Four In Ten Students May Default On Their Loans: Treasury Fear Funding System Is Unsustainable

[frederick]

consider this career trajectory,

person goes to university to train as teacher, starts working, perhaps briefly exceed the threshold for repayment but then starts family and goes part time (may as well the benefit tax system means that this is almost as rewarded as working full time) 25 years later last child leaves home and person is now 50 they go back to work full time as child tax credits+ benefit have evaporated, but the loan is written off at 50!! so this person will never pay off perhaps any of their loan...

obviously what i am describing is a typical married womans life at the moment so that is potentially 50% for a start

I think its 60, so if someone in their 50s goes they have 3 or 4 years to pay back 27,000

[NorthamptonBear]

Could be a problem for those with kids...

But you would expect people who had been unemployed for a few months to look at using some of their 'allowance' for relevant training.

An important bit of this is that since everyone gets something - even if it's just earlier retirement - it's perfectly reasonable to fund the whole thing out of general taxation.

10 years allowance for being prime carer for kids? Shareable between parents?

[interestrateripoff]

BoE was always going to end up buying up a chunk of student debt. That was the whole point.

The accounting is irrelevant - you can't undo the education received which is the main thing.

Investing for the future knowledge based economy...

[Venger]

Perhaps take the politicians out of education and let the free market dictate what education is actually required.

The worrying thing for the long run in Britain is its global marketability in education.

Having legions of debt ridden desmonds in liberal arts crying foul, protesting their 'injustice' via ranting mobs does not make for good advertising.

Global marketability... I see Vince Cable is off to Latin America to promote all the benefits of a UK university eduction. Education here in a country where they let credit rip over 10 years and stupid borrowers to set ever higher house prices, BTLers who can barely do math to acquire huge portfolios, then follow it by QE, FLS, Help-To-Buy, and claim it's mortgages availability and high deposit requirements that are the only problem.

Two British ministers are mounting a charm offensive in Latin America to try to attract potential students to come to universities in the UK. Business Secretary Vince Cable and universities minister David Willetts travel to the emerging economies of Brazil, Mexico and Colombia on Monday.

UK universities have seen big falls in the number of students coming from countries such as India, which have traditionally been the biggest players.

http://www.bbc.co.uk/news/education-22222582

[RufflesTheGuineaPig]

Tuition fees were nothing more than a debt transfer.

Billions of pounds of government debt was transferred directly to young people and became personal debt.

It's all part of the plan to transfer the debts to the young.

Where possible the debts will be transferred directly, as if it's government debt the argument could be made that everyone contribute. If you make it personal debt, the old are free and clear.

Essentially, tuition fees are allowing the government to reduce university funding at a time when universities are finding themselves having to pay out the pensions for all the staff who provided education to those now in their 50s.

Put simply, tuition fees aren't paying for a students education, they are paying for their PARENTS education.

[we the sheeple]

Wow, no one ever seems to ever do the maths on this horrendous scheme.....

Interest rate on the old system running at 1.5% p.a.

To quote the new system "From 1 September 2012 until 31 August 2013, the interest rate for ICR loans taken out in 2012 will be 6.6% (RPI, plus 3%)."

Let's say, new student graduate has borrowed 3 * 9K fees + 3 * 4K living costs

Interest clicking away as follows. 6.60%

1 39.00 2.57

2 41.57 2.74

3 44.32 2.92

4 47.24 3.12

5 50.36 3.32

6 53.68 3.54

7 57.23 3.78

8 61.00 4.03

9 65.03 4.29

10 69.32 4.58

11 73.90 4.88

12 78.78 5.20

13 83.98 5.54

14 89.52 5.91

15 95.43 6.30

16 101.72 6.71

17 108.44 7.16

18 115.59 7.63

19 123.22 8.13

20 131.36 8.67

21 140.03 9.24

22 149.27 9.85

23 159.12 10.50

24 169.62 11.20

25 180.82 11.93

26 192.75 12.72

27 205.47 13.56

28 219.03 14.46

29 233.49 15.41

30 248.90 16.43

Paying back 9% of income over 21K. Assume you start work at 21K, you would need 8% p.a. income growth to only just pay it off at 30 years.

Excellent system, definitely not a tax on jobs Mr Clegg.

Edited April 22, 2013 by we the sheeple

[RufflesTheGuineaPig]

Paying back 9% of income over 21K. Assume you start work at 21K, you would need 8% p.a. income growth to only just pay it off at 30 years.

Excellent system, definitely not a tax on jobs Mr Clegg.

