Tales from the Squeezed Middle

[Xenia]

Article in today's Weekend FT.It does look as if the Durham couple in the article below (see a forthcoming R4 programme mentioned at the end) are being a bit foolish. Their daughter with her Cambridge degree can pay back her student debt during her life. No need to sell their home when they have 2 other children too.

"First Person: Caroline Beck

As told to Rosie Millard
The struggling freelance writer says she ?can see the abyss?


We?d always thought of this house as being our pension. It was derelict when we bought it 14 years ago, we have done everything ourselves; the painting, the flooring, the garden ? But we need that money now. I can?t think of any alternative but to sell.

Roisin, our eldest daughter, has been offered a place at Cambridge university. I can?t bear the thought of her being saddled with huge debts, so we will sell up and live in rented accommodation.

I am a freelance writer, my partner is a wine merchant. Lots of people here in County Durham ? architects, graphic designers, photographers ? are going through the same thing. We all used to be OK. Some of them now have no work. I am still working but I can always see the abyss, my toes are reaching over the edge.

Six years ago both the children played the piano, one went swimming and my eldest daughter had singing lessons. They don?t have any lessons any more. It?s my youngest daughter Eve?s birthday next week. She hasn?t asked us for anything. We won?t give her a party because this week we had three catastrophic bills: the exhaust fell off my car yesterday; our oven blew up at the beginning of the week; and, last month, the lights in the kitchen fused.

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We look at our finances every day to find out where the money is coming from. For the last two weeks of each month we live off a lot of lentils and chickpeas.

I make my own bread because it saves me £10 a week. I make all my own cakes because if the girls take a slice of it to school, they won?t spend £2 on a muffin. So much of my time is devoted to domesticity. And I find that boring.

For six months I have not been out of this jumper. I wash it. I put it on the radiator. And then I wear it the next morning because it?s the warmest thing I possess. We all have one pair of jeans, and we do the same thing. We also save by not having the heating on much.

We used to take really flash holidays. But when we went to Europe last year, we stayed in hostels. We would have breakfast in the morning, then we wouldn?t eat again until the evening.

Recently I had a voucher for £7 off my weekly shop. I gave it to the shop assistant at the till and she told me it was out of date. Although the date on the voucher said it was in date, the scanner was saying it wasn?t. So, I am standing there with my shopping ? my kids are saying ?Oh Mum!? There are people standing behind me, but I don?t care: I want this £7 off, because £7 off is £7 off. I never would have done that eight years ago. I would have thought: ?Oh that is a crazy woman in the supermarket.? I dug my heels in, and, in the end, it got knocked off.

I went to university in the early 1980s when we were told that our generation of young women could have it all. And I did think we could have it all. I thought I could have a career. I thought I could have children. I thought I could have a cleaner and go out occasionally. When I was 21, if somebody had fast-forwarded my life and said ?That?s what you will be doing?, I would have said: ?No, no, no. That?s my mother?s generation, I will not be doing that.?

It won?t bother me not owning a house.

What bothers me is getting us all through the next decade, so we can get our children to a point where they are self-sustaining. Right now that seems a long way off. We are not living in a Victorian novel. We are healthy, we are happy, we are together. But I can?t see an end to it. I don?t know how they are going to ever afford to buy a house. They are going to be living in rented accommodation for the rest of their lives.

At the end of the day it?s a house. It?s a house that we have done up and we love and we have been really happy here. But it is just a house."

?Tales from the Squeezed Middle?, by Rosie Millard, will be broadcast on Radio 4 on Monday May 6.
www.ft.com/cms/s/2/78affbb4-b1e6-11e2-9315-00144feabdc0.html#axzz2SJ60wVvM

[LadyIsabellaWrotham]

That family need to read MSE. Martin Lewis is excellent on the foolishness of paying for tuition fees up front rather than taking out a loan.

[Hassled]

I agree - that's insane. My oldest DCs have massive student debts - I wish they didn't, but there was no way either their father or I could have paid the tuition fees and the living costs. We contributed what we could and bailed them out when things were tight; otherwise they worked every holiday and dealt with the debt.

Selling the family house would not have been a viable solution.

[alreadytaken]

student loans are fine for the poor and at Cambridge for those just above it but this person is talking about being squeezed middle. I'd guess they are above the cut-off for student finance so will have to fund their daughter but have a big mortgage on the house. So they sell and rent or buy a smaller place. There is an issue for students not being able to borrow enough to live on.

