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85% Of English University Students Will Never Pay Off Their Loans

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About 85 per cent of students in England will never repay their student loans, according to research conducted for The Mail on Sunday. It suggests that hundreds of thousands will be burdened with long-term debt, making it even harder for them to afford to buy a home.

The findings, which fly in the face of earlier Government claims that suggested 60 per cent of students would be able to clear their loans during their working lives, could have a severe impact on the UK’s finances because debts are automatically written off after 30 years.

The student loan time-bomb is a result of changes introduced last autumn to the way fees are charged – and in particular the interest on outstanding debt.

Students who started in college or university before last autumn currently pay 1.5 per cent a year. But for those who started last autumn, their bigger loans – up to £9,000 a year for tuition fees as well as a maximum £5,500 maintenance loan – have a higher rate.

This is calculated at the Retail Prices Index (RPI) plus three percentage points. Based on the March RPI figure, this gives 6.3 per cent. And inflation is expected to rise.

The research, by Dr Mike Clugston, a teacher at Tonbridge School, Kent, confirms that because of the devastating impact of the compounding of interest, only 15 per cent of students are likely to repay debts from income alone. The repayments they are required to make once they start working will do little to stop their debts escalating.

Clugston’s work has been backed by Sir John Stanley, Conservative MP for Tonbridge and Malling, who helped him provide evidence to the Business, Innovation and Skills Select Committee in 2011 that looked at the proposed changes to student loans brought in last year.

Clugston is a thorn in the side of the Government. He has challenged it on wrong tax codes on two occasions.

Research among his pupils confirmed widespread ignorance about the changes to the interest charges applied to student loans taken out from last September.

‘I asked 160 pupils what the new tuition fees cap was and they all chorused £9,000 a year,’ he says.

‘But when I asked about the rate that would be applied to these loans, not one boy could tell me what it was.’

Clugston says a student on a three-year course with tuition fees of £9,000 a year and getting a maintenance loan of £3,575 would leave £43,515 in debt. This is based on a rate of 6.3 per cent (RPI plus three points). After university, they start making repayments once their salary is over £21,000. At present, repayments for someone on £21,000 are £34 a month.

Interest continues to be applied to the debt with the rate depending on the size of earnings – the more they are paid, the higher the rate, subject to a maximum of RPI plus three points.

Take, for example, someone starting on the average national wage of £26,600. Assuming earnings growth throughout their career of RPI plus two points and the £21,000 threshold increases in line with inflation, Clugston calculates they will never repay their loan. The £43,515 debt accumulated at university will escalate for 27 years – peaking at £78,510 – before falling slightly to £76,800 at the end of Year 30. Under current rules, the debt is then written off.

For the £43,515 debt not to escalate, the graduate’s starting salary would have to be £51,460. For graduates on a lower starting salary, Clugston’s analysis is more worrying. At £21,000 – the threshold for loan repayments to be made – and using the same assumptions as in the previous example, Clugston calculates that the graduate’s debt will keep on escalating because the required repayments are insufficient to arrest the impact of compound interest. At the end of 30 years, the outstanding debt is £101,942.

Only those graduates among the top ten per cent of earners will come close to clearing their debt. Someone starting on £35,000 will be left with a debt of £2,245 after 30 years.

Clugston says: ‘David Willetts, the Universities Minister, says 60 per cent of students will repay their debts over their working lives. But I think this is highly unlikely. Based on the reasonable assumptions I have made, the Government will be forced to write off billions of pounds of student debt per year.’

John McCabe, rector of St Mary’s Church, Byfleet, Surrey, has closely followed Clugston’s work and says the findings are devastating.

‘It’s already extremely difficult for young people to get on the housing ladder and these accelerating loans are not going to help,’ he says.

‘The regulator warned about the time-bomb of interest-only mortgages. Well these loans are another time-bomb. This is creating a culture of living with unrepayable debt – and wasn’t it that culture that has caused so much damage to the strength of the economy?’

SLC loan book, either in part or complete, is going to be flogged to the 'highest' bidder they say.

I reckon most universities have about 3/4 of their students studying subjects that will never get them a job outside of ASDA unless you have some family or industry connections.

Parents need to start putting up for their kids, because higher education is a privilege, not a right.

A whole lot of people in it should simply not be there, and it's and insult to see somebody in a liberal arts course graduate with a 'degree' written on the same paper as a doctor, engineer, or other challenging vocational discipline.

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I reckon most universities have about 3/4 of their students studying subjects that will never get them a job outside of ASDA unless you have some family or industry connections.

That is simply untrue. For example, research by the alumni office of the university in which I work suggests that around 80% of graduates are earning in the £25-40k range within three years. It's probably more like 20-30% of graduates who will never achieve a significant increase in earning power relative to if they'd left full-time education at 16 or 18. And if you strip out those who don't attempt to (e.g. leave the job market to have children, or emigrate), I would guess 10-20%. But that's still tens of thousands more graduates than the economy needs.

