[music man]

3 callers - all 'friend of a friend' types.

With debts at £45K, £55K and £65K.

Paying of credit with credit, oops.

This amount is huge to me. I cannot believe how it can happen? but it does and will continue.

And with reference to this post maybe the media method of control here is of care and consideration http://www.housepricecrash.co.uk/forum/ind...topic=28826&hl=

The psychology of crash mentality is coming in stages. And the first step seems to be debt worries and councelling. Then people will look at debt as an overhead rather than an investment.

Whether the media do continue with this in steps or not the stories will come out.

[trompe le monde]

the psychology of debt is interesting. Somehow, it seems that the more debt you have, the wealthier you are perceived to be, maybe because there is an assumption that you have the ability to service that debt, or the assets to back it up.

Overheard this in the changing room of my sports club last week - 'I reckon my house has gone up £170,000 over the last couple of years, so I've taken another £85,000 out'. This sounds to me like he's already taken the same amount out already, ie he's cashed in what equity he thinks he's made over this time.

His three or four mate's reactions are interesting: 'minted man!', 'lucky b*****d!', etc. He is obviously 'the man' in their eyes. All they can see is that he has a wad of cash to blow. They don't see the enormous financial hole he will now be paying interest on. Meanwhile, I'm thinking 'what a dick!'.

I can understand the mentality of 'keeping up with the Jones', though I've never bought into that myself, but the idea of declaring your indebtedness as a sign of wealth is just bizzare.

Interest rate rises, or redundancy is going to be a big wake up call for folks like this.

TLM

[music man]

trompe le monde, on Apr 27 2006, 10:15 PM, said:

His three or four mate's reactions are interesting: 'minted man!', 'lucky b*****d!', etc. He is obviously 'the man' in their eyes. All they can see is that he has a wad of cash to blow. They don't see the enormous financial hole he will now be paying interest on. Meanwhile, I'm thinking 'what a dick!'.

Interest rate rises, or redundancy is going to be a big wake up call for folks like this.

TLM

I can picture your eyes rolling to the back of your head thinking it 'aint worth educating these people.

It is however is unimaginably attractive to the human psyche. All that wealth and not even a blink or a thought for debt.

We are (pop population) sold down the river.

Great story.

This post has been edited by music man: 27 April 2006 - 09:53 PM

[Fancypants]

trompe le monde, on Apr 27 2006, 10:15 PM, said:

Interest rate rises, or redundancy is going to be a big wake up call for folks like this.

or failing that, and possibly worst of all outcomes is that they survive IR rises (or there are none) and keep their jobs only to get to 65 with no savings, no pension and ten more years of crippling mortgage payments. Whoops.

[RichB]

I don't know how many of you lot are (former) students, but indulge me for a moment while I tell a tale of Government backed debt pushers.

I started university in '93. Student loan of almost 2k was available (no grant for me, just fees paid of £750) but this was a huge amount of debt and most people shunned it.

The trouble began in the first few weeks as the banks started to offer interest free overdrafts of up to £400. This is a palatable amount, tide you over between parental maintenance cheques. Only buys a few weeks worth of drinks though. The initial hurdle of debt acceptance overcome, the heavy hitters at the Student Loans Company - backed and sponsored by the government come into play. Pretty rapidly (within the first semester) most of the folk I knew were in hock for around £2200. A few had a plan to invest it. A small percentage did.

The rest of us blew it in a couple of months - on computers / hifi / drinks / cars. Mostly drinks. Not sure the exact return but £1700 of government money ploughed into alcoholic beverages at what 30%+ tax, then index link the payments over x years. Winner.

Anyway, in the second year the bank offers £800 interest free overdraft, SLC another £1800. 3rd year bank is up to £1200 and SLC about £2k. At this stage - or maybe slightly before - credit card approvals come through. Maybe start you light - £800. Within 6 months thats easily up to £2k.