[senua]

I make all my own cakes because if the girls take a slice of it to school, they won?t spend £2 on a muffin.

Sorry. Had to smile at that. It's all a bit Marie-Antoinette. If things were really that bad then there would be no cake - homemade or otherwise.
I can't feel too bad for people who 'used to take really flash holidays' but who, for some inexplicable reason, are now skint.

And the first family -selling their house to go into rented - are bonkers.

[LadyIsabellaWrotham]

If she's that hard up then her daughter would get a maintenance grant, and a Cambridge bursary alreadytaken.

I agree that there can be a problem with middle income families struggling to pay the living expenses top-up (although they have presumably previously paid for all their child's food, clothes, entertainment, phone, travel etc, so as long as the universal 65% living expenses loan covers the rent and leccy then the rest should normally still be affordable at a stretch).

But this woman is talking about selling the family house simply because she doesn't want her DD to take on a student loan, which is utter madness.

[Numberlock]

A fool and his money are soon parted.

[senua]

oops. Did I not read that properly? With the break in the middle, I thought that we were talking about two different families. Are they really selling the house to finance DC1? What happens when they get to DC2 - what's left to to finance her through University?

As to the comment "it is just a house": wait a few years until the landlord ratchets up the rent or refuses to renew the agreement in the middle of GCSEs. I don't think that she properly appreciates security of tenure.

[Numberlock]

How will they afford rent when they retire? Mind you, the FT is hardly a barometer of average people's lives and finances.

[Numberlock]

There is an issue for students not being able to borrow enough to live on.

Couldn't agree more. Boils my piss that the maintenance loan is means tested.

[secretscwirrels]

I suppose we might be classed as squeezed middle. DH is retired so while we are not poor our ability to save is reduced now.

DS1 is 17. He would have got EMA until a year or two ago but that has gone for all but the poorest. He hopes to do a 4 year MA course. I was feeling sick with the prospect of him coming out of education owing £60k+ having been brought up in a family where you don't borrow you save up first.
However I have come to terms with thinking of it as a graduate tax, with the help of Martin Lewis.
His advice is that if you have the financial ability to help out your children then do not pay off their loans, use it to help them after uni, for example with deposit for a house.

[Xenia]

I just don't understand it. So you can borrow the £9k fees. There is no need for parents in the position she is in to raise the fees themselves. Then assuming incomes of parents are reasonably high they get a £4300 a year maintenance loan. If you live at home (and she lives in Durham so surely Durham or Newcastle university are possibilities) and if her parents buy her food £4300 covers her books.

She instead is going to Cambridge so say £3000 for her rent. So she is left with £1300 from the loan. Most students even fairly well off ones like my children take summer holiday jobs. That raises money to help keep you during the rest of the year. I do not see why she needs to sell the house at all.

I also agree there is no point in paying the £9k a year fees. I have paid my children's student fees because I can and I wanted them to graduate debt free and I can do that plus help them buy flats etc and that's because of my own career choice being fairly wise all those years ago but parents who are struggling really do not need to feel they have to cover this £9k a year. Martin Lewis is right. Also if it's a girl very very sadly the 70% of women who have children do tend to work about 8 years and then never really earn much again and I hate writing that as a feminist but if you looked at so many women on mumsnet their husband earns the lion's shares of money and even if they had a good career until they turn 30 trhey basically give up work and if they go back it is 3 hours a day or charity work. so they may well find they never in their whole lives earn over the £20k or whatever thesehold is to pay any of the loan back as they live off male earnings or move from husband to husband taking divorce settlements as they go. If you are a housewife who has bred a potential housewife then it does not make much sense to pay her student fees.

[LadyIsabellaWrotham]

It's true that as the labour market currently stands, most women will never finish repaying their student loans. The vast majority of them will pay some of it, but career breaks and subsequent SAHMing/part time work (or simply the decision to do an Art History degree in the first place ) mean that they'll get a load of it written off at the end of the term.

Which makes me wonder - do you think Kate Middleton has an outstanding student loan?

[Xenia]

KM? I don't know. Amongst my daughters' friends those of us who are reasonably well off there were difference - some parents think you only appreciate your degree if you have to pay for it yourself and do not fund their children at university even though they can afford to - which is a legitimate point of view; some others took the full student loan and stuck it in an ISA for 3 years; and we just chose to pay all the fees each year which were less than school fees anyway as I would imagine my daughters are likely to be higher rate tax payers for 30 years + and already are in their 20s.