Setting aside the rhetoric of those who hate higher education (especially in arts, humanities and social sciences) in a similar way to BNP-ers hating black people, there is certainly a case that we're producing more graduates than there are graduate level jobs for - and incidentally, that applies to STEM subjects as well (a friend in the medical school tells me that unemployment among newly qualified doctors is a growing problem, thanks to a big increase in the number of medical school opening during the Blair/Brown years, and capacity increases in the existing ones). And as for the loans issue, this man's sums appear to add up. I never suspected that it would be as high as 85%, but if he's right in that you'd need to be earning £51k before you'd start to pay off the capital, then the 85% figure sounds right.

All of which invalidates the left's argument that £9k fees will deter those from lower incomes from HE. As the system is currently set up, you only start paying the loans back once you're earning significantly more than you'd be likely to if you'd left school at 16 or 18. Given the supply/demand imbalance in those jobs, then it's not going to be very long before that system will have to be changed, which will probably mean a big reduction in the number of university places and the closure of some institutions. The root cause of this problem was Blair's 50% participation target.

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The research, by Dr Mike Clugston, a teacher at Tonbridge School, Kent, confirms that because of the devastating impact of the compounding of interest, only 15 per cent of students are likely to repay debts from income alone. The repayments they are required to make once they start working will do little to stop their debts escalating.

Just like the economy more generally then. :lol:

That is simply untrue. For example, research by the alumni office of the university in which I work suggests that around 80% of graduates are earning in the £25-40k range within three years.

If they are working in London (indeed living in the South East at all) then due to housing costs and the cost of living they are probably only slightly better off than a shop assistant living in the north,

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If they are working in London (indeed living in the South East at all) then due to housing costs and the cost of living they are probably only slightly better off than a shop assistant living in the north,

Quite possibly - but that is not a problem caused by higher education.

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I can't help thinking that some of these colleges/universities that provide certain degree courses are for all intents and purposes businesses trying to flog their wares.....only able to sell what they have due to the availability of loans/credit that will one day turn into higher taxes......do they work with the companies and commerce in the wider working world to place their proteges with suitable employment that fits in with all that they have learned and worked so hard for?.........or are they left to fend for themselves?.... have degrees become diluted to what they once were?......would time be better spent starting with a firm with a good set of A levels and working your way up from the bottom gaining experience, promotion and 'paid for' training from the firm that employs you.........or is that now sadly becoming a thing of the past. ;)

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Setting aside the rhetoric of those who hate higher education (especially in arts, humanities and social sciences) in a similar way to BNP-ers hating black people

I worked in media, and had many job applications from media studies students. I've previously commented on this forum that I never gave a job to a media studies student (there were always better applicants), and that I didn't know of any media studies graduate actually working in the parts of the media industry I was involved in.

Does this make me a fascist?

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Quite possibly - but that is not a problem caused by higher education.

.

Yeah, you are right, I was just trying to elaborate on the point that HE in the UK does not equate to a better standard of living.

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I worked in media, and had many job applications from media studies students. I've previously commented on this forum that I never gave a job to a media studies student (there were always better applicants), and that I didn't know of any media studies graduate actually working in the parts of the media industry I was involved in.

Does this make me a fascist?

Eye-opener for me as that's where I thought they actually were getting jobs!

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.

Yeah, you are right, I was just trying to elaborate on the point that HE in the UK does not equate to a better standard of living.

Not in purely financial terms: that ended long ago[1].

But I wouldn't've missed out on it. Education enriches life.

[1] I don't think I could put a single end date on it, because there are so many different historic trends involved. Not to mention dubious statistics confusing any overall picture.

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.

Yeah, you are right, I was just trying to elaborate on the point that HE in the UK does not equate to a better standard of living.

People have their whole lives to educate themselves.....there are plenty of ways to do that at a fraction of the cost they are asking. ;)

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Eye-opener for me as that's where I thought they actually were getting jobs!

Media studies degree - - - - - > Newspaper seller

Media studies is really like an English literature degree for students who don't like reading novels.

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Media studies degree - - - - - > Newspaper seller

Media studies is really like an English literature degree for students who don't like reading novels.

What should they study instead?

We have a terrible Secondary education system. It is a joke really. Most children at 18 (and most are still children) do not have the mathematical capability to study any of the sciences or pure maths. Couldn't study accountancy. Law and medicine would be very difficult.

Engineering? Unlikely for an inner city kid whose parents cant even change the oil filter on their modern car and the child has had no experience of basic engineering.

Languages? After studying French for 5 long pointless years?

So they are left with the humanities. And for a child who has been brought up on TV and celebrity lifestyles media studies seems the obvious choice over, say, philosophy or Greek history.

I am not defending the decision just trying to explain that the Daily Mail/Telegraph attitude does not get you very far when we look at the UK HE system.

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People have their whole lives to educate themselves.....there are plenty of ways to do that at a fraction of the cost they are asking. ;)

+1

I agree. Unfortunately our education system does not reflect that. It is just about passing exams. GCSEs. Then AS levels. Then A Levels. I did well at school and university for one simple reason: memory. I new what facts to memorize and in what order to put them. I could have told you all the elements on the periodic table but not explained their importance. I could real off the compounds that were created but not what use they were. Yet I came top of the class time after time.

