University Tuition Fees

[dorotheehw]

How can mums support the student protest against the rise in tuition fees for higher education. I went to uni one day a week when my children were 8 and 12. I could not have afforded it under proposed fees nor would I have wanted a debt of £30.000

@ prh47bridge

Somebody on £30k will never cover the interest on a £42k + loan, which means that they will be paying 9% for 30 years.

The current arrangements (although involving slightly higher repayments) mean that the loan can be paid back over about 15 years (assuming the same £30k salary).

Therefore, at a time in their mid 30s when graduates might reasonably have a young family with all the additional expenses, they will still be paying off the loan. If they should seek promotion, they will effectively be paying a 9% surtax on anything they earn.

As Middlemarch stated, the people who will be hit hardest are those like teachers and others in the same income bracket, who will earn enough to ensure that they never fall below the threshold, but not enough to be debt-free for 30 years.

Daphnedill - I think that's what I said! However, I don't entirely agree with your figures.

On the current arrangements our notional graduate earning £30,000 would pay £1350 a year (roughly £25.96 per week - 9% of all earnings over £15,000). If we assume the total loan is around £24k (given that you have suggested £42k+ under the new system which is £27k tuition fees + £15k maintenance), at current interest rates it would take 21 years to pay off the loan, NOT 15 years, so they would typically be in their early 40s when they finish paying. Our graduate would have paid a total of £28350 in that time, some £4,050 more than under the proposed system. If interest rates rise our graduate on £30k would take longer to pay off the loan and would pay more in total under the current system, whereas it would make no difference at all under the proposed system.

So yes, under the government's proposals more people will be paying for the full 30 years rather than the current limit of 25 years. However, those on lower earnings will end up paying less than they would under the current system, both per week and total. Those on higher earnings will pay more than under the current system. Exactly where the crossover point is depends on interest rates.

Of course, whether any kind of tuition fee/loan system is the right approach to student finance is another matter. As I say, I am not expressing an opinion.

I can see a nice debate here. Love the argument that this is not debt but extra tax liability. It reminds me of all the dodgdy deals the bankers were pushing... off balance sheet transactions.

Is the 1.8bn pension fund liability of BA a debt or not?

Anyway, let me add my 10 cents.

I feel the government is silly not to have adapted a two tier system, where:

1. top 20% of students study for free
2. other 80% pay 9k, or even 14k if it is medicine etc (basically pay private fees depending on the costs)

This way both cameron and libdems would be happy. It was the easiest solution of them all, and frankly... fairish too.

I understand that we have too many students now, and hence the once that would have not made it say 20years ago should now pay to study, for their privilage. Others should not pay, regardless of their social background, as frankly speaking as a government, i would be happy for the students to study and make living afterwards (though i would say that you will need to work in uk for say 10 years afterwards, or compensate the government for the education costs).

In summary, the governmet has approached this issue very rapidly, hastely adapting an economically suboptial policy and socially unfair one, whereas the solution was around the corner.

PLEASE DO NOT STOP PROTESTING. THEY PUT THIS STUPID LAW AND THEY CAN CHANGE IT.

I DEMAND FREE EDUCATION FOR THE MOST GIFTED, AS A REWARD FOR HARD WORK AND MOTIVATION TO STUDY.

I certainly wouldn't say that it isn't debt but it is an unusual type of debt. It doesn't show up on credit checks and gets written off after 30 years (25 years at the moment) even if you haven't paid anything.

kris123 I'm not sure if many of your fellow protesters would support your two tier, free only for the elite proposal. .

well, pr, you are 'laying out the facts' in a particular way which suggests that you think the fees are reasonable.

I think most people are well aware of the facts and do not think that paying back fees of up to £27000 plus interest over 30 years on top of paying ordinary taxes and quite possibly devoting their working life to public service is in any way reasonable.

Why as a society do we fund the training of the police and the army but not teachers and doctors?

5candles - I expect Pr was just applying her usual logical facts based approach. How's about you get out your calculator and show us how the NUS proposed graduate tax works in that scenario.

Or whatever it is that Labour are currently proposing.

Fivecandles - No I am not saying I think the fees are reasonable. Show me where I say that the fees are reasonable. You say I am laying out the facts in a particular way. How can I lay them out differently?

