to think that re tuition fees, the focus on the repayments is a red herring

[RitaLynn]

The coalition seem very focused on the size of the repayments, but the focus for most students is the actual size of the debt (which will explode) and will continue to increase with higher interest rates and low repayments.

To focus on the repayments is a complete red herring.

YANBU - rich kids will not think twice about it as Mum and Dad or an inheritance will sort it out. Poorer kids will shy away from starting their career with that much debt, no matter how they can pay it back.

I think it's likely to make more people stupid with money when they graduate, thinking "I owe this much anyway, what the hell?!"

Not sure what the answer is though...I'm not keen on graduate tax either.

My opinion is that the new proposals will essentially be a graduate tax for the less well off.

Those who come from wealthy families will get it paid off straight away, those who become investment bankers will pay it off in a few years, and those who take less well paid, but equally valuable jobs will be paying it off for 30 years. The government has admitted they expect 50% to never pay it off.

My main bugbear is the fact that interest is charged.

the student loan I have (don't know if it's the same now) is charged interest at the rate of inflation. which seemed a good deal when it was taken out, cos savings interest was around 6%. Now it's NOTHING and my student loan is still racking up interest of 4% every year!
It's grown by £1500 since i took it out, and I'm not getting anywhere near that in savings interest.

the repayments should be only what you padi in, no interest charged (and that should be retrospective too)

not "padi in", "paid in", but then "took out" is actually what i wanted to say.

I think the subject that hasn't really come to the fore is that saddled with a debt, any debt, the amount that you can borrow for a mortgage is reduced by the entire amount of the debt rather than the annual repayment amount. Therefore if your earnings are such that you could get a mortgage for £120,000 but have £30,000 of student debt you would only get a mortgage for £90,000. That makes a huge difference to a lot of people and will be yet another reason why graduates are priced out of the property market.

And yet with mortgages, the main focus is still on affordability of repayments, as for most people this is the relevant number. A debt of £500 is too high if you have nothing and no way of making anything, a debt of £1,000,000 is nothing to worry about if you are a billionaire. Affordability of repayments is the relevant question on most significant debt.

D

Mollie, I'm not sure you're correct there. I think mortgage lenders consider the repayments rather than the absolute debt.

I.e. assuming my take home pay is £1500, and I repay £50 per month, rather than considering the £1500 pay, they just recalculate my salary as £1450, rather than worrying about the £15k debt.

Delia, obviously affordability of repayments is important, but assuming you had a 200k mortgage, rather than a 100k repayment, assuming that the repayments were the same (for whatever reason), would the magnitude of the debt not bother you, especially if interest rates could change?

that should be 100k mortgage

I worry that something like teaching will become a very unpopular career move, as that is surely one of the essential but not mega-buck professions in which people will be saddled with debt for ever more.

RitaLynn no as presumably I and the bank would have taken into account my income and ability to repay in likely good and bad circumstances. And if I suddenly had no income at all, then I would lose my house, regardless of whether it was £100k or £200k.

In this respect, uni debt will be much easier to swallow as it goes up and down with your income, mortgage repayments don't. Undergraduates do not even have to estimate their likely earnings/job security/likelihood of being able to make the repayments, as they won't have to if they're not earning accordingly. It's actually much harder with mortgages because we do to some extent have to take a leap of faith that things will always be good.

It's a very forgiving debt provider that provides relief throughout bad times.

D

Katisha, you see I don't understand this use of words like 'saddled with' and 'hanging round their neck' in relation to uni debt (I know you only used one of them, but I've seen both frequently over the past couple of days).

It isn't really a millstone if you only have to pay back as much as you can afford, on a timescale you can afford. If they never earn enough to pay it all back, it just gets written off.

D

Delia whatever form of words you use, many people will not want to choose large debts for an education that does not necessarily lead to a highly paid career.

I think mortgage analogies are the red herring here. I don't think people can deal with large mortgage PLUS long-standing education debt and will choose not to go to university.

Fine. I happen to think that too many people are going to university anyway, and that many jobs which have lately come to require degrees, shouldnt.

But it does mean that many people of modest means will not go into jobs like teaching because of the debt.

It may have changed then. Definitely was the case in an article I read a couple of years ago. I guess it may depend on the lender.

But if you don't get into a highly paid career, you don't pay much back.

I don't know what the current average teacher's salary is these days, but say for the sake of argument it's between £25k and £30k (and I think I'm being conservative there?), they will be paying back roughly between £30 and £70 a month (which is less than they are currently paying back).

For most people earning a those amounts (a take-home salary of £1543-£1885), I don't think that's unreasonable. I'm not saying those people are going to be living in the lap of luxury, but if they're not, it won't be because of uni repayments. For most people with that level of income (which is only slightly less than what I earn), £30-£70 a month is less than 2 nights out, or the difference between the car you need and the one with the fancy wheels that you really want (this was my dilemma), or which Sky/Virgin package to go for, all decisions which people with both far less and far more money have to make all the time.

I had to pay back a lot more than that per month when I graduated, when I was earning just £16k. Yes the debt was gone quicker, but if I was still paying back £70 a month now, it wouldn't bother me one bit, it would just be factored into my monthly outgoings like my mortgage is, and council tax, and utilities etc.

D

If we want 50% of students to go to university, taking varying quality degrees just to keep them off the jobs market for 3 more years, then students can pay their own way.

If we want to go back to the 10% of elite students going to university, with decent vocational apprentiship training for the rest, then we can continue to provide free uni education.

Which one would you like?

Delia, I think we happen to disagree here then. I'm definitely from the school of thought where the absolute magnitude of the debt is a psychological burden, rather than the repayments.

ccpccp, I think that's a false dichotomy. I don't necessarily oppose fees per se. I had a debt of £15k, I've paid it down slowly (a few k left which doesn't frighten me) and I got a Masters and a PhD out of that. However, if I'd have been saddled with the thought of 4 * (9k + 4k) = 52k, I'd have been horrified.

RitaLynn, I do think the absolute magnitude of debt can be a psychological burden, where the following conditions apply:

• You have to pay it back regardless of circumstances
• If you are not earning enough to pay it back, you stand to lose something important to you
• You have to pay it back at a rate that causes you significant hardship

Mortgages can be a psychological burden, especially now when people are not feeling secure in their jobs etc. And the risk of having nowhere to live means that repayments need to be met at all costs. FWIW payments that aren't debt can be a psychological burden too, where the risk of not paying means that you lose something important like heat/light/get sent to prison etc. But you can't say the same about the proposed student loan repayment system.

I guess we do differ here, but on the whole, I'm only interested in the actual impact on the person's life. If all of my monthly outgoings were modified according to my ability to pay, I would be a very happy and completely non-financially stressed person!

D

Not 100% certain of this but I think that there are going to be conditions imposed so that you are not allowed to pay it back early to avoid the interest or just pay up front if you can - the idea is that it will be down to the student to pay it back in PAYE style rather than just have daddy or mummy fork it over. Of course there is nothing to prevent parents setting up a direct debit for the same amount into their kids bank every month if they are able to but getting the interest on these loans is a fairly significant factor in how unis are to be funded in the future. I agree that it is monthly figure that really matters. When I look at the annual mortgage statement it terrifies me that we owe that much money but the monthly repayment is within our means so fine.

Trixie, what you mean that mummy and daddy can't pay the student fees for you but you are obliged to take out a loan? What if you don't agree on loans on moral or religious grounds?