may not offer

None of those jobs create or bring wealth into the UK. Good luck to the country if that is what we want the majority of our kids to be doing…..meanwhile in Germany, China, Malaysia, Singapore, India, Japan etc they are busy educating their population for a high tech economy and innovating.

That’s something that pisses me off about the UK, we have a subset of society that has a sneering contempt for education, dismissing university because of the relatively few courses offered in idiotic subjects such as “meeja studies”.

But then you’re talking about the old system, where the interest rate is such that they might pay more in absolute terms, but when adjusted for inflation they don’t.

‘Interest free when adjusted for inflation’ is a complete load of rubbish, unless you live in a world where everyone gets a payrise that matches inflation each year…

Sounds great tom.

Whos going to build your houses , fix your boiler , wire in your shower ?

All our lot are too busy getting educated in high tech stuff.

Is it just me or is it a great ploy by the government to keep wages down. As soon as you get to X amount you are liable for repayment ,hence a lot of people will want to stay below the threshold suppressing wages.

As a 1995 graduate I was the first generation to be offered loans

I graduated in 93 and had 1 years worth of student loans which were introduced in my last year, the 1st 2 years of my pointless media degree was funded with grants. I left owing £1600 (or thereabouts) to the student loans company and a £500 overdraft. Seems like small change compared to the figures today’s graduates are owing, no way would I want to be in higher education now.

My pointless media degree has allowed me to pay my loan and grants back several times over in higher rate tax so maybe it wasn’t pointless after all 😕
Education will now be the indulgence of those with family money just like it was 50 years ago, The poor will probably not want the risk of a lifetime of debt. If it was loans/fee’s when I left school no way would I have studied in HE.

Education will now be the indulgence of those with family money just like it was 50 years ago, The poor will probably not want the risk of a lifetime of debt. If it was loans/fee’s when I left school no way would I have studied in HE.

Although the data points to the opposite conclusion.

How about the supply of education? At what point will supply adjust down ie unis cutting the prices. Truly absurd that they all charge the same price.

Better more transparent pricing, competing offerings, different structures (shorter, moe flexible), use of technology – ll the stuff they teach about, can now be put into real practice. About time education woke up…..

Well the decision to enter HE used to based on time spent learning v’s time spent earning and having a car/motorbike/drink/drug habit (well it was back in my day) the idea of £45k of debt was not a factor.

Not really when you’re discussing repaying student loans by people who aren’t on the breadline. The repayment effectively comes from disposable income, so somebody who pays the loan off in full in 10 years has missed out on more pints of beer than somebody who’s been paying for 30 years and never paid it off. What’s happened to their pay is irrelevant.

It’s not the sort of threshold where you lose out if you cross it (like the old stamp duty rates). If you earn £1 more than the threshold, then you take home £0.59 more (compared to £0.68 more for the last £1 under the threshold). It doesn’t seem that only taking home £0.58 for every extra £1 puts people off earning more when they’re over the higher rate income tax threshold.

I graduated in 93 and had 1 years worth of student loans which were introduced in my last year[/quote]

I thought I’d leave it, but can’t help correcting a corrector. I graduated in 1992 and I could have taken out a student loan in my last year, possibly also the year before (I was a rich sponsored student so survived without).

Education will now be the indulgence of those with family money just like it was 50 years ago, The poor will probably not want the risk of a lifetime of debt. If it was loans/fee’s when I left school no way would I have studied in HE.

Probably wasted on those who can’t work out that it’s a tax rather than a debt. Worth considering whether it’s worth paying that extra tax, but since you only pay it when you’re not poor by any normal measure, being poor when you leave school and having poor parents is fairly irrelevant to the affordability. As I suggested above, if you want to drop out after uni feel free – you won’t be saddled with any debt at all unless your wind turbine company takes off and you become rich.

You are right (thanks Wikipedia) they were available but as people had grants the uptake was low (28% average £360 loan) in the first year, and I obviously didn’t need to take a loan out until my 3rd year.

being poor before you leave school and having poor parents is fairly irrelevant to the affordability

Yes it’s the same costs for fee’s/living costs etc for rich or poor but don’t underestimate the effect of having the bank of mum and dad on tap when making choices regarding HE when the costs are so much higher now than they were 25 years ago.

Yes it’s the same costs for fee’s/living costs etc for rich or poor but don’t underestimate the effect of having the bank of mum and dad on tap when making choices regarding HE when the costs are so much higher now than they were 25 years ago.

Well the data suggests it is not putting off the poor, in fact the ability of better funded universities to pay maintenance grants at present means they are more willing to go to university than ever – free university education is a sop to the middle classes not the poor.

