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Parents Confused By University Funding

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Maddeningly brief interview with woman representing British universities.

She was asked to comment on the increased amount of debt students will amass from next year. She was quick to reply.. "Stop trying to scare people". "it's not a debt because students aren't asked to pay anything". For a change Bill Turnbull was fairly robust, pointing out that interest starts to accrue at RPI+3% from day one, and sooner or later this money plus interest will have to be paid.....by someone. The guest admitted that in most cases the money will never be repaid by the graduate and costs will be met by the taxpayer. And that we should see it as a "graduate tax" based on salary. All very well, but if it's a tax, it's an odd sort of tax: one that doesn't apply in Scotland and Wales, one that is based on parents earnings and where your parents live- these then become factors that determine your "tax status" for the following 25 years. Unfortunately the interview was cut short, and no further questions were asked.

What was telling though was the way that the student finance bill has changed the status of personal debt, from something that is a millstone, and has to be repaid in full, to something that is viewed as a pay as you go tax.......that you should try to pay some of it off, if you can afford it. I can see all sorts of debts being rolled into this kind of scenario-with the taxpayer as effective guarantor. It is adding a whole new type of debt to the existing mountain of UK personal debt.

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Maddeningly brief interview with woman representing British universities.

She was asked to comment on the increased amount of debt students will amass from next year. She was quick to reply.. "Stop trying to scare people". "it's not a debt because students aren't asked to pay anything". For a change Bill Turnbull was fairly robust, pointing out that interest starts to accrue at RPI+3% from day one, and sooner or later this money plus interest will have to be paid.....by someone. The guest admitted that in most cases the money will never be repaid by the graduate and costs will be met by the taxpayer. And that we should see it as a "graduate tax" based on salary. All very well, but if it's a tax, it's an odd sort of tax: one that doesn't apply in Scotland and Wales, one that is based on parents earnings and where your parents live- these then become factors that determine your "tax status" for the following 25 years. Unfortunately the interview was cut short, and no further questions were asked.

What was telling though was the way that the student finance bill has changed the status of personal debt, from something that is a millstone, and has to be repaid in full, to something that is viewed as a pay as you go tax.......that you should try to pay some of it off, if you can afford it. I can see all sorts of debts being rolled into this kind of scenario-with the taxpayer as effective guarantor. It is adding a whole new type of debt to the existing mountain of UK personal debt.

The rich ones won't notice it (and will pay the least interest).

The poor ones won't notice it (apart from having less and less incentive to earn more as time goes by).

The middle ones get stomped.

Hmmm. Can anyone see a pattern emerging here? Anyone?

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The rich ones won't notice it (and will pay the least interest).

The poor ones won't notice it (apart from having less and less incentive to earn more as time goes by).

The middle ones get stomped.

Hmmm. Can anyone see a pattern emerging here? Anyone?

+1

I know parents who still believe that sending the kid off to uni will guarantee a great career - some of the degrees they are going to study at just nuts. One good friend of mine has a son about to go off to study egyptology despite him having spoken with previous graduates of the same course who tell him there are no jobs out there for would-be Indiana Jones types.

I feel he is about to rack up a huge debt. Many will be like this.

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+1

I know parents who still believe that sending the kid off to uni will guarantee a great career - some of the degrees they are going to study at just nuts. One good friend of mine has a son about to go off to study egyptology despite him having spoken with previous graduates of the same course who tell him there are no jobs out there for would-be Indiana Jones types.

I feel he is about to rack up a huge debt. Many will be like this.

you'd think that the new funding rules would concentrate the mind - but oh no

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+1

I know parents who still believe that sending the kid off to uni will guarantee a great career - some of the degrees they are going to study at just nuts. One good friend of mine has a son about to go off to study egyptology despite him having spoken with previous graduates of the same course who tell him there are no jobs out there for would-be Indiana Jones types.

I feel he is about to rack up a huge debt. Many will be like this.

That all depends on who is on your course and if you get on with them, if there is no one of worth on the course you won't make the connections you need to progress.