I did not favour the ISA option as you get caught in the student loans company net on their books with all the hassle and admin attaching to that. 2% a year on what was then £3k - let us say 2% x 5000 - let us say you might make £100 or may £300 out of your ISA plan. Just not worth the hassle. Might as well not bother with the loan.

It is of course absolutely appalling that in 2013 there are such male/female differences when 60% of graduates are female. You could argue there is not much point educating beyond age 14 the 70% of girls who will have children if most really never have much of a job or income unless I suppose it helps them hook richer men in the marriage market I suppose in the style of Ms Middleton.

[alreadytaken]

in reverse order - the interest rate on student loans is now so punitive while they study, and the interest on ISAs so low, that no-one in their right mind takes out the loan and puts it into an ISA. If you are what you claim to be, Xenia, you should know that. Also the woman claims to work but to be worried about it drying up, so your comments about housewives don't really apply.

LadyIsabellaWrotham - if you are above the level for Cambridge bursaries but have a large mortgage, are worried about your work drying up and have other children who may be heading for university soon then you have financial worries. I have no idea if the student can get work in the summer to fund herself but that might be feasible.

Selling a house to avoid paying tuition fees would be mad but I know a number of people taking on extra work to fund their children's living costs.

[Xenia]

I claim to be a parent of children who do not have student loans and where 3 of the children have graduated. When my older daughter was at university she did have several friends who stuck the loan sum in an ISA. I worked out the sums then and it didn't seem worth the small profit. It may well be the case that now it is certainly no way ever going to be worth it so that shows I was right all along.

[Moominmammacat]

We can afford to pay tuition fees and living costs up front for our DCs ... but I hate the thought of missing out if they never earn enough to pay it back and am tempted to take out at least some of it. And my DH has a theory than one government, one day, will scrap the whole stupid loans system and write everything off, because it is a costly mess, so I want to be in there. Also, re alreadytaken's point on punative interest rates, I think I worked out that if DS1 borrowed £56,000, he would pay back more than £150,000 ... may as well take out a Tesco mortgage.

[Xenia]

Now it's £9k a year not the £3k a year I paid for my older one it is harder. I still think I will pay as they probably will earn enough to be required to pay it back.

It might even be a gender issue - parents of girls who are not very feminist with housewife mothers who may never earn very much and are interested in their nails and unlikely ever to earn much and give up at 30 to keep house perhaps should be taking out the loans as they never pay them back. Sons who probably are ilkely to be keeping said housewife type wives if their class or culture makes that likely then it may be for them better to pay their fees for them if a parent can afford it.

Of course as a feminist I wish that were not so and 30% of women never have children anyway but even of those plenty end up kept by men and of those who aren't many never reach the dizzy heights of £20k a year of earnings.

[senua]

I think that the whole logic is back to front. They should give loans to all - not huge amounts that some might fritter, but enough to live on. The student loan is then forgiven at, say, £1 for every £2 income tax (on earned income) paid to the Government. Thus those that use their degree to boost the country's GDP are rewarded by having their debt gradually chipped away. If you choose not to do this then that is fine but when you die the remaining debt is recovered, as a preferential creditor, from the Estate. It would be an incentive, as opposed to the current system where many are quite blase about relying on the 30 year write-off rule.

[funnyperson]

Selling the family home is a dodgy decision. A Cambridge education is not worth that much.

Not going on flash holidays and eating lentils and chickpeas describes our family life but we thought we were ...er...normal. City bankers aside, most people give up flash extensions and redecorating to fund education.

However I agree with the notion that undergraduate and postgraduate education, with the concomitant living expenses, post tuition fee hike, are currently priced out of a family budget. I do not agree with Xenia or anyone else who says paying for a university education is doable on even an above average (and in my case very decent) income. I am just lucky that my DC made it through before the hike.

[Xenia]

senua, I like that plan but that's because my children probably will pay a lot of tax ni due course. Plenty of children do degrees for reasons of loving a subject or commitment to their art and are unlikely to earn much - all those artists and actors etc who one knows will wait tables for life on the minimum wage.. In a sense with the loans system we are incentivising children to live a life post grad or idleness or housewifery or in jobs where they earn very little,. If they use their degree to earn a lot for the state they then have £40k+ to pay back. If they pick a degree which will earn them nothing or they have planned to live off the dole for life or off a man's earnings then we pat them on the back and say there there - you need never pay a penny back.