I thought I’d leave it, but can’t help correcting a corrector. I graduated in 1992 and I could have taken out a student loan in my last year, possibly also the year before

Pretty sure 91-92 was the first year, but was phased in. I didn’t bother applying for the loan since I had more left over from summer internships than the loan, and that was my final undergrad year.
Could have been cheap cash, but a faff not worth bothering with.
Guess I was lucky to have proper paid summer work rather than making good use of part time and zero hours type contracts during term time to earn beer money.
SERC award for postgrad was good (like more than twice the amount of a grant, plus ability to claim all kinds of extra expenses, bus tickets, conference attendance, etc.). No idea if they’re still like that?

I graduated 9 years ago, with approx. £10k of student loan debt.
I made my last payment about 6 months ago, at the point I finished paying it off, I was paying £168 per month.

I was paying £168 per month.

And what is your gross pa income?

free university education is a sop to the middle classes not the poor.

I agree

falkirk-mark – Member
Is it just me or is it a great ploy by the government to keep wages down. As soon as you get to X amount you are liable for repayment ,hence a lot of people will want to stay below the threshold suppressing wages.

eh?

earn 21k = no repayments

get a payrise, earn 23k, your (re)payments will be about £15/month, your income will have increased by about £100/month (net)

why would you not want the payrise?

Pretty sure 91-92 was the first year

I’d say 90/91 as I got one in that year which was my 2nd year – so my 1st year was last year of grants – I was also the last year of O’levels so that’s nice.

why would you not want the payrise?

Its similar to the “why do overtime, the tax man takes it all” comment that you sometimes hear. Its worrying that people dont have a better grasp!

I’d say 90/91 as I got one in that year which was my 2nd year

My third 🙂

Probably wasted on those who can’t work out that it’s a tax rather than a debt.

You mean those who are young and dont have educated parents to help them?

seems it was 90-91 after all. that was also my 2nd yr, and I too was lucky to be in the last year of O-levels 🙂
either way it was phased in somehow, so must have been mostly grant up to at least the end of the ’92 academic year, with a top up loan, and I was one of the majority that didn’t take the loan at all. and I certainly got the full available grant due to parents being skint.

I was paying £168 per month.

And what is your gross pa income?

I was probably hovering around the 40% tax threshold at that point.

Another point worth knowing is that is you get bonus payments at work (we get an annual bonus bases on profit) the student loan co will take a pro-rata percentage.

I think there are two problems

Firstly – pushing 18yo’s straight into an undergradate course when they have no experience of work isn’t a great idea – you could spend three years and then end up in an industry you hate. The current drive for degrees seems to less about skills and more about taking kids out of the job market for 3 or 4 years and building flats and campuses with money you’ve borrowed against their potential.

Secondly – why can’t / don’t universities offer cheaper degrees? There must be plenty of programmes out there that are massively profitable, and others that could scale-up or use more online teaching. The idea that costs and quality are directly related seems barmy. In a true open market good courses would flourish and all of the guff would very soon become unsustainable. If this meant that a medical degree ended up costing £40k a year – then so be it.

they barely get touched if the indivdual doesn’t earn a lot of money.

it’s not a completely unfair system.

(ie, low earners won’t have to pay very much, if anything at all)

4 pages and lots of “it’s just a graduate tax” but nobody seems to have highlighted how it’s actually a very regressive form of taxation.

The more you earn, the quicker your load gets paid off, the less interest you pay. The worst case is earning just above the various thresholds, just enough to acrue interest but not enough to quickly clear your loan; here you pay the “tax” for the whole of your working life. But earn buckets and your loan is paid off and the “tax” stops.

It’s a shit system, a graduate tax would be a shit system. It highlights how we have become a society of petty jealousy. Graduates and an appropriately skilled workforce will enable the UK to increase it’s productivity which will improve quality of life for all and allow the UK to cover the ever increaing costs of an aging population.

It’s just another example of the old shitting on the young from their overinflated houses with their gold plated pensions. They are living of the proceeds of unprecidented growth and oportiunity but they aren’t willing to pay for the next generation to have the same oportunity.

If this meant that a medical degree ended up costing £40k a year – then so be it.

You do realise how rediculous this is?

If a medical degree costs £200k then people will stop training to be doctors unless the earning potential of being a doctor goes up accordingly. So we end up paying for the training of doctors in doctor’s wages rather (paid from taxation) rather than paying directly for their training.

Your “demand sets the price” market driven approach to higher education assumes the only benefit of having this education is to the graduate in the form of higher earning potential.

This is clearly bollocks. Tertiary education benefits the whole of society. Doctors are probably the most obvious example of this but it’s also easy to see the benefit of engineers, mathmaticians, computer programmers, scientists, teachers, even historians.

fixed – I certainly got a grant in my last year, it was just a bit less than in my first year. As mentioned, they were phased in as grants were phased out.

Well it’s income on which you pay tax and NI, so why wouldn’t they?

Overwhelmingly, the people I knew at university went because they thought it would be more fun than going out to work. Most 18 year olds haven’t a clue what they want to do.
I didn’t know too many medical students, I expect they tended to go into it for the right reasons, i.e. having a vocation from an early age.