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Maddeningly brief interview with woman representing British universities.

She was asked to comment on the increased amount of debt students will amass from next year. She was quick to reply.. "Stop trying to scare people". "it's not a debt because students aren't asked to pay anything". For a change Bill Turnbull was fairly robust, pointing out that interest starts to accrue at RPI+3% from day one, and sooner or later this money plus interest will have to be paid.....by someone. The guest admitted that in most cases the money will never be repaid by the graduate and costs will be met by the taxpayer. And that we should see it as a "graduate tax" based on salary. All very well, but if it's a tax, it's an odd sort of tax: one that doesn't apply in Scotland and Wales, one that is based on parents earnings and where your parents live- these then become factors that determine your "tax status" for the following 25 years. Unfortunately the interview was cut short, and no further questions were asked.

What was telling though was the way that the student finance bill has changed the status of personal debt, from something that is a millstone, and has to be repaid in full, to something that is viewed as a pay as you go tax.......that you should try to pay some of it off, if you can afford it. I can see all sorts of debts being rolled into this kind of scenario-with the taxpayer as effective guarantor. It is adding a whole new type of debt to the existing mountain of UK personal debt.

its clearly not a tax otherwise it would be administered as a tax, there are clear advantages to the govt frontloading it as a debt and as for few graduates paying that is clearly bollarcks as they will use fiscal drag as they do on income tax at some point in the future to bring the correct number of graduates into it, unless of course she is happy for her family to financially backstop any govt changes of policy at any time in the future. Its the sort of comment that i despise politicians for as it is blatant lies as they cant answer for future govt

Edited by georgia o'keeffe

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its clearly not a tax otherwise it would be administered as a tax, there are clear advantages to the govt frontloading it as a debt and as for few graduates paying that is clearly bollarcks as they will use fiscal drag as they do on income tax at some point in the future to bring the correct number of graduates into it, unless of course she is happy for her family to financially backstop any govt changes of policy at any time in the future. Its the sort of comment that i despise politicians for as it is blatant lies as they cant answer for future govt

They are actually talking about imposing early repayment charges, so that those of us who would pay their kid's fees for them either can't or pay a stiff fee for the privilege of doing so.

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So I take a 3 year course in Genetics at a good University, get a first and go into research science.

Just looking at the course fees we are talking £27k.

I start my career on £18k and don't reach the £21k threshold for 3 years.

Ignoring the interest accrued whilst at University and with RPI+3% at say 7% then I'd have a total debt of £33k

In the next 5 years I earn £25k so I'll pay back 9% over £21k so £360 a year. In the meantime that debt is increasing by RPI+3% and has now reached £44.5k

In the next 5 years I do really well and earn a promotion to £35k. My repayments are now £1260 a year. However RPI+3% means my total loan has reached £56k after payments.

In the next 10 years I reach the peak of my earnings £45k. My repayments are now £2160 a year. However with RPI+3% my total bill is £88560 after all my repayments.

In total over 25 years I've paid back £29700 with an effective tax rate+ NI rate of 43% on all earnings above £21k and £88k has been written off. Can I buy a house and save for a pension too?

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Why should they be confused? The vast majority of students are over 18. They are adults, whats it got to do with the parents?

Everything to do with the parents. You can get your fees paid if your parent's income is low enough.

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Maddeningly brief interview with woman representing British universities.

She was asked to comment on the increased amount of debt students will amass from next year. She was quick to reply.. "Stop trying to scare people". "it's not a debt because students aren't asked to pay anything".

When is a loan not a debt? And surely they are been asked to pay it (at least part of it) at some point. Did I miss the clause that said they can choose not to pay anything (well apart from staying on the dole).

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So I take a 3 year course in Genetics at a good University, get a first and go into research science.

Just looking at the course fees we are talking £27k.

I start my career on £18k and don't reach the £21k threshold for 3 years.

