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

[billybong]

,

Quote

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

It's a shame that students can't just look through the inflation surge when it comes to their interest rates unlike Mark X-Ray Carney when he's considering interest rates on government debt.

[ftb_fml]

12 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

Thanks - nice that the first response to my post was positive rather than the inevitable flaming death I was expecting

It certainly seems to make no sense to pay it back if you're earning only a little above the threshold as you'll barely be paying off the interest. Best approach seems to be all or nothing - earn a load and get the principal smashed in the first few years or earn below the threshold and avoid payment completely until the debt's (hopefully!) written off.

Tbh I count myself "lucky" to an extent as my fees were about £3k/yr - I can't imagine how younger generations can cope when getting hit for £9k/yr in fees plus living costs.. that's got to be £45k debt for a three year course. Sadly yet another mechanism to keep the rich and privildged in favourable positions while grinding into the dirt those from poorer backgrounds (no matter how high their aptitude and skill) through exclusion or lifetime debt slavery for all but the highest earners.

 

11 hours ago, Little Frank said:

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.

 

 

10 hours 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.

Totally agree with both the above posts - the intention is to tie the "loan" recipient to a lifetime of effective taxation, rather than actually helping them with a proper short term loan. In this respect it's just like HTB - a new and exciting way to screw the poor and punish those who dare to aspire to better things, dressed up as a means of helping those who've been disadvantaged by circumstances outside the government's control. Of course tuition fees and "loans" were purposefully introduced by the government (and of course could have been avoided) while they had / have plenty of alternative means of helping FTBs get into housing (by putting the brakes on rampant HPI) however neither of these suited their agenda.  
 

10 hours ago, hurricane said:

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

I took on the debt under certain contractual conditions (that the interest would rise in line with inflation, that the debt would be held by the government and that none would be repayable below a certain earnings threshold). I've kept my part of the bargain in that had I ever earned above that threshold I'd have automatically started repaying that debt - which of course I'd have had no problem with as it what I'd signed up for.

The government on the other hand have renaged on thier side of the deal (surprise, surprise) - selling off the debt to private investment concerns while (as this thread attests) introducing a special, (inflated!) rate of inflation just for students. What concerns me now is that the final caveat will go in time and that private companies will start forcing reposessions / baliff visits for those with outstanding student debt, regardless of their earnings or circumstances.

In addition the commercialisation of universities that was gaining momentum when I started massively impacted both the quality and quanity of education we received, so not only did I incur a significant amount of debt compared to those who'd gone before me, I also got an inferior service for my trouble. 

These I did not sign up for.
 

9 hours ago, 24 year mortgage 8itch said:

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

 

9 hours ago, Sancho Panza said:

And therein lies the rub

Indeed on both counts.

Sadly it appears that student debt is just another example to add to the growing pile of reasons why our society (especially the young and poor) is circling the drain. 

 

[CockneyTrader]

13 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.. 

Please don't let this deter you from finding a great career with good money. If you don't, I assure you that it is something you will regret for the rest of your life. Trust me, please.

[Sancho Panza]

12 hours 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.

 

Bankruptcy in early twenties is probably the best option.Student loans are exempt I believe(?) but turning it into a private loan if you can get one would be an option

11 hours ago, mathschoc said:

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.

 

It's very sad.

7 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 ?

Greg,I'm at uni at the minute doing a qual my employer is paying for.I hear the first year undergrads taking prospective students round making it all sound so swimmingly easy but it isn't.

My sector-Healthcare these days-is full of people doing degrees to qualify as nurses,paramedics etc that ten years ago were taught below degree level.I work with people who've never seen the in side of a uni and they're damned good at what they do.These poor kids-and yes they are poor both in generational terms and with the misrepresentations of our recent political leaders-are being sold £50,000 debts for £25,000 jobs.For some,they'll be £50,000 in the hole for a part time job at B&Q.............

Most don't have an elder 'HPCer' to tell them the realities of life.Most are just suckers in a generational ponzi scheme.

Edited April 12, 2017 by Sancho Panza

[mat109]

13 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

This is ends up distorting the whole tax system though and you end up with some crazy taxation.

I'm a 40% tax payer (just). My marginal rate of "tax" now is:

40% income tax + 2% NI + 9% loan repayment

Drumroll...

51% tax higher, 56% additional!

What if you go and do masters and get a postgraduate student loan?

That's 6% more ladies and gents.

57% tax higher, 63% additional!

Between 100-112k, the personal allowance gets withdrawn. Your effective base rate of tax is 60%, so that's a 77% tax rate with the two loans + NI.

77%!

Going really extreme, if you have four children and one person earns between 50k and 60k, the withdrawal of child benefit gets you a 72% tax charge for every extra pound.

With those two loans...

87% tax (4 kids) or 77% (2 kids)!

Why bother making the jump between 50 and 60k at all?