Er, actually it’s been discussed lots (I suggest you just read my posts if you can’t be bothered reading the whole thread), and no it’s not regressive. Not until you’re earning over £37.3k at which point you pay back more than the total loan (in reality due to inflation effects that threshold is something over £40k). If you earn less than that, then you’d never pay back the original loan even if it was interest free, so the interest rate is completely irrelevant. Sure as I highlighted earlier it’s regressive above that point – you can cry for those earning just over £40k if you want, but I don’t suppose the student loans system is putting them off earning more or putting those with a potential of earning that much off going to university (they can of course also pay off the debt early if they want to avoid paying interest – at that point it may be better to consider it as a debt rather than a tax, but as pointed out in the OP you have to earn way more than that to clear the debt before the 30 year write off).

Completely wrong about the worst case being just above the threshold – if you earn £22k then you pay £90 a year, which is effectively the same as 0.75% on the base rate of income tax. If you earn £35k then you pay £1260 a year which is equivalent to 5% on the base income tax rate. How is that regressive?

You seem to be looking at this in terms of the big lump of “debt” and the interest on that, when in reality you should be looking at what payments people make (hence tax, rather than debt). Because crucially the debt is written off after 30 years.

“Another point worth knowing is that is you get bonus payments at work (we get an annual bonus bases on profit) the student loan co will take a pro-rata percentage.”

Yep that wasnt fun but it did contribute to how quickly my loan went away…..

here you pay the “tax” for the whole of your working life

They are written off after 30 yrs.

Tertiary education benefits the whole of society. Doctors are probably the most obvious example of this but it’s also easy to see the benefit of engineers, mathmaticians, computer programmers, scientists, teachers, even historians.

Probably but what about people who study degrees then never “use” then in career terms or degrees of dubious value? Should we pay for some degrees and not others?

I think some degrees should have a higher level of susady than others. Adegree in engineering / mathematics should be cheaper per year than one in mangment as to become a manger is a lot easier to do without a degree (arguably easier as its an experence thing) than to become a engineer / mathematician.

why?

the point at which debts became so large as to be irrelevant was passed along time ago.

let’s say we reduced the fees for an engineering degree from £9k to £3k. Engineers would still graduate owing around £20k. which is more than most will ever pay off.

ie, it wouldn’t make any difference to the (small) amount paid back by a typical engineer.

all it would do is reduce the amount of money paid by VERY successful engineers – who are exactly the kind of people we need to carry on paying for decades.

the people I knew at university went because they thought it would be more fun than going out to work. Most 18 year olds haven’t a clue what they want to do

Probably but what about people who study degrees then never “use” then in career terms or degrees of dubious value? Should we pay for some degrees and not others?

It’s spurious to judge the value of tertiary education purely in the direct knowledge you gain on a specific subject. The simple act of continuing in education is beneficial.

I have a degree in Mechanical Engineering but I’m not an engineer now. Should I pay back the state subsidy of my education (I only paid £4000ish in fee’s over 4 years) because my education has “dubious value”. Or is it true that although my learning turned out be just for the sake of it that the skills I learned at university where much wider than metal fatigue and bending moments.

If you don’t know what to do with your life then surely continuing to learn is probably the best use of your time and everyones money.

Whilst I wouldn’t want to argue Engineers are highly paid, I’m not sure your figures are right. With a debt of only £20k you’d only need to pay off more than £667 a year to fully pay it off and end up paying less – so anybody earning more than £28407 a year would fully pay off the debt and benefit from starting with a lower level of debt. Even I was earning more than that when I was working full time.

Of course you still then have the issue that it is regressive, but then if you do pay it off in full it does revert to being a debt rather than a tax, and debt tends to be regressive.

can i have your old job?

With a debt of only £20k you’d only need to pay off more than £667 a year to fully pay it off and end up paying less – so anybody earning more than £28407 a year would fully pay off the debt and benefit from starting with a lower level of debt. Even I was earning more than that when I was working full time.

This is a quibble perhaps, but you’d only nominally be paying off 20K. You wouldn’t actually ‘clear the debt’ as such.

If you were earning 28407, your ‘debt’ would be increasing by 722 per year.

So yes, you’d effectively be paying an extra tax for 30 years, but this would also apply if you earned 38K.

To stop paying the additional 9% before 30 years was up, you’d need to earn (an average of) about 41K. That’s if your loan was 20K.

It’s spurious to judge the value of tertiary education purely in the direct knowledge you gain on a specific subject

You quoted specific qualifications in your post.

The simple act of continuing in education is beneficial

I agree and good luck to you if you want to study something that is niche and esoteric however we have to make judgements and if you want to study something that by any definition is going to add nothing to society and simply be of interest to you then why should everybody be forced to pay for it?

If you don’t know what to do with your life then surely continuing to learn is probably the best use of your time and everyones money.

I am 50 and still not sure. If I decide to go back to University for several years you would be happy to fund that? I wouldnt.
Education is a great thing but it comes at a cost.