Ignoring the interest accrued whilst at University and with RPI+3% at say 7% then I'd have a total debt of £33k

In the next 5 years I earn £25k so I'll pay back 9% over £21k so £360 a year. In the meantime that debt is increasing by RPI+3% and has now reached £44.5k

In the next 5 years I do really well and earn a promotion to £35k. My repayments are now £1260 a year. However RPI+3% means my total loan has reached £56k after payments.

In the next 10 years I reach the peak of my earnings £45k. My repayments are now £2160 a year. However with RPI+3% my total bill is £88560 after all my repayments.

In total over 25 years I've paid back £29700 with an effective tax rate+ NI rate of 43% on all earnings above £21k and £88k has been written off. Can I buy a house and save for a pension too?

Exactly.

Why don't you see this sort of (very simple) analysis in the mainstream media?

(One slight niggle with it is that you're ignoring pay inflation)

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Exactly.

Why don't you see this sort of (very simple) analysis in the mainstream media?

(One slight niggle with it is that you're ignoring pay inflation)

Think the repayment threshold moves up with that.

Not that there will be any of that, the wrong type of inflation if people are getting richer :)

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In the next 10 years I reach the peak of my earnings £45k.

In 13 years time, if you are only earning £45K after the benefit of a university education you would question its value. I would expect that many people who left university would be earning £45K and probably more in today's money. Wages will probably be closer to £60K in 13 years time, and over the 25 years the loan would be in place you will probably end up paying it all back. I don't expect governments to raise the £21K threshold and fiscal drag as alluded to elsewhere will ensure that 90% + of the loans are repaid in full.

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So I take a 3 year course in Genetics at a good University, get a first and go into research science.

Just looking at the course fees we are talking £27k.

I start my career on £18k and don't reach the £21k threshold for 3 years.

Ignoring the interest accrued whilst at University and with RPI+3% at say 7% then I'd have a total debt of £33k

In the next 5 years I earn £25k so I'll pay back 9% over £21k so £360 a year. In the meantime that debt is increasing by RPI+3% and has now reached £44.5k

In the next 5 years I do really well and earn a promotion to £35k. My repayments are now £1260 a year. However RPI+3% means my total loan has reached £56k after payments.

In the next 10 years I reach the peak of my earnings £45k. My repayments are now £2160 a year. However with RPI+3% my total bill is £88560 after all my repayments.

In total over 25 years I've paid back £29700 with an effective tax rate+ NI rate of 43% on all earnings above £21k and £88k has been written off. Can I buy a house and save for a pension too?

is interest seperate?

i.e your required to pay £360 a year but the interest just racks up and up and up?

or do you have to repay £360 + the interest every year?

if the interest is seperate surely you will never pay the loan off, you will forever be in debt, as the interest portion rises by more than the amount you are paying off every year.

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In 13 years time, if you are only earning £45K after the benefit of a university education you would question its value. I would expect that many people who left university would be earning £45K and probably more in today's money. Wages will probably be closer to £60K in 13 years time, and over the 25 years the loan would be in place you will probably end up paying it all back. I don't expect governments to raise the £21K threshold and fiscal drag as alluded to elsewhere will ensure that 90% + of the loans are repaid in full.

Can't see wages rising in real terms in the next 20 years - they've declined over the last 40 years in the US and globalisation is a one way bet.

In research science the pay bands at my wifes work are identical to when she started in 2001.

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Why don't you see this sort of (very simple) analysis in the mainstream media?

(One slight niggle with it is that you're ignoring pay inflation)

Because it is likely to be wrong. My pension projection looks great based on 10%/annum growth and 8% annuity rate, but that is not likely to be the reality. Maintaining the £21K threshold, increasing fees and wage inflation will mean a very different situation.

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So I take a 3 year course in Genetics at a good University, get a first and go into research science.

Just looking at the course fees we are talking £27k.

I start my career on £18k and don't reach the £21k threshold for 3 years.

Ignoring the interest accrued whilst at University and with RPI+3% at say 7% then I'd have a total debt of £33k

In the next 5 years I earn £25k so I'll pay back 9% over £21k so £360 a year. In the meantime that debt is increasing by RPI+3% and has now reached £44.5k

In the next 5 years I do really well and earn a promotion to £35k. My repayments are now £1260 a year. However RPI+3% means my total loan has reached £56k after payments.

