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interest rate set to rise by a third after UK inflation surge

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Don't get too excited!

It's only student loans, large mortgage holders and boomer equity will be protected at all costs. 

Student loan interest rate set to rise by a third after UK inflation surge

Students appear to be paying a heavy price for the UK’s inflation surge after the Brexit vote, which will drive the interest rate on their loans up by a third to 6.1%.

The rise in inflation, driven by a decline in the value of the pound since June, means students will be charged substantially more interest on their loans, despite the fact that many other consumers are benefiting from record low interest rates. Personal loans from high street banks have rates starting at 2.8%, while five-year fixed-rate mortgages are available from 1.29%.

https://www.theguardian.com/money/2017/apr/11/student-loan-interest-rate-rise-uk-inflation-brexit

 

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However, the website pointed out that those who started university after September 2012 do not start repaying their loan until they are earning more than £21,000 a year, adding: “Unless you start off with a graduate salary of higher than £30,000, it’s unlikely you will pay off your full loan and interest before it’s wiped after 30 years anyway.”

Openly accumulating junk debt, all underwritten by the taxpayer.

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I earn feck all (significantly under the repayment threshold) and fully intend to never pay off my student loan (accrued chasing a "proper" degree, the experience of which was significantly marred by the uni's constant cost-cutting and profit-chasing followed by a related career that didn't pan out for personal reasons).

I'm 10yrs deep now and plan on sitting the next 20 quietly whistling and looking the other way until it's finally struck off.. what really concerns me of course that the goalposts will be moved once again to allow the now-private owners of that debt even more free-rein to screw people into paying it.. 

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1 hour ago, hotairmail said:

The Government and Bank of England could stop this surge in inflation and student loans in a trice.

Put Bank rate back up and unwind QE to where it was before Brexit and the £ will magically rise.

Choices. The authorities choose to punish students and incomes.

QE is the only thing keeping the UK out of recession! There's not a snowball's of it being reversed.

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39 minutes ago, ftb_fml said:

I earn feck all (significantly under the repayment threshold) and fully intend to never pay off my student loan (accrued chasing a "proper" degree, the experience of which was significantly marred by the uni's constant cost-cutting and profit-chasing followed by a related career that didn't pan out for personal reasons).

I'm 10yrs deep now and plan on sitting the next 20 quietly whistling and looking the other way until it's finally struck off.. what really concerns me of course that the goalposts will be moved once again to allow the now-private owners of that debt even more free-rein to screw people into paying it.. 

I noticed a comment in the article: "What happens if UK graduates find that they are financially better-off taking lower paid jobs?"

The 21k threshold isn't too bad. I think a lot of people might decide to keep their wage not to high above that to avoid the extra 9% on top of the tax they already pay. Even more so if you are at the 45k threshold as you would then be paying the closer side of 50% in tax if you go over. At 150k a year it's closer to 54%.

http://www.moneysavingexpert.com/students/student-loans-tuition-fees-changes

Edited by Arpeggio

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Anyone explain what constitutes qualifying income here? I assume anything that is taxable. So income from ISAs is exempt? How about dividends from outside an ISA. I assume this would be counted, so self employment is not a means of escape.. Am I right? Just asking.

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Re student 'loans', the impact for most graduates earning above the £21k lower limit - they're not 'students' anymore of course - will be to increase the nominal value of the outstanding loan more or less in line with inflation (it varies according to earnings & inflation & due to the fixed lower limit and fixed % repayment will depend upon the value of the loan and the earnings of each graduate over time)

Simply put, the policy appears to be designed to ensure that the real value of the loan remains more or less the same during its lifetime. i.e. until age 50 in order to generate broadly similar real terms tax revenues.

This differs from a 'normal' loan which remains the same in nominal terms & thus reduces in value in real terms during its lifetime due to inflation e.g. a mortgage.

Of course this is because a student 'loan' is not really a 'loan' at all. It is a graduate 'tax' which uses a device similar to a loan in order to trigger, calculate & maintain the tax payment.

 

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Stick that in your compound interest pipe and smoke it. For most graduates their maximum earning potential won't be reached before they're 30 and then the £30k student loan will be more like  £50k.

The only way I could make university stack-up for a career that might max out at £45-50k per annum would be to pay the student loan off with a normal loan in my twenties, move and default until the loan is statute barred (six years) hopefully all before  the big 30 when maximum earning potential is reached. It really is that much of a millstone, we shouldn't deprive people of the right to a proper degree at little cost to themselves afterall their learning is of most benefit to our country and economy. The young have be collateralised, securitized and sold out to the highest bidder. ****** the system.

Edited by longtomsilver

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All new graduates should be dumping any money earn above that threshold into their SIPPs via salary sacrifice, and letting the goverment whistle for it imho, as the financialisation of their costs is almost criminal.

For instance, it was zero suprise to find out that the cost of halls of residence have *quintupled* since I was there not that long ago, and starting salaries are the same. The reason? Well if you offer 9k maintenance loans, don't be suprised when the parasite rent seekers - in these cases the halls raise the rent to capture the lot.

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12 minutes ago, longtomsilver said:

Stick that in your compound interest pipe and smoke it. For most graduates their maximum earning potential won't be reached before they're 30 and then the £30k student loan will be more like  £50k.

The only way I could make university stack-up for a career that might max out at £45-50k per annum would be to pay the student loan off with a normal loan in my twenties, move and default until the loan is statute barred (six years) hopefully all before  the big 30 when maximum earning potential is reached. It really is that much of a millstone, we shouldn't deprive people of the right to a proper degree at little cost to themselves afterall their learning is of most benefit to our country and economy. The young have be collateralised, securitized and sold out to the highest bidder. ****** the system.

