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Less Student Loan Pay Back Than Expected

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No surprise to HPCers... :lol:

http://www.bbc.co.uk/news/education-26171742

Government 'overestimates' student loan repayments

The government is likely to be underestimating the value of student loans that will never be paid back, an influential committee of MPs says.

The Public Accounts Committee reports there is currently £46bn of outstanding student debt on the government's books, set to rise to £200bn by 2042.

The government currently assumes that between 35% and 40% of that debt will never be paid back.

In its report the PAC thinks even that figure might be overly optimistic.

The Department for Business, Innovation and Skills is responsible for the overall system of collecting repayments, which is operated by the Student Loans Company and HM Revenue & Customs.

The Public Accounts Committee says that since student loans were introduced in 1990, there has been "no reliable model for forecasting how much will be repaid to the Exchequer".

'No confidence' Committee chairwoman Margaret Hodge said the government consistently overestimated the amount of money it would get back from repaid student loans by 8%.

"The Government assumes that 35% to 40% of the total will never be repaid," she said.

"That is some £16bn to £18bn on the current debt of £46bn, and £70bn to £80bn on the estimated value of student loans by 2042.

"But we don't have confidence in those figures. We think that the value of student loans never to be repaid could be even higher."

The report recommends that the department should publish "clear and easily understood annual forecasts of what it expects to collect in the year ahead, and explain any subsequent variances between forecasts and the amounts actually collected."

The committee also believes the approach to collecting repayments "is not tough enough".

"The Student Loans Company has not put enough energy into identifying those borrowers who should be making repayments but have slipped out of contact," Ms Hodge said.

"It knows very little about British graduates who live abroad or about graduates from the EU who have since left the country. Will they ever pay back their loans? The Student Loans Company simply doesn't know."

'Room for improvement' The service that lenders received from the Student Loans Company was also criticised in the report, particularly the premium-rate phone lines used as a point of contact, and the company's IT systems.

The Department for Business, Innovation and Skills insisted it had "an effective and efficient process for collecting student loans through the tax system".

A spokesman said that system resulted in "high collection rates at a low cost which we believe demonstrates good value for money".

However the department acknowledges there is "room for improvement".

"We need to ensure that all borrowers who are earning over the relevant repayment threshold are repaying their loans including those who have moved overseas after leaving their course," the spokesperson said.

"We are continually improving the collection process for borrowers and we will carefully consider the PAC's recommendations as part of this programme.

"A new and more accurate forecasting system is also being developed."

'Pay back twice' Rachel Wenstone, vice-president of the National Union of Students, said the report showed the government had "got its maths badly wrong".

"Forcing debt on to students as a way of paying for universities is an experiment that has well and truly failed. We now need to see serious thought about moving the system away from this unsustainable funding burden," she said.

"Graduates now stand to pay back twice, through their student loan repayments and as taxpayers confronting the spiralling costs of this ill-considered scheme."

Sally Hunt from the UCU, which represents lecturers, said the government had "rushed through" student loans "without doing the proper maths".

"Amazingly," she said, "we may well end up with the taxpayer footing a larger bill for students' education than before students had to pay £9,000 a year fees. It is time for a rethink."

Shadow universities minister Liam Byrne called the student loans system "unsustainable", and said it was "going bust".

"It is now clear universities are sitting on flimsy foundations. We now need urgent answers from the government for how they're going to fix this £80bn mess which our country cannot afford. Ministers have serious questions to answer."

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"Amazingly," she said, "we may well end up with the taxpayer footing a larger bill for students' education than before students had to pay £9,000 a year fees. It is time for a rethink."

That is a stunning statistic.

So essentially the traditional university entrant (who is academic and goes on to get a well paying job) is being hammered financially for no good reason as the system is actually costing more.

In former jobs I've done the payroll checks, I was surprised by how much people were losing in student debt deductions each month, and this was before £9k tuition fees.

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However it won't be this govts problem, therefore no one ultimately gives a 5h1t.