By this time the student has £1800 overdraft, £5500 SLC and £2k on the cc.

Of course then I continued for another 4 years.

Come out of that with £3300 OD, £10,600 SLC and £3000 cc. Or itro £17k debt.

Start first job out of uni at about £19k. Not bad. Ok so I owe almost 1 years salary - or rather 1/3 of a mortgage - already. Nice one. Of course, now I am working I need to find a room £350mnth. Some suits. Travel at over £100mnth. Council tax. Bills. Food? Due to excessive overdraft - no graduate loan at pref rates...

Debt payments - interest only/minimal payments at this point. A year or so later some white goods and a bigscreen tv on 5 years tic at £50mnth. Bargain. Have 2. Seems like the credit companies like me again. New credit card, balance transfer to interest free. Soon ofcourse thats 2x£3,3k ccards. So an £8k loan, smashing, a bit of breathing room. Pay off the cards. So, soon that's an £8k loan + 2x£3.3k CCs. Best get another card to balance transfer. So £4.5kcc + £2k cc. Then 2x£3.3k ccs +£4.5k. So another £8k will sort that out.

Of course earnings are up by this stage - £30k +. But on top of the £17k student debt, £5k white goods theres now £10k ccards and £16k loans. Or 1.5x salary. Over half takehome pay goes as debt servicing.

Fortunately I had bought a flat for £32k as a student. So theres this £27k mortgage I havent mentioned. Which happily mew'd up to 47k. Add in a loan from mum and debts down to £6k of student loans and whitegoods. Mortgage up from £190 to £290, total debt payments down to £470 (inc mortgage).

Happy bunny.
Not terribly interested in borrowing money any more. Recovered addict perhaps? Personally I feel the whole thing was an orchestrated, and government led campaign to get young middle class kids comfortable with debt that otherwise they would never have taken, to spend money they would not have had for several years, on stuff that dissappeared in a short time span - real short term consumers.

And I understand my debts pale in comparison to the current generations of students...

[RichM]

RichB, on Apr 28 2006, 10:57 AM, said:

Happy bunny.
Not terribly interested in borrowing money any more. Recovered addict perhaps? Personally I feel the whole thing was an orchestrated, and government led campaign to get young middle class kids comfortable with debt that otherwise they would never have taken, to spend money they would not have had for several years, on stuff that dissappeared in a short time span - real short term consumers.

And I understand my debts pale in comparison to the current generations of students...

The truly sad thing is that your debts really don't sound that bad by today's standards! At least you don't have a monster mortgage either.

The changing attitudes to debt are a really disturbing phenomenon. You have to wonder people are expected to jump on to the property ladder given all the debt they've had to accrue through university etc etc.

I guess some would ssay that no one is ever forced to take on too much debt, but I wonder if people's heuristics have been altogether shifted - "everyone else does this, the banks are offering the cash, it must be OK". I guess lots of parties are to blame.

[RichB]

:yup:

hey, even the gvmnt says its ok...!

[Zaranna]

RichB, on Apr 28 2006, 10:57 AM, said:

I don't know how many of you lot are (former) students, but indulge me for a moment while I tell a tale of Government backed debt pushers.

I started university in '93. Student loan of almost 2k was available (no grant for me, just fees paid of £750) but this was a huge amount of debt and most people shunned it.

The trouble began in the first few weeks as the banks started to offer interest free overdrafts of up to £400. This is a palatable amount, tide you over between parental maintenance cheques. Only buys a few weeks worth of drinks though. The initial hurdle of debt acceptance overcome, the heavy hitters at the Student Loans Company - backed and sponsored by the government come into play. Pretty rapidly (within the first semester) most of the folk I knew were in hock for around £2200. A few had a plan to invest it. A small percentage did.

The rest of us blew it in a couple of months - on computers / hifi / drinks / cars. Mostly drinks. Not sure the exact return but £1700 of government money ploughed into alcoholic beverages at what 30%+ tax, then index link the payments over x years. Winner.