Not in real terms. 

That's the point. For high inflation to be sustained nominal wages must also be rising at a similar (if not higher) click. Since higher wages increase the 9% repayment above £21k this offsets the interest charge to keep the real loan value (more or less see caveats above) the same.

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7 minutes ago, Little Frank said:

Not in real terms. 

That's the point. For high inflation to be sustained nominal wages must also be rising at a similar (if not higher) click. Since higher wages increase the 9% repayment above £21k this offsets the interest charge to keep the real loan value (more or less see caveats above) the same.

Hmmm...Do you really believe this? 

Surely it's perfectly possible for high inflation to be sustained whilst nominal salaries go nowhere for the majority (no question the asset holders/executive class will capture their share appropriately). It just means everyone gets poorer. I'm not seeing wage rises, and haven't done for many, many years - especially when it comes to graduate starting sals.

It undoubtedly increases the likelihood of either civil disobedience or people gaming the system though.

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2 hours ago, ftb_fml said:

I earn feck all (significantly under the repayment threshold) and fully intend to never pay off my student loan (accrued chasing a "proper" degree, the experience of which was significantly marred by the uni's constant cost-cutting and profit-chasing followed by a related career that didn't pan out for personal reasons).

I'm 10yrs deep now and plan on sitting the next 20 quietly whistling and looking the other way until it's finally struck off.. what really concerns me of course that the goalposts will be moved once again to allow the now-private owners of that debt even more free-rein to screw people into paying it.. 

Im sorry, what? You took on the debt so why is it unreasonable for you to repay it?

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4 minutes ago, Frugal Git said:

Surely it's perfectly possible for high inflation to be sustained whilst nominal salaries go nowhere for the majority (no question the asset holders/executive class will capture their share appropriately). It just means everyone gets poorer.

Yes, this is the current position of the BoE. As long as the inflation is due to the weakened GBP and there's no sign of wage inflation, they'll continue to maintain the current rate.

Should meet with Treasury pressure though eventually, falling purchasing power + falling house prices = angry voters.

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1 minute ago, hotairmail said:

the only conclusion one can draw is that the implicit remit of the Bank is to impoverish working people.

We can offer impoverishment in a stable manner, losing around 2% of your value per year until you overdose on Xanax.

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15 minutes ago, hurricane said:

Im sorry, what? You took on the debt so why is it unreasonable for you to repay it?

:rolleyes:

Because they've conned minors into taking on these massive debts that, as explained above, it is unlikely they will ever repay.

Edited by 24 year mortgage 8itch

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2 hours ago, ftb_fml said:

I earn feck all (significantly under the repayment threshold) and fully intend to never pay off my student loan (accrued chasing a "proper" degree, the experience of which was significantly marred by the uni's constant cost-cutting and profit-chasing followed by a related career that didn't pan out for personal reasons).

I'm 10yrs deep now and plan on sitting the next 20 quietly whistling and looking the other way until it's finally struck off.. what really concerns me of course that the goalposts will be moved once again to allow the now-private owners of that debt even more free-rein to screw people into paying it.. 

And therein lies the rub

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Hilarious that the rich and upper middle class won't even have these loans. This only hits the less afluent and the poor.

Anyone else will just pay in cash and be debt free.

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My children will come out of uni to pay sky high rents, pay a large whack of their salary towards student loans, and they will have no savings and no help from me for a deposit for a home as I am a renter. Shi*

Either I will have to encourage them to forget uni and learn a trade such as plumbing or I need to emigrate.

This country is turning into a great big mess at a rapid rate, "Great" Britain is a joke.

 

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6 hours ago, Arpeggio said:

 

I noticed a comment in the article: "What happens if UK graduates find that they are financially better-off taking lower paid jobs?"

The 21k threshold isn't too bad. I think a lot of people might decide to keep their wage not to high above that to avoid the extra 9% on top of the tax they already pay. Even more so if you are at the 45k threshold as you would then be paying the closer side of 50% in tax if you go over. At 150k a year it's closer to 54%.

http://www.moneysavingexpert.com/students/student-loans-tuition-fees-changes

Or of course you could choose a subject with some commercial value, get moving through the career ladder, pay off sharpish because you minimised the debt by working at Uni ?

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3 hours ago, Greg Bowman said:

Or of course you could choose a subject with some commercial value, get moving through the career ladder, pay off sharpish because you minimised the debt by working at Uni ?

 

On the contrary: if the primary motivation of going to university is to be able to pay back the debt you only incurred by going to university then what is the bloody point of it?

Different people view the purpose of education differently, but whatever it's purpose is, it can't be merely to pay for itself.

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Easy solution: go study abroad, save a bunch, grow a network of contacts, have fun, learn a lot and then come back with international experience

University in the UK is complete nonsense these days, unless you get parachuted into oxbridge and have a made career. 

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8 hours ago, hotairmail said:

 

Many will likely more than repay the original cost of the course. Just that the rate is so high (3% above RPI) and the repayment requirement kept low, so that the debt never gets cleared.

Loan of £50,000 a year. The real rate is 3%+(RPI-CPI) = c. 5% pa.

£2,500 pa for 30 years = £75,000

 

If the amount accumulates in the early years due to low wages, then the situation may be even worse.

That's not good enough for some posters, they want their pound of flesh too.

 

:rolleyes:

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