So I suppose family businesses could ensure the graduate child never earns over the ceiling and then pay them in shares or other capital gains in due course.

Is it doable if you borrow the fees (so nothing to pay now) and take your £4k a year loan? It certainly would be if you lived at home. Of course it is even if you don't take ajob.

So you must be saying it's not possible if yoyu have hall fees to pay. Oxford costs about £3k a year so that leaves you £1k if you do not do a stroke of work in any vacation and have no parental help whatsoever.

I don't agree that a £4k rent/living cost loan plus summer job (plus in some cases family help) means it's impossbile. In fact the scheme under the £9k a year fees you pay nothing for fees until you earn over the ceiling.

Also e probably want to go back to when 15% of children went to university as in my day. I was talking to an academic at Cambridge this week who was despairing of the science students who compared with all foreign students and whether from state or private schools are pretty useless. If only 10% of children went to university or 15% as in my day we could afford more state support, we could return jobs like teaching and nursing and even law to beingnon graduate or part non graduate and children could get on with work from age 16 and by the time they were 21 they would have 5 years of experience rather than keeoping them as kidults well into their 20s.

[mummytime]

Xenia I actually agree with some of what you say. It is extremely foolish to sell the house to pay one set of fees.
If she took the loan, then if she took a low paid job (highly possible with some career choices or degree subjects) then she will not have to repay, and may never have to repay.
I think the parents should pay a small amount and get some sensible financial advice. Cambridge also is more affordable as it helps its students more.

[creamteas]

Whilst I agree that it is stupid to sell the house instead of taking out the loans, the problem many encounter is that for many the maintenance loan is not enough to live on. In some cases, it doesn't even cover the rent. It is assumed that families will top this up, but this doesn't necessarily happen.

I see lots of students in real financial hardship because their families are unable (or unwilling) to support them. In some cases, they are maxing out credit-cards and taking out other high-rate interest loans to cover the basics.

Many of them are desperate to get work but there are not enough jobs for students to top with either.Lots of people who would not usually apply are taking traditional student-type work, because of the dearth of full-time work.

Summer jobs are also not as easy to come by anymore. where they do exist, employers often want them to work more months than their university vacation.

I know at least two of my students that started working full-time at Easter as they needed the money, yet this means they could not attend any classes this term. Both are planning on phoning in sick on exam days, as they will not be allowed the time off otherwise. By rights, I should report this, but getting reprimanded by uni, will only make their situation worse, so I'm not going to.

[Xenia]

alpine, yes it's fascinating how it plays out. It rewards artists and actors and dance students who will never earn much and potential housewives or those who may be going to work in a family business which will not pay them over £20k which is not what was intended although those supporting degrees as a love of learning, academia etc will support that principle and say it's fine the state in effect provides a subsidy for those studying subjects from which they will never make a living.

I listened to this week's Money Box on R4 today and Money Box live and one of those had questions about student finance including the issue above that if you don't live at home (and plenty of students do stay at home) and are not poor then you need a parent or job to make up the difference between the loan element for your maintenance/rent - £4k or whatever it is and what rent you may have to pay. One adviser did say students sometimes pick expensive accommodation and it may be worth looking for further away cheaper rooms to keep within what they can borrow or earn. Some teenagers do save up a bit of money. My children saved all their presents from relatives since they were born and had that to help at university too. Jobs in term time were possible - one worked in a restaurant once a week. I know Oxbridge does not like that and I also know that student jobs are not easy to get. Working with holiday companies abroad was one choice of my child's and those companies need many more staff during school holidays to look after the children so that's worth looking at too. Most also have an over draft.

So suppose to fund teh difference between £4k loan and your rent/travel/food you have:

1. overdraft
   
2. jobs
   
3. additional bank loan - if you can get one
   
4. parental contribution
   
5. your savings, money gifts during your childhood, paper rounds etc.
   

If all that fails many can go to university at home and have none of those problems.

So we are talking about the difference between say £4k loan and £7k they might need so £3000 a year. I think from 1 - 5 most of them will be able to raise that £3k if we go on the basis that £7k a year is what you need for rent, food etc.

[Baiji]

There's such a divide between the 'squeezed middle' kids and the 'full loan, grant and bursary' crowd who are lent / given up to £10k per year. they don't need that much.

From what I hear, the students from low income families furnish themselves with ipads, iphones, head to toe Hollister and are out every night, while the kids of working parents can sometimes barely feed themselves. It's crazy.




Oh, Xenia, I would so love it if your daughters became housewives.