The figures for a graduate on £30k are what they are, and since others were talking about the poorer paid graduates, that seemed a good earnings figure to go for. Whether or not the repayments are reasonable is for others to judge. It is a fact that the goverment's proposals mean that poor graduates will pay less than under the existing system but better off graduates will pay more, some of them substantially more.

If you want to know what the figures look like at the top end of the earnings scale, pick a salary and I will happily work them out and post them.

actually current student loans show up on credit checks so why would this new kind of loan not show up?

Current student loans do NOT show up on credit checks. The Student Loan Company do not provide information to credit reference agencies unless the graduate has a CCJ against them due to lack of payment so student loans do not show up on the graduate's credit file. The only exception is that since early 2009 they have reported any students with old style loans who have defaulted. That only affects students who started university pre-1998. Loans made since then do not appear on your credit file. Barring a CCJ, there is no way for any lender to find out whether or not you have a student loan.

In contrast, credit card debts, bank accounts and so on appear in full. So for those debts anyone looking at your credit file will know your available credit, actual debt, whether you've missed repayments, the amount you repay and whether you have any promotional deals.

@ horsemadmom Everyone in MY country suffers from elitism and inequality, so why shouldn't you "

universal access to education is the mark of an evolved society (as is universal access to healthcare)

And yes, I always smile wryly to myself that it's the people whose children will be able to go who so profoundly argue that " Degrees will mean something" or "we need more plumbers"

Degrees will mean something, as in, "when fewer people have them"...

Having been accused a few times of favouring the government's proposals, let me try to make my own position clear.

As far as I can see there are three basic ways of funding universities:

1. From general taxation as it was when I went to uni.
2. A tuition fee/loan system as introduced by the last government.
3. A graduate tax.

It seems to me that a graduate tax is to all intents and purposes it is identical to a tuition fee/loan system but with an unlimited tuition fee, so some students would end up paying far more than under the current system. Also, unlike a loan, a graduate tax cannot be collected from graduates that move overseas. I am therefore not in favour of a graduate tax, although I accept that it has the advantage of not involving placing students in debt (and I accept that presentation is sometimes more important than the underlying reality).

I genuinely cannot make up my mind between general taxation and a tuition fee/loan system. A couple of the factors I can see:

• Both universities and the NUS are in favour of a tuition fee/loan system on the basis that this gives universities greater independence from the government. Universities also think it gives them greater ability to compete on the global stage.

• A tuition fee/loan system means that students leave university with a large amount of debt. Attitudes to debt have changed significantly following the financial crisis and the message that this debt is different (doesn't affect your credit rating and gets written off after 30 years) may not get through, putting some potential students off university.

There are many more factors in my mind which I am not going to list here. I also don't feel I know enough of the approaches taken in other countries. So I genuinely don't know which approach is better. I am, of course, aware that what we actually have is a mix between government funding and tuition fees/loans. Again, I don't feel I know enough to say whether this approach is best and whether or not the balance between government funding and tuition fees is correct. I know the universities would like to reduce or lose the government funding bit but that doesn't mean they are right.

Turning to the specifics of the government's proposals:

• Students will leave university with more debt. A student on a typical 3 year course will end up roughly £17,000 more in debt. I know the government hopes that there will be a market with some courses/universities charging more than others. This was certainly envisaged by the Browne report produced for the last government on which these proposals were based. The NUS, on the other hand, believes that tuition fees should be identical for all courses. I am uncertain about this - what answer I give may depend on the day of the week! However, previous experience suggests that most universities will charge the maximum allowable tuition fee so I suspect the government will be disappointed.

• Graduates will have lower annual repayments as a result of lifting the repayment threshold from £15,000 to £21,000. The threshold will rise annually in line with inflation.

• Graduates will have to pay for 30 years instead of the current 25 (unless, of course, they pay off the loan earlier). How many graduates will be affected depends on interest rates.

• Interest rates will remain lower than general loans but will be higher for richer graduates than they are now.

• Poorer graduates will pay less in total than they do now but richer graduates will pay more, some of them much more.

• More graduates will have their loans written off without paying them off in full. Indeed, more will be written off without the graduate ever making any payments.

To give an example of a graduate who will be worse off, let us imagine one who leaves university and walks straight into a job paying £100k. Under the current system they would have paid their loan off within 4 years at a total cost of around £24750. Under the government's proposals it would take a little over 7 years to pay off the loan at a total cost of around £51000. Repayments under the current system would be £7650 per year; under the government's proposals repayments would be £7110 per year.

