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So, loans it's not really that bad

(21 Posts)
Changebagsandgladrags Fri 19-Aug-11 18:02:49

I had a look at student finance. Say you borrow £9,000 a year for fees and £7,675 in maintenance loans a year (London amount). It works out at a little over £50,000 in loan. A huge shocking amount, yes.

However, it doesn't matter how much you borrow, your payments are based on your salary. You pay back 9% of your income over £21,000. If you don't pay back the full amount after 30 years it is written off.

So, you borrow £50,000

Say your earnings are £35,000 a year.

£35,000-£21,000 = £14,000 9% of £14,000 is £1260 a year, or £105 a month.

But £1260 x 30 is only £37,800. The rest is written off.

Obv, I have discounted the inflationary interest and I haven't double checjked the maths. But for anyone thinking that going next year is going to be unaffordable, it isn't really. You might not end up paying that much more back than if you went this year, I work it out as £30,909 this year, London based. Plus this year's people pay back at earnings over £15,000.

OK if you get a good job in the city then you will pay it all back. But you'll be too busy drinking expensive champers to notice.

dreamingofsun Fri 19-Aug-11 19:22:04

are you a gov minister? this is the rubbish they've been trying to kid us with. tuition fees will still be 27k - and 9k of this is to subsidise poorer students - this should come out of general taxation not the pockets of students who happen to have slightly better off parents (not rich nec). If you are only earning 21k a year and trying to buy a house/run a car/feed a family £105 per month is a fairly significant amount of money.

50k is a massive amount of debt - 100k if you are a couple who met at uni. Thats twice my first mortgage

Changebagsandgladrags Fri 19-Aug-11 19:48:31

No, sorry I am comparing loans starting this year with loans for next year. Loads of students are in a panic because of the fee-rise, but looking at the numbers it's not as bad as it looks.

Resitting and going next year is not going to be financially cripplling.

I'm against the rise in tuition fees, yes. The increase is too big. Ideally itt should be fee-free. But it's not.

If you were earning £21,000 then you wouldn't pay anything. You only pay 9% of any amount over £21,000. So if you earn £22,000 then you pay back £90 that year (not a month).

The £105 a month above is worked out on an annual salary of £35,000 and this is with the max loan over three years.

I'm not denying that it's a lot of money. It's a huge amount of money. But the repayments won't be crippling.

gingeroots Fri 19-Aug-11 20:38:28

Not forgetting interest ( clock starts from study day 1 ) - tho at moment only 1%.

jgbmum Sat 20-Aug-11 08:12:07

From 2012 the interest rate is RPI plus 3%.

So on your example above, forgetting about interest that accumulates over the 3 years of your course, and assuming interest rates stay at 1% (ha-ha) then you will have £50,000 x 4% = £2000 interest added to you loan, so at the end of the year you owe
£50,000 - £90 (paid back) + £2,000 (interest added) = £51,910

Changebagsandgladrags Sat 20-Aug-11 20:02:20

I thought it was just inflation-based interest?

Oh well, with the interest you'd even be less likely tofully pay it off in an averagey sort of graduate wage job.

Corvax Sat 20-Aug-11 20:10:26

Message withdrawn at poster's request.

Changebagsandgladrags Sat 20-Aug-11 20:23:04

I'm not saying it's right. I'm just comparing this year to next because some students are desperate to go this year, and some may choose courses that aren't that great. But really, it's not going to make a huge amount of difference.

If a student with A-levels works for a year, they could pay some fees up-front too. Some may be better off waiting till next year, re-sitting or working.

IMO it should be free, just in case people think I agree with this fee-rise.

hocuspontas Sat 20-Aug-11 20:36:45

What worries me more is the fact that they can change the rules whenever they feel like it! Who's to say it's going to stay at 9%? And the thought of having £100,000 debt as newlyweds is just horrible.

DilysPrice Sat 20-Aug-11 20:43:19

I agree, it's not great, but it is best seen as an extra tax rather than a debt, and for most women there's no practical difference between a course that "costs 6K" and one that "costs 9K"

chibi Sat 20-Aug-11 20:45:00

Is it treated like a debt when you apply for a mortgage, does anyone know?