Bitch please... they'll just increase the salary payment %age and lower the salary threshold.

[The Ayatollah Buggeri]

person goes to university to train as teacher, starts working, perhaps briefly exceed the threshold for repayment but then starts family and goes part time (may as well the benefit tax system means that this is almost as rewarded as working full time) 25 years later last child leaves home and person is now 50 they go back to work full time as child tax credits+ benefit have evaporated, but the loan is written off at 50!! so this person will never pay off perhaps any of their loan...

obviously what i am describing is a typical married womans life at the moment so that is potentially 50% for a start

It was the life of a typical married woman who graduated in the late '90s or earlier: however, runaway house price inflation is causing an increase in families with both parents working even if that is not what they would have wanted. And the child benefit thing (both parents on a medium salary get it, but a family with one high-earning parent does not) will discourage stay-at-home mums even more.

[saving since 2005]

Most will never make enough to even start paying the loan through PAYE.

But it's not defaulting if you never pay back the loan as student loans are not really like other loans. If I buy some massive tv from argos on credit they are not going to give me a loan where I only have to pay it back if I earn 50k a year.

Anyway if you do a degree in something that skilled that is in demand then earning 21k + isn't out of the reach of many starting wages.

[saving since 2005]

Wow, no one ever seems to ever do the maths on this horrendous scheme.....

Paying back 9% of income over 21K. Assume you start work at 21K, you would need 8% p.a. income growth to only just pay it off at 30 years.

Excellent system, definitely not a tax on jobs Mr Clegg.

The online calculator uses 4% meaning if you earn an average wage then you just about pay back an average amount in 26 years.

http://www.studentfinance.direct.gov.uk/scheme/dgv/pws/repayment-calculator.html

[saving since 2005]

The online calculator uses 4% meaning if you earn an average wage then you just about pay back an average amount in 26 years.

http://www.studentfinance.direct.gov.uk/scheme/dgv/pws/repayment-calculator.html

Scratch that, looks like interest rate is based on earnings :confused:

Interest is included in the calculation above:

Retail Price

Index (RPI)3.6%+ interest rate based

on your salary

[Jack's Creation]

Tuition fees were nothing more than a debt transfer.

Billions of pounds of government debt was transferred directly to young people and became personal debt.

It's all part of the plan to transfer the debts to the young.

Where possible the debts will be transferred directly, as if it's government debt the argument could be made that everyone contribute. If you make it personal debt, the old are free and clear.

Essentially, tuition fees are allowing the government to reduce university funding at a time when universities are finding themselves having to pay out the pensions for all the staff who provided education to those now in their 50s.

Put simply, tuition fees aren't paying for a students education, they are paying for their PARENTS education.

This^

[Executive Sadman]

How can they default if it is automatically taken out of PAYE?

They always expect some to never pay back their loans. The last system wrote them off after 30 years.

I think its their way of saying '4 out of 10 graduates will never earn over £15k a year' (or whatever point they start taking money)

Sounds better than 'for almost half of all graduates, a degree actually retards earning power'

[Errol]

Anyway if you do a degree in something that skilled that is in demand then earning 21k + isn't out of the reach of many starting wages.

Average wage in this country is around £22,000 ...

[Executive Sadman]

Average wage in this country is around £22,000 ...

Median (ie true average ignoring all the civil servants and banksters on six or seven figure incomes) is nearer £17-18k IIRC.

[winkie]

Average wage in this country is around £22,000 ...

No overtime governor......would prefer time off in lieu.

[Snugglybear]

No overtime governor......would prefer time off in lieu.

You don't think people get paid for overtime, do you? You do it for free to get a good annual review in order to progress or even, these days, to keep your job.

[winkie]

You don't think people get paid for overtime, do you? You do it for free to get a good annual review in order to progress or even, these days, to keep your job.

So doing long hours of unpaid overtime regularly sees that you get a good annual review.....what is the point of them paying you extra for a good review for the work you have already done, paying you in arrears.

[Snugglybear]

So doing long hours of unpaid overtime regularly sees that you get a good annual review.....what is the point of them paying you extra for a good review for the work you have already done, paying you in arrears.

Assuming that they pay you anything like what it would have cost them if they'd paid you the overtime. Or indeed, assuming they pay you anything at all for a good review, as opposed to holding out the hope of a better paid job at some unspecified point in the future.

[btl_hater]

Tuition fees were nothing more than a debt transfer.

Billions of pounds of government debt was transferred directly to young people and became personal debt.

It's all part of the plan to transfer the debts to the young.