There needs to be moral hazard for MP's that they lose assets for stuff like this. Admittedly it will be the asset bought and paid for by the taxpayers but everything seems to be a circular argument any way.

Do many business run on assumptions of not getting paid for 35% and 40% of work?

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I graduate in 2011 with an MEng in Electrical Engineering

I haven't started paying any of it back. Iøm in two minds. On one hand its a joke and I know most people will never pay the thing back, and on the other hand I think the debt will be sold to a private company and then I will be completely ******.

If I ever work in the UK I might start paying it, by then it will be a ridiculous amount. Probably about 50k.

University was undoubtedly the biggest waste of money and time I have ever witnessed. Unfortunately at the time I was brainwashed and didn't have the confidence to follow what I thought.

University is a total joke and I knew it before I went. Basically what you do these days is you buy a piece of paper worth 30k, that is all you are doing. Its no different to going to Tescos and buyin eggs

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I graduate in 2011 with an MEng in Electrical Engineering

I haven't started paying any of it back. Iøm in two minds. On one hand its a joke and I know most people will never pay the thing back, and on the other hand I think the debt will be sold to a private company and then I will be completely ******.

If I ever work in the UK I might start paying it, by then it will be a ridiculous amount. Probably about 50k.

University was undoubtedly the biggest waste of money and time I have ever witnessed. Unfortunately at the time I was brainwashed and didn't have the confidence to follow what I thought.

University is a total joke and I knew it before I went. Basically what you do these days is you buy a piece of paper worth 30k, that is all you are doing. Its no different to going to Tescos and buying eggs

You raise good points. Having half of youths going to University is a bonkers idea giving them false hopes and unrealistic aspirations - and a huge amount of debt that will hamper them as they enter the big, bad world. And it is a big, bad world. Life is tough, having a £50k millstone round their necks because politicians deem it advantageous (to them) - lower unemployment, being able to brag about educational standards - is a crying shame.

The debt will be sold on, that is the political MO, then will come the heavy stuff. I do believe a generation have been completely sold down the river - that will teach them for not voting!

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Basically what you do these days is you buy a piece of paper worth 30k, that is all you are doing.

It's another form of economic rent- without that piece of paper you are automatically excluded from all but most menial and low paid jobs.

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I graduate in 2011 with an MEng in Electrical Engineering

I'd have hoped that that was one of the 'hard' subjects (and therefore a worthwhile degree). Why was it a waste of time?

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I had a great time at University, made some great friendships which are still going strong, met the girl who is now my wife, grew up a lot and gained a lot of confidence. The jobs I have had have all specified that applicants must be graduates.

However I could have learned the entire contents of my course in about 6 months rather than 3 years. The only thing that was of practical use was learning how to use Excel to a fairly high level which wasn't even a proper module of my course.

Had I paid £9k a year I'd have felt ripped off completely though - there were quite a few modules where it was basically "buy a £30 text book and teach yourself"

Edited by Timak

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That is a stunning statistic.

So essentially the traditional university entrant (who is academic and goes on to get a well paying job) is being hammered financially for no good reason as the system is actually costing more.

In former jobs I've done the payroll checks, I was surprised by how much people were losing in student debt deductions each month, and this was before £9k tuition fees.

Original system : Government borrows to pay tuition fees, pays the lowest interest rate possible, money is recovered, on average, through PAYE (so admin costs of recovery are basically zero).

New system : Students borrow to pay tuition fees, paying a much higher interest rate, which allows the banks to get a slice of the action. Money is recovered both by hiking taxes on the middle earners (effectively) with general taxation still covering the rest.

Result: Universities get pretty much the same cash per student (unless they get the fee cap lifted). The overall costs are higher, because more interest is paid. The banks get a new income stream, and the actual payment burden is shifted somewhat from high to middle incomes. And the chancellor gets to report a slightly lower deficit, for a while anyway.

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I'd have hoped that that was one of the 'hard' subjects (and therefore a worthwhile degree). Why was it a waste of time?