Changebagsandgladrags Sat 20-Aug-11 21:00:18

"The Council of Mortgage Lenders believes that student loans should not be taken into consideration when calculating the size of mortgage that can be obtained and that the loan should not be seen as a liability against the mortgage amount."

mumofsoontobelawstudent Sun 21-Aug-11 11:04:32

Not that a couple graduating from Uni with 100k of debt will be able to afford to buy a house! In the paper yesterday it said that the average age of first time buyers will increase to 35 shock

edam Sun 21-Aug-11 11:19:43

It's a scary amount of debt to have round your neck before you even start earning. All very well for government ministers, who are all very well off if not millionaires, to think it's trivial. For ordinary people, it is very significant. Especially when inflation is so high, house prices are so high, and there's no guarantee that you will even have any job after graduation, let alone one that leads to a well-paid career.

Feel very sorry for teenagers today, and young people who have the current system of student loans. £100 a month might not sound a lot to someone who won't miss £100 a month but it's a lot to most people.

Especially as the people who made these decisions all benefited from free higher education - I don't see any of them offering to pay back the cost of THEIR university tuition.

CristinaTheAstonishing Sun 21-Aug-11 11:25:26

"The rest is written off." So if it's not even breaking even after 30+ years of paying back, what economic sense does it make and why go through with all this utter rubbish?

CristinaTheAstonishing Sun 21-Aug-11 11:27:27

Oh, and I've been listening to radio interviews about this whole change of language, as if calling it a graduate tax rather than a debt makes it any more appealing. It seems it's the plebs who get worked up about it, if only they could understand how great the future will be hmm

TrillianAstra Sun 21-Aug-11 12:09:19

Students borrowing under the new system (which doesn't start til next year) will be paying back less out of each pay packet than students who were in university all through the 2000s who pay 9% of everything they earn over £15,000. They'll do it for longer, yes, but it's less of an impact on what they take home.

If you don't think that going to University will increase your earnings over £21,000, or if you think that there are no other (non-financial) benefits to going to university then just don't go.

CristinaTheAstonishing Sun 21-Aug-11 13:59:02

"They'll do it for longer, yes" - so? what if they don't want to do it for longer? Who decided that that's a good thing?

"but it's less of an impact on what they take home" - it's not, 9% is 9%, you start at 21K rather than 15K but you have more to pay.

As for the intangible benefits, yes, of course there are. What's that got to do with not being happy with the NuSpeak and the massive increase in debt?

TrillianAstra Sun 21-Aug-11 16:53:37

It'll have less of an impact during the period (if there is one) when they are at the bottom of the career ladder and are paid less than £21k.

I'm not suggesting that anyone should like it, I'm just agreeing with the OP that it's "not really that bad".

edam Sun 21-Aug-11 17:15:13

I read somewhere that when this comes in, we'll have the most expensive system in the world. Don't know how true that is. But I do know that it is costing the taxpayer an arm and a leg right now (in the start up years) so why the hell are we doing it, then? When the government keeps using 'deficit reduction' as an excuse for not doing anything good and for doing lots of bad things?

vj32 Mon 22-Aug-11 09:18:32

Finally - someone who understands the system!

I have two student loans - undergraduate and PGCE under two different systems. I just started paying back more than I was getting charged in interest, being a 3rd year teacher, with the interest rates very low. However now I stopped work to have a baby. I do not expect to ever pay off the debt. My second lot will be cancelled in 22 years, the first lot when I reach 60 - 32 years. (bizarrely) I feel annoyed I worked hard to keep my debts low through uni because now I know it was pointless!!

Unless you are a stockbroker or surgeon etc on a huge wage you won't pay it back. It is theoretical debt like monopoly money that isn't taken into account for a mortgage and most people will never pay it off - especially under the newer systems. People who have student loans under the older systems are actually much worse off because they will either have to pay the full amount, or not have it cancel until they are 60 rather than after 25 years.

Nobody knows at any given time how much you owe - because money is taken by HMRC out of your pay and only passed on to SLC once a year - the whole thing is a farce, best not to worry about it at all!

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