Anyway, in the second year the bank offers £800 interest free overdraft, SLC another £1800. 3rd year bank is up to £1200 and SLC about £2k. At this stage - or maybe slightly before - credit card approvals come through. Maybe start you light - £800. Within 6 months thats easily up to £2k.

By this time the student has £1800 overdraft, £5500 SLC and £2k on the cc.

Of course then I continued for another 4 years.

Come out of that with £3300 OD, £10,600 SLC and £3000 cc. Or itro £17k debt.

Start first job out of uni at about £19k. Not bad. Ok so I owe almost 1 years salary - or rather 1/3 of a mortgage - already. Nice one. Of course, now I am working I need to find a room £350mnth. Some suits. Travel at over £100mnth. Council tax. Bills. Food? Due to excessive overdraft - no graduate loan at pref rates...

Debt payments - interest only/minimal payments at this point. A year or so later some white goods and a bigscreen tv on 5 years tic at £50mnth. Bargain. Have 2. Seems like the credit companies like me again. New credit card, balance transfer to interest free. Soon ofcourse thats 2x£3,3k ccards. So an £8k loan, smashing, a bit of breathing room. Pay off the cards. So, soon that's an £8k loan + 2x£3.3k CCs. Best get another card to balance transfer. So £4.5kcc + £2k cc. Then 2x£3.3k ccs +£4.5k. So another £8k will sort that out.

Of course earnings are up by this stage - £30k +. But on top of the £17k student debt, £5k white goods theres now £10k ccards and £16k loans. Or 1.5x salary. Over half takehome pay goes as debt servicing.

Fortunately I had bought a flat for £32k as a student. So theres this £27k mortgage I havent mentioned. Which happily mew'd up to 47k. Add in a loan from mum and debts down to £6k of student loans and whitegoods. Mortgage up from £190 to £290, total debt payments down to £470 (inc mortgage).

Happy bunny.
Not terribly interested in borrowing money any more. Recovered addict perhaps? Personally I feel the whole thing was an orchestrated, and government led campaign to get young middle class kids comfortable with debt that otherwise they would never have taken, to spend money they would not have had for several years, on stuff that dissappeared in a short time span - real short term consumers.

And I understand my debts pale in comparison to the current generations of students...

Were the student loans available really that big in the early 90s? Am I remembering it wrong? I started university in 1995 and had the maximum loan for all three years, and I'm sure I could only borrow between 1400 and 1800 per year at that stage. I ended up with student loans co. debt of about 4.5k, and that was on the maximum rate for each year. No fees either then. (I think I got a good deal really: three years of education for 4.5k? Bargain compared to the US, say, and knowing now how low lecturers' pay is, I don't resent it at all). How did you get 10k off the SLC; how long was your course....???

edit: reading it again I see you said you continued for another 4 years - what subject? (I did postgrad and wasn't allowed to borrow from the SLC)....were you doing medicine or something similar? In which case, that amount of debt is easily repayable and probably represents nothing like the real cost of your education (sorry to be a pain, but I'm a university lecturer and what students pay is nothing like what the real costs are, even at the present time - in reality they should be paying much more like the levels paid in North America)

This post has been edited by Zaranna: 28 April 2006 - 04:44 PM

[RichB]

On the contrary, the real cost is absorbed by the exhorbitantly high wages (gvmt estimate £400k average over their working life) earned by a graduate compared to a non grad. Given that tax is going to be paid on that portion at around at least 30% + the national insurance, then the government rakes in at least £120k for the average graduate in extra taxes - thats before we factor in anything exciting like the extra fuel tax for the large car, the 17.5% rake on sales etc. But as a lecturer I am sure you have considered this already.


Not medicine - ended up with an MA in history and an MSc in AI. Now sitting pretty as a DBA for an international online gaming group, so the £130 a month repayments are less relevant. But when your take home is £1300 its a lot.