Because I got a 1st without having to do basically anything. All you had to do was turn up. And this is at a 'proper' university

I didnt learn anything and probably got thicker as a result of 4 years of doing nothing. I kind of think it all started when I finished my GCSEs. A levels were a waste of time as well (I got bad A level results btw).

and YES I could have gone to the library and studied myself. But in my defense, I don't blame myself as much for that, being 19 years old surrounded by people doing the absolute opposite, as I do for not trusting myself and not going entirely. Perhaps it could have been worthwhile if I had used the resources there instead of wasting them (the resources and lecturers and the research they did was in fact very very very good). In fact this is what one professor told me when I complained that I felt I had just wasted 4 years of my life when I finally had the confidence to say I was right about the whole thing, but even he admitted that he had had courses removed because they were 'too hard'. I felt that deep down he agreed with me, but obviously if he used the language I used about it I doubt he would be working there for much longer.

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I had a great time at University, made some great friendships which are still going strong, met the girl who is now my wife, grew up a lot and gained a lot of confidence. The jobs I have had have all specified that applicants must be graduates.

However I could have learned the entire contents of my course in about 6 months rather than 3 years. The only thing that was of practical use was learning how to use Excel to a fairly high level which wasn't even a proper module of my course.

Had I paid £9k a year I'd have felt ripped off completely though - there were quite a few modules where it was basically "buy a £30 text book and teach yourself"

I feel exactly the same . got a job and none of stuff i learnt was any use. thank fully i had grant and i don't feel to ripped off.

I know an accountants daughter is going to uni and he has told me she never pay her loan back .

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You raise good points. Having half of youths going to University is a bonkers idea giving them false hopes and unrealistic aspirations - and a huge amount of debt that will hamper them as they enter the big, bad world. And it is a big, bad world. Life is tough, having a £50k millstone round their necks because politicians deem it advantageous (to them) - lower unemployment, being able to brag about educational standards - is a crying shame.

The debt will be sold on, that is the political MO, then will come the heavy stuff. I do believe a generation have been completely sold down the river - that will teach them for not voting!

Indeed.......Soooo true, what a waste in so many ways. ;)

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Going to university was the best thing I ever did and would have been well worth the money had there been tuition fees at the time. Agreed that I probably wouldn't be saying the same thing if I done basket weaving at Scumbag poly mind you.

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Going to university was the best thing I ever did and would have been well worth the money had there been tuition fees at the time. Agreed that I probably wouldn't be saying the same thing if I done basket weaving at Scumbag poly mind you.

Although I enjoyed University (mostly), I would be worried about having debts that amounted to 2-3 years take home pay, when I left, assuming I got a job!

A friend of mine has just finished paying off his much more modest "student loan" after ten years, and the debt was not so big then!

I think I owed about £60, when I graduated! :huh:

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It is time for a rethink

Understatement of the millenium.

Its like they actually looked for the most inefficient, bureaucratic and costly system around (the US one) and said 'lets adopt that model'

They seem to be doing the same with healthcare. Who wouldnt want to copy the yanks, afterall?

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It's another form of economic rent- without that piece of paper you are automatically excluded from all but most menial and low paid jobs.

Yep, education inflation means that for most jobs which 1980's/1990's perhaps good GCSE's would do now you need a degree.

It's even better now you pay £27k not to be on the unemployment register for 3 years.

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Although I enjoyed University (mostly), I would be worried about having debts that amounted to 2-3 years take home pay, when I left, assuming I got a job!

A friend of mine has just finished paying off his much more modest "student loan" after ten years, and the debt was not so big then!

I think I owed about £60, when I graduated! :huh:

I managed to come out about flat, but I worked every summer and part time during term to achieve that. For me though, even if I'd come out with 60K of debt in 1980s terms, it would still have been financially worthwhile. I couldn't put a price on the experience and the lifelong friends I made though.

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Yep, education inflation means that for most jobs which 1980's/1990's perhaps good GCSE's would do now you need a degree.

It's even better now you pay £27k not to be on the unemployment register for 3 years.

That's a comment a friend of mine made in the 1990s! Borrowing from a bank to pay your own dole for 3 years! :blink:

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