The lucky ones realize early that the education system does not benefit them.

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SLC loan book, either in part or complete, is going to be flogged to the 'highest' bidder they say.

I reckon most universities have about 3/4 of their students studying subjects that will never get them a job outside of ASDA unless you have some family or industry connections.

Parents need to start putting up for their kids, because higher education is a privilege, not a right.

A whole lot of people in it should simply not be there, and it's and insult to see somebody in a liberal arts course graduate with a 'degree' written on the same paper as a doctor, engineer, or other challenging vocational discipline.

Found this, it might be of interest. ;)

http://michael-hudson.com/2013/03/banking-on-student-debt/

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I worked in media, and had many job applications from media studies students. I've previously commented on this forum that I never gave a job to a media studies student (there were always better applicants), and that I didn't know of any media studies graduate actually working in the parts of the media industry I was involved in.

Does this make me a fascist?

That depends on how you determined the other applicants to be better. If it was by assessing the specific qualifications and experience they had in relation to what you needed for the postholder, then fine. If you jumped immediately to the conclusion that someone with a media studies degree is by definition a loser and put their application on the reject pile without looking any further, that indicates a prejudice.

I have taught media studies students (I teach in a history department, but students in another school on a degree called Media and Communications take one of my modules as an elective in significant numbers): there are good ones and not-so-good ones, just like the undergrads in my own department. I am not aware of there being a particular graduate employment problem related to their degree. In fact, one of my PhD supervisees has a first degree in film studies (from a respectable, though not stellar redbrick) and worked in film distribution for 5-6 years afterwards.

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2010: Mortgage salesman - "Ah, Mr Smith, thank you for coming in. Here's your cheque, more than you asked for I'm pleased to say, treat yourself on us, haha! No you wont have to pay a penny back until you can afford it, interest will accrue though. No sorry didn't say anything, off you toddle.

2015: "Ah Mr Smith, we've reviewed our policy on loan non-payers like you and decided your credit score is now zero. We do need you to pay off your debts. Yes I know what we said, but you're a big boy now and debts are debts and you incurred them."

2020: "What with the economy as it is we've sold our loan book to factors with retroactive legislation that debts are repaid starting at one pounds earnings. Parliamentary sovereignty's a bitch eh. That's what you get for trusting the government, now where's our f***ing money?"

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+1

I agree. Unfortunately our education system does not reflect that. It is just about passing exams. GCSEs. Then AS levels. Then A Levels. I did well at school and university for one simple reason: memory. I new what facts to memorize and in what order to put them. I could have told you all the elements on the periodic table but not explained their importance. I could real off the compounds that were created but not what use they were. Yet I came top of the class time after time.

The lucky ones realize early that the education system does not benefit them.

Agreed. I think its because the general debate isn't smart enough on desired 'outcomes'.

Ironically, we're stripping education of its worth through an impoverished -scientific method: all very well wanting 'more people with higher grades', but good intentions to try to inprove have ended up with an obsessive and misguided determinism.

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2010: Mortgage salesman - "Ah, Mr Smith, thank you for coming in. Here's your cheque, more than you asked for I'm pleased to say, treat yourself on us, haha! No you wont have to pay a penny back until you can afford it, interest will accrue though. No sorry didn't say anything, off you toddle.

2015: "Ah Mr Smith, we've reviewed our policy on loan non-payers like you and decided your credit score is now zero. We do need you to pay off your debts. Yes I know what we said, but you're a big boy now and debts are debts and you incurred them."

2020: "What with the economy as it is we've sold our loan book to factors with retroactive legislation that debts are repaid starting at one pounds earnings. Parliamentary sovereignty's a bitch eh. That's what you get for trusting the government, now where's our f***ing money?"

As I understand it "Bankers" usually end up having to "sell on" a "bad" loan book usually for a fraction of its worth

so I wonder - - -

assuming "book" sold for say 30% of its value does that mean the "clients" (i.e. "us") only have to repay 30% of their loans???? :lol:

I dare someone to try it ;)

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Even when i went to university and tuition was pegged at around £1000 a year, I still got the full basic amount of an £11,000 loan over three years, and even that didnt fully cover board and living costs. I took a working gap year a year before so had another £10k or so saved up to run down but other than summer holidays didnt work during my uni years. However, the vast majority of other undergrads didnt seem to work either, so i wondered how they afforded university. With runaway inflation in the uni sector i'll be surprised if many who have had to pay the new top up x 2 fees will graduate with less than £50k in debt.

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That is simply untrue. For example, research by the alumni office of the university in which I work suggests that around 80% of graduates are earning in the £25-40k range within three years.

The difficulty with that statistic often is that it is based on a self-selecting sample, and then one very unlikely to contain anyone who deliberately understates their income. Another risk is that it is compiled by an organisation that benefits if the earnings are high. There is no indication of how many people earn above that range, and especially what is the distribution inside that range.

But I suspect the fundamental problem with your argument is that you work for a selective university where the requirements are substantially above "has a pulse". Even nowadays, only something like 10% of A-level results are As. So it may be that you only look at the very top of the distribution?

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  • 241 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
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      • Even
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      • up 5%



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