[godsakes]

When you're a student, loans are a fact of life, you and everyone else had one.

When i when to uni in 1999 everyone took out the £3k student loan for the 3 years they were there + overdrafts and in some cases emergency loans + credit cards.

Basically regardless of how much in debt you were, there was always someone else who was more in debt than you - so there is a perception that's everything is fine and also you didn't really think of the student loan cheques as debt more like a life line.

I came out of uni with about £11k of debt - i think that's a decent price for my education and the experience. although i didn't think that when i got my first real job which paid only £11k - thankfully times have gotten better since those days.

[derharper]

a freind of mine told me how a few years ago he and his wife had been working really hard at their (low paying) jobs and he said" i told her youve worked hard treat yourself. get a loan and buy yourself some thing nice"
he was telling me that they were that well off they could afford a loan!....wow.

[Zaranna]

RichB, on Apr 29 2006, 12:45 AM, said:

On the contrary, the real cost is absorbed by the exhorbitantly high wages (gvmt estimate £400k average over their working life) earned by a graduate compared to a non grad. Given that tax is going to be paid on that portion at around at least 30% + the national insurance, then the government rakes in at least £120k for the average graduate in extra taxes - thats before we factor in anything exciting like the extra fuel tax for the large car, the 17.5% rake on sales etc. But as a lecturer I am sure you have considered this already.
Not medicine - ended up with an MA in history and an MSc in AI. Now sitting pretty as a DBA for an international online gaming group, so the £130 a month repayments are less relevant. But when your take home is £1300 its a lot.

The real costs aren't in fact covered by the amounts raised in taxation. Lecturers' pay has fallen by 40 percent over the past three decades, whilst the workload has increased by 140 percent (as not enough lecturers are hired). Cost-cutting has meant that the only way graduates are getting the education they do get is because university staff have been willing to accept less pay for the same job (in real terms). Now, with the current cost of housing, I would need to earn a base salary of 75k to achieve the kind of living standards enjoyed by lecturers 40 years ago. This means more and more university staff are leaving the profession. Graduate tutors and junior scholars are routinely paid below minimum wage (they are contracted per "contact hour" not per working hour, but in reality they will spend 4-5 hours work for that one "contact hour"). For us to be paid a reasonable salary the money coming in per student would need to more than double - not the kind of costs that it's feasible to be borne through general taxation. I look forward to the day when our top universities are charging people what it really costs to run a university and pay staff what they're actually worth - say around 35,000 pounds per head in fees, which is many more times what the state factors in as costs at the moment.

This post has been edited by Zaranna: 03 May 2006 - 12:34 PM

[RichB]

You aren't paying attention are you zaranna?

The gvmt reckons the average graduate earns £400k over the average non graduate over their lifetimes.

Even tax rake of only 25% is £100k. If the cost of educating a University student for 3 or 4 years is truly over £25k per annum, someone really needs to look at the business side of academia in a hurry. Hell, top residential public schools cost less than that.

If we actually look at the tax rate as being closer to 40% then it works out to over £40k pa for a 4 year course. You cannot possibly tell me that the actual cost of educating a university graduate is more than either of those figures.

[gasket37]

RichB, on May 3 2006, 03:06 PM, said:

The gvmt reckons the average graduate earns £400k over the average non graduate over their lifetimes.

sorry to butt in on what is an interesting thread

anyhow, i seem to recall (sorry - no link!) that much vaunted government figures of graduate lifetime earnings are produced by the AGR (the Association of Graduate Recruiters).

members of the AGR are your classic City type employers - banks, big four accountants etc etc

unfortunately the sort of student who attends a "new" university and who leaves with an "OK" degree and ends up working in a SME is never going to earn anything like these sort of sums.

<cynical mode>perhaps it is a brilliant government plan to effectively have a self-financing scheme to keep people off the dole</cynical mode>

food for thought, anyway...