Another reason why houseprices are going nowhere, younger middle class earners are going to be taxed into oblivion for most of their adult lives.

[mathschoc]

HTB equity loans, you can borrow 20% of value of home and 

• There is no interest to pay for the first 5 years 
• In year 6, interest (known as a 'loan fee') kicks in at 1.75% 
• The rate increases every year thereafter at the RPI measure of inflation plus 1%

 

Student loan RPI +3% from the start. 

WTF

[Greg Bowman]

9 minutes ago, Sancho Panza said:

 

Most don't have an elder 'HPCer' to tell them the realities of life.Most are just suckers in a generational ponzi scheme.

Agree but...where are their families in all this? 

[maverick73]

7 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 ?

The draw backs are increased living age, incurred an increase in the retirement ages, slowed down the young rising up the ladder, in an era where decreasing salaries. meant less savings of money. Were following the US into large deficit.... and continuing cycle of printing money to mask the errors of those in power.

[stuckmojo]

12 minutes ago, Sancho Panza said:

 

Bankruptcy in early twenties is probably the best option.Student loans are exempt I believe(?) but turning it into a private loan if you can get one would be an option

It's very sad.

Greg,I'm at uni at the minute doing a qual my employer is paying for.I hear the first year undergrads taking prospective students round making it all sound so swimmingly easy but it isn't.

My sector-Healthcare these days-is full of people doing degrees to qualify as nurses,paramedics etc that ten years ago were taught below degree level.I work with people who've never seen the in side of a uni and they're damned good at what they do.These poor kids-and yes they are poor both in generational terms and with the misrepresentations of our recent political leaders-are being sold £50,000 debts for £25,000 jobs.For some,they'll be £50,000 in the hole for a part time job at B&Q.............

Most don't have an elder 'HPCer' to tell them the realities of life.Most are just suckers in a generational ponzi scheme.

good point on the £50k debt for £25k jobs. It used to be airline pilots who paid £50k but then they'd get a £150k job. No more. 

[Greg Bowman]

1 minute ago, mat109 said:

 

Why bother making the jump between 50 and 60k at all?

Another reason why houseprices are going nowhere, younger middle class earners are going to be taxed into oblivion for most of their adult lives.

Its never been worth it thats old news you have to gain momentum to get past it that was true 30 years ago

[19 year mortgage 8itch]

4 minutes ago, Greg Bowman said:

Its never been worth it thats old news you have to gain momentum to get past it that was true 30 years ago

Rubbish. You've just been told 2 of the new mechanisms to steal from the young AND there was MIRAS 30 years ago.

 

 

[mat109]

5 minutes ago, Greg Bowman said:

Its never been worth it thats old news you have to gain momentum to get past it that was true 30 years ago

Forgive me if I'm wrong, but the withdrawal of child benefit dating back to 1975 was withdrawn by a tory government wanting to keep pensioner perks introduced much more recently.

Doubtless same people benefited from both lots.

[mat109]

1 minute ago, mat109 said:

Forgive me if I'm wrong, but the withdrawal of child benefit dating back to 1975 was withdrawn by a tory government wanting to keep pensioner perks introduced much more recently.

Doubtless same people benefited from both lots.

Correction:

Forgive me if I'm wrong, but the withdrawal of universal child benefit dating back to 1975 was withdrawn by a tory government wanting to keep pensioner perks introduced much more recently.

 

[CunningPlan]

10 minutes ago, Greg Bowman said:

Why bother making the jump between 50 and 60k at all?

Another reason why houseprices are going nowhere, younger middle class earners are going to be taxed into oblivion for most of their adult lives.

I think it is worse than this. There is very little difference earning £20k and £75k if you have kids. Nowadays you need to hit the really big money to make the extra effort worthwhile. 

[mat109]

4 minutes ago, 24 year mortgage 8itch said:

Rubbish. You've just been told 2 of the new mechanisms to steal from the young AND there was MIRAS 30 years ago.

 

 

I've just read about the "doctoral student loan", which lumps an extra 3% on top as well, bringing my top hypothetical tax rate to 90% for a phd earning between 50-60k with 4 kids.

It's pretty hard to live on a 12k/year from a research council. I suspect this will be going to science students genuinely doing something worthwhile as well.

[Dorkins]

13 minutes ago, mat109 said:

I've just read about the "doctoral student loan", which lumps an extra 3% on top as well, bringing my top hypothetical tax rate to 90% for a phd earning between 50-60k with 4 kids.

It's pretty hard to live on a 12k/year from a research council. I suspect this will be going to science students genuinely doing something worthwhile as well.

If you need a student loan to do a PhD, you're probably a humanities student. Science PhDs are fully funded by the government (tuition fees and living costs), the student does not need to borrow money. 12k a year is enough for a single person living in an HMO to live on. I know a lot of current/recent science PhDs and none of them took out a "doctoral student loan".

[winkie]

12 hours ago, Errol said:

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.