Where possible the debts will be transferred directly, as if it's government debt the argument could be made that everyone contribute. If you make it personal debt, the old are free and clear.

Essentially, tuition fees are allowing the government to reduce university funding at a time when universities are finding themselves having to pay out the pensions for all the staff who provided education to those now in their 50s.

Put simply, tuition fees aren't paying for a students education, they are paying for their PARENTS education.

Nice post.

And they only did it because they knew they could get away with it- i.e. anyone 22+ at the time didn't really give a shit and those who were to be screwed over couldn't even vote! Bunch of cowards.

[we the sheeple]

Just to clarify, at 30 years the debt would grow to £248,900 Any periods of high inflation would easily whack it over the million mark.

And they've systematically pedalled this deal to children ffs.

Wow, no one ever seems to ever do the maths on this horrendous scheme.....

Interest rate on the old system running at 1.5% p.a.

To quote the new system "From 1 September 2012 until 31 August 2013, the interest rate for ICR loans taken out in 2012 will be 6.6% (RPI, plus 3%)."

Let's say, new student graduate has borrowed 3 * 9K fees + 3 * 4K living costs

Interest clicking away as follows. 6.60%

1 39.00 2.57

2 41.57 2.74

3 44.32 2.92

4 47.24 3.12

5 50.36 3.32

6 53.68 3.54

7 57.23 3.78

8 61.00 4.03

9 65.03 4.29

10 69.32 4.58

11 73.90 4.88

12 78.78 5.20

13 83.98 5.54

14 89.52 5.91

15 95.43 6.30

16 101.72 6.71

17 108.44 7.16

18 115.59 7.63

19 123.22 8.13

20 131.36 8.67

21 140.03 9.24

22 149.27 9.85

23 159.12 10.50

24 169.62 11.20

25 180.82 11.93

26 192.75 12.72

27 205.47 13.56

28 219.03 14.46

29 233.49 15.41

30 248.90 16.43

Paying back 9% of income over 21K. Assume you start work at 21K, you would need 8% p.a. income growth to only just pay it off at 30 years.

Excellent system, definitely not a tax on jobs Mr Clegg.

[winkie]

Assuming that they pay you anything like what it would have cost them if they'd paid you the overtime. Or indeed, assuming they pay you anything at all for a good review, as opposed to holding out the hope of a better paid job at some unspecified point in the future.

Fine if a few want to do the extra...let them, but by them doing it does not make for a precedence for those that don't want to work for nothing being coerced into doing that.....anyway if you can't get your work done in the hours allocated either you are no good at the job or you are doing the the work that one person could not normally be expected to do.....they should therefore be taking on extra workers, if this is happening on a regular basis.

[wonderpup]

A society that tries to monetise the education of it's children seems to have lost it's way somehow.

[Snugglybear]

Fine if a few want to do the extra...let them, but by them doing it does not make for a precedence for those that don't want to work for nothing being coerced into doing that.....anyway if you can't get your work done in the hours allocated either you are no good at the job or you are doing the the work that one person could not normally be expected to do.....they should therefore be taking on extra workers, if this is happening on a regular basis.

Oh, I agree. Trouble is, many employers don't.

Did you know that employers are not obliged by law to pay for overtime? As long as your total pay for the houres you do is equivalent to the NMW, you don't have to get paid. https://www.gov.uk/overtime-your-rights/overview

They can ask you to work overtime, even though you know they may not pay you. Equally, you can refuse. And if you do, jolly good luck with getting promoted, or getting a glowing reference when you want to leave, or even keeping your job.

[Sour Mash]

Oh, I agree. Trouble is, many employers don't.

Did you know that employers are not obliged by law to pay for overtime? As long as your total pay for the houres you do is equivalent to the NMW, you don't have to get paid. https://www.gov.uk/overtime-your-rights/overview

They can ask you to work overtime, even though you know they may not pay you. Equally, you can refuse. And if you do, jolly good luck with getting promoted, or getting a glowing reference when you want to leave, or even keeping your job.

You seem to think that employers are somehow doing you a favour, dishing out jobs like rewards and that everyone should just be grateful for the largesse of the people you work for.

Given that jobs for life is a long gone idea, there's little point to currying favour with an employer beyond behaving in a professional manner and fulfilling your contractual obligations. Get a better job somewhere down the line (that's where you'll see the most career and salary progression) or alternatively play the politics game and kiss the right peoples' backsides and worm your way up the ladder. You really have to be a special kind of loser to dutifully stay in a position, working unpaid overtime and showing deference to your 'betters', in the hope they toss you a bone.