In the next 10 years I reach the peak of my earnings £45k. My repayments are now £2160 a year. However with RPI+3% my total bill is £88560 after all my repayments.

In total over 25 years I've paid back £29700 with an effective tax rate+ NI rate of 43% on all earnings above £21k and £88k has been written off. Can I buy a house and save for a pension too?

Or alternatively I can leave school at 16/18, get a trade apprenticeship, qualify and gain a few years on the job experience. Look at house and car insurance prices, and think ar5e to that.

So then I’ll ‘unexpectantly’ lose my job, get pregnant/get girlfriend pregnant, apply for a council house and live off benefits whilst working my ‘trade’ on the side.

No need to worry about house prices, pension provision, or a £80K debt. Better still should the state get FUBAR, I'll still have a useful time served trade to fall back on.

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Can't see wages rising in real terms in the next 20 years - they've declined over the last 40 years in the US and globalisation is a one way bet.

In research science the pay bands at my wifes work are identical to when she started in 2001.

Wages may not rise in real terms, but over a ten year period, there is likely to be a 50% uplift in the amount paid (i.e. if you earn £40K in 2010, you will probably earn £60K in 2020, even if bread now costs 60p instead of 40p)

Successive budgets have seen tax allowances frozen (particularly SDLT and income tax), so why would the loan threshold of £21K be treated any different. In fact if they project not enough loans will be paid, they are more likely to maintain this threshold.

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hold on. so if you have a 30k loan

you earn 30k.

youre required to pay back 9% above £15,000

i.e you repay £1344 per year

BUT the interest in your loan is 7% @ 30k = £2100

you debt will rise forever - it is technically impossible for you to pay of that debt at current rates of RPI.

if (RPI+3%) x (the size of your loan) is greater than your (earnings above 15k) x 9% - you debt will never be paid off, you will be in debt forever until the day it is wiped out after 30 years...

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In 13 years time, if you are only earning £45K after the benefit of a university education you would question its value.

Is this in some fantasy world where everyone's rich and works in the south east?

No wonder house prices are so stubborn there.

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in fact at current rates of RPI for you to break even you need to be earning £38,333.

i.e you wont even begin to pay down your loan until you earn above this amount.

have i got this right?

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That all depends on who is on your course and if you get on with them, if there is no one of worth on the course you won't make the connections you need to progress.

Soon university will be a thing of the past....internet, networking, kindle books, distance learning, Skype conferencing is a start. ;)

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Is this in some fantasy world where everyone's rich and works in the south east?

No wonder house prices are so stubborn there.

It is very hard to afford to live in a private home in London with a household income of less than £45K/annum.

Yes, it is little wonder the house prices are stubborn down here.

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So I take a 3 year course in Genetics at a good University, get a first and go into research science.

Just looking at the course fees we are talking £27k.

I start my career on £18k and don't reach the £21k threshold for 3 years.

Ignoring the interest accrued whilst at University and with RPI+3% at say 7% then I'd have a total debt of £33k

In the next 5 years I earn £25k so I'll pay back 9% over £21k so £360 a year. In the meantime that debt is increasing by RPI+3% and has now reached £44.5k

In the next 5 years I do really well and earn a promotion to £35k. My repayments are now £1260 a year. However RPI+3% means my total loan has reached £56k after payments.

In the next 10 years I reach the peak of my earnings £45k. My repayments are now £2160 a year. However with RPI+3% my total bill is £88560 after all my repayments.

In total over 25 years I've paid back £29700 with an effective tax rate+ NI rate of 43% on all earnings above £21k and £88k has been written off. Can I buy a house and save for a pension too?

If this is true it is frightening. Personally I can't be bothered to check the figures. Perhaps the same goes for parents, ministers, MPs and journalists.

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  • 285 Brexit, House prices and Summer 2020

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