I see some of the above points as good, some as bad and some as neutral. I think these proposals are better than those in the Browne report (which would have removed the cap on tuition fees completely) but whether or not they are an improvement on the current system is more open to question.

Haven't read the whole thread but would like to make a point about the current system. I heard on the radio that the student loan company has messed up a few repayments and overtaken money when loans have been paid off.

Most, and including members of my family have paid off their student loans at the age of 30. This new system means that our children are looking at this milestone being met at aged 55. It doesn't take a financial genius to work out that whilst the repayments might be the same the length of the terms are forever. Norton finance springs to mind.

Christmaseve - The repayments will be lower per year for all graduates. Lower paid graduates will end up paying less, both per year and in total - indeed, some who would pay under the current system will pay nothing under the new system. Some graduates will end up paying for the full 30 years and those in high paid jobs will end up paying much more in total than they do now.

The typical student debt on graduation is expected to be around £25k for those who started university this year. I suspect that few of them will clear that debt by the time they are 30 - they would need to be earning in excess of £45k to do so at current interest rates. However, following the changes our student earning £45k will probably be paying for the full 30 years. So you are absolutely right that some graduates will be paying for 30 years when previously they would have paid off their loan within the current 25 year maximum. How many students will be affected (and, indeed, how many will end up paying more in total than they do now) depends on what happens to interest rates and the typical size of student debt.

'It is a fact that the goverment's proposals mean that poor graduates will pay less than under the existing system but better off graduates will pay more, some of them substantially more.'

I understand that, but surely that just means they're paying off their debt more quickly. Put this way -'higher earners pay more' - makes it sound like they're bearing a bigger brunt of the costs!!

Just heard on the radio that 90% of men earn under £50k! And that's MEN!!

Stoatsrevenge - Higher earners will be paying less per year than they do now(as will all other graduates). As the loan they have when they graduate is higher they will therefore be paying for longer and will be paying more in total than they do at the moment.

However, it is also true that really high earners will pay less in total than moderately high earners because they will pay off the loan quicker. That is also a feature of the current system.

Compared with the existing system, any graduate on low earnings will be better off - they will be paying less per year and less in total than they are now. Any graduate on high earnings will be paying less per year but more in total. So, compared to the current system, it is true that the higher earners will be bearing a bigger brunt of the costs.

No, graduates on low earnigns will not be better off. If you're just over the threshold and end up paying over 30 years you will pay more in total than those on higher incomes who can pay off the loan more quickly.

How so? Surely the fees are the same. Higher earners will pay more, but will pay off the debt more quickly.
I don't understand how they 'will be bearing a bigger brunt of the costs'. In fact, I would have thought they pay less because of less accumulated interest.

Am I missing something?

There is plenty of evidence to say the people most debt averse and most likely to be put off going to university in the first place are those from lower income backgrounds.

Also, pr, I noticed that although you suggested initially that university could be funded by general taxation you didn't discuss the pros and cons of this.

What's wrong with this idea?

Why shouldn't we all fund universities in the hope that they will be accessible to all of our children and benefit society as a whole?

fivecandles - neither the NUS nor the Labour party are calling for HE to be funded by an increase in general taxation.

Have you seen any figures on this from anywhere? I think the current amount per tax payer is £400pa. However under current plans that's that's going to drop a bit - I assume.

If someone somewhere has costed this out - it would be interesting to see.

But I am calling for an increase in general taxation.

Or, as I keep saying a change in priority.

How many billions did we waste in Iraq??

And how much of tax payers money is spent on training army officers?

How much has been going on MP's 'expenses'?

So why is it impossible to fund the training of doctors and teachers?

Person A goes to University X to study Subject Y.
Obtains First. Gets graduate job on £50k/year. Pays RPI+3% until paid off.

Person B goes to University X to study Subject Y.
Obtains Third. Bums around for a few years, ends up getting call centre job on £15k/year. Never pays a penny back of their fees.

How can it possibly be fair for two people who went to the same university to do the same course (at the same time) can end up paying a different amount in fees for doing to same course?

It just unfair to those who want to achieve.

That's a strange way of looking at it siasl. Are you saying you should pay less the higher marks you get? And the better job you get?

Class of degree is irrelevant to what fees you should pay back surely?

5candles... don't worry... local service bigwigs have just been told to ditch their chauffeurs and TO DRIVE THEIR OWN CARS! So savings are being made.