That is why it often works out more advantageous for certain poor to see to it they continue to remain poor......no or little benefit to aim for affluence.

[mat109]

16 minutes ago, Dorkins said:

If you need a student loan to do a PhD, you're probably a humanities student. Science PhDs are fully funded by the government (tuition fees and living costs), the student does not need to borrow money. 12k a year is enough for a single person living in an HMO to live on. I know a lot of current/recent science PhDs and none of them took out a "doctoral student loan".

Not introduced yet - it's due in 2019.

All the phds in London I know are getting about 14k/year. You're right, they have to live in an HMO quite frugally, but it's possible. But this stipend has not gone up for a very, very long time and I suspect this loan system is probably going to end up replacing it.

[mathschoc]

New York's governor announced a deal to scrap tuition fees in public universities and colleges for families earning up to $125,000 (£100,000) per year, being phased in from the autumn.

https://www.timeshighereducation.com/news/new-york-moves-abolish-tuition-fees-poorer-families

[Sour Mash]

16 hours ago, zugzwang said:

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

Anyone who thinks that the existing QE (425 billion quid I think, or is it even more?) is ever going to be unwound really is deluding themselves.  That's straight up monetised debt.  At worst it'll just be written down via new legislation.  I suspect it'll be parked into custom-made 100 year 0% interest bonds at some stage, and quietly forgotten about.

 

The only question to me is, 'How much more will they print when the economy hits the rocks again?' as it surely will.

 

[VeryMeanReversion]

2 hours ago, mat109 said:

.....

87% tax (4 kids) or 77% (2 kids)!

Why bother making the jump between 50 and 60k at all?

Marginal taxation, my favourite subject (I'm not very popular at dinner parties).  Glad to see other people working this out.

I decided to stick at £49,999 a few years ago and salary sacrifice the rest into SIPP to avoid those marginal rates.  I'm getting interest from companies offering nearly twice that but all it will do for me is either :

- Hit the annual pension allowance (£40K)
- Hit the the lifetime pension allowance (eventually)
- Bring forward retirement (but can't get the money any earlier than 55)
 

I'll try and sort out apprenticeships for my kids, companies can pay for the degree as a business expense. Learning from home and on the job seems far more efficient.

My sister in law (mid-50's) has just finished a masters in Drama and milked the loans/benefits system for all its worth. Not a penny will ever be paid back.

 

[london_thirtythree]

The TPTB have fecked this system.

Too much debt, too much interest - it will never be paid back.

In my experience 10K of debt takes most about 10 years to pay back, so the student will be sorted by 30+, which seems about right.  This has weaponised the system to the point where it will either never be paid back, or students will simply move abroad or play the tax system to avoid paying it.

Hope the government are not relying on this in their balance sheet!

[winkie]

20 minutes ago, london_thirtythree said:

The TPTB have fecked this system.

Too much debt, too much interest - it will never be paid back.

In my experience 10K of debt takes most about 10 years to pay back, so the student will be sorted by 30+, which seems about right.  This has weaponised the system to the point where it will either never be paid back, or students will simply move abroad or play the tax system to avoid paying it.

Hope the government are not relying on this in their balance sheet!

It is not the interest so much nowadays as the debt itself........gone from low but managable debt, high interest to mega high principle debt, ultra low interest.

[Lonwontbuy]

4 hours ago, mat109 said:

Not introduced yet - it's due in 2019.

All the phds in London I know are getting about 14k/year. You're right, they have to live in an HMO quite frugally, but it's possible. But this stipend has not gone up for a very, very long time and I suspect this loan system is probably going to end up replacing it.

 

Remember the stipend is tax-free, and you don't start paying your undergrad student loan back while you receive it. I did my (science) PhD in 2008-2012 and was earning more as a PhD student that my friends with graduate jobs. Admittedly I was funded by the Wellcome Trust, one of the most generous, but I started on £22k rising to £24k by the 4th year. I think the average stipend for non-Wellcome stipends was £18-20k in London back then, I've no idea what they are now. My tuition fees were covered by my grant, as are almost all other science PhDs that come with charity/research council funding.

[Democorruptcy]

7 hours ago, Sancho Panza said:

 

Bankruptcy in early twenties is probably the best option.Student loans are exempt I believe(?) but turning it into a private loan if you can get one would be an option

 

A bit about it here on the governbankment's bankruptcy page:

Quote

 

7.2 What happens to your debts
You’ll be freed from your debts once your bankruptcy has ended, except for:

debts gained by fraud
money owed under family proceedings (maintenance and lump sum settlements)
damages payable to anyone for personal injuries
student loans
court fines
debts created after the bankruptcy order

https://www.gov.uk/government/publications/guide-to-bankruptcy/guide-to-bankruptcy

 

The loans must be going to be sold cheap to the right faces e.g. Gidiot Osbanker/Rupert Harrison (ex-Treasury, Gidiot's main advisor) at Blackrock