'Rich students save by paying fees up front'

[QuietContraryMary]

Lol

www.bbc.co.uk/news/education-46866346

'The wealthiest students are going to university in England for the lowest cost, by paying their tuition fees up front, say researchers.

About 10% of students are not taking out loans and so avoid interest rates of 6.3% paid by other students, says the Intergenerational Foundation.'

'Interest charges begin to build up as soon as a student begins at university - and about £6,000 can be owed before a student even graduates.

Those paying up front will leave not owing this money - and they will not be part of the repayment scheme paying back loans over 30 years.

This will give self-funders a "serious economic advantage" when they leave university, say researchers.'

This is rather silly.

Firstly the interest rate is only 6.3% during the course, or if you are on high earnings. If you are on very high earnings then your debt will get repaid. If you are on low earnings then it will never be repaid and the rate is any case only 3.3%, so the rich students never saved anything, since, well, you got fees + maintenance loan and you never paid them back, whereas they paid for them out of pocket.

The issue really isn't with the 6.3%, but with the fact that if you can pay for fees up front you have lots of money, which is hugely advantageous quite irrespective of university.

And also when you pay less "tax" if you pay it off in a lump sum?

It's a weird sort of tax, if you ask me - and you don't even pay it to HMRC.

Most teachers and nurses earn enough to pay back their loans, so the argument you may never have to pay it back is a bit pointless - who goes to university for a job that earns so little they don't have to pay back the loan?

Errr no they don't. 40% of grads won't pay their loans back - that was the original assumption the Govn made when loans came in (RAB charge).

As to who goes to university just to get a low paid job - people who regard life as a vocation (nurses, artists, musicians, teachers, actors, academics). And very sensibly they know that the loan is never going to be a big issue for them. And how glad I am that people like them exist. The world would be a very poor place indeed without them.

Regardless of what my childrn end up doing post-university, I would pay their fees upfront if I could afford it. Rather that than have to keep an eye on your income at all times in case you earn enough at any point to repay any of the loan. If you have an unreliable income, eg as an actor, that must be quite stressful, especially if mistakes are made. I'd rather my children could limit their debts in all respects, rather than have debts that might or might not pop up from time to time as their income varies over the years.

Persuading people to view student loans as a tax was one of the ways that the government were politically able to get away with introducing such high fees.

Would we think it was fair to be able to get a lower rate of income tax by paying upfront?

An actual tax would be fairer because there would be a direct correlation between what you earn and what you pay for your education.

How is calling it a tax better than paying for what you consume? Why should people who don't consume higher education, and earn average lower salaries pay for those who do? (Especially those who don't consume the service but still earn higher incomes)

?? In what way is a tax only paid by university graduates a tax that non-graduates have to cough up for, QuietContraryMary? If student loan companies can keep track of graduates, why can't HMRC?

Of course the status quo is not a graduate tax. That doesn't mean university costs can't be funded through a graduate tax, paid by high earning graduates based on their income, rather than by their parents in a lump sum.

Why should people who don't consume higher education, and earn average lower salaries pay for those who do?

I'm not saying they should, I'm saying that all graduates should pay a higher rate of tax throughout their working lives.

However it is done, it's all artificial, with graduates borrowing pretty much the same amount for fees regardless of university and quality of course, regardless of job prospects, regardless of what the taxpayer thinks of the value of the course they chose. There is no way of doing it that anyone has yet worked out that does not result in it being "unfair" one way or another. Has the current system resulted in more people from less affluent backgrounds breaking into the acting profession, or becoming academics, or musicians or artists? Because that's not what people from those industries seem to be saying.

And nurses and teachers are extremely unhappy with their long hours and low pay. Too few people are attracted to the vocations of nursing and teaching - not having to pay back student loans because you will never earn enough to do so isn't encouraging people to make the leap.

I am sure the Government also looked at a tax on new graduates - a tax on older ones who already pay in many cases 40%+ tax which funds university for those who will never pay it all back. The problem with applying it say to me - I didn't have a free university education other than fees. We had a minimum grant of £50 a year and rents etc were £900 so my parents already paying a lot of tax into the system them - up to 63% for my NHS fatherin the 1970s then very kindly made that £50 up to £900 so I had the same as the "full grant". If I also had to add 9% to my current tax rate that's quite a lot of double or triple paying for university. If we just applied the 9% to new UK institution graduates from 2021 say then people might just go to the US for university to avoiid it. I suppose we could try to cover foreign taken degrees too but it could be hard to track.

I certainly don't like the idea of loans and am happy to pay so the children have no university debt but that is unusual and I know the financial arguments the other way. I just choose to pay. Many will think I am a fool and that's fine too. I expect like me and indeed my parents they will have mortgages so I am not completely anti debt I just don't like the idea of starting a young life in debt despite it being (currently) a graduate tax of 9%.

Interestingly in going through my father's old papers I found his older brother's 1936 bill for Durham University - the fees were the equivalent today of £9000 (once inflation was allowed for) - this was from before the Post WWII grants. So just about the same. I don't know what college rent he paid.

I thought you started paying student loans back when you start earning over £21k. If that is the case teachers most certainly will be paying them back and that is even before they get senior positions. Not sure I’d fancy being a head or deputy head with all the incredible stress both entail and lose £200 a month on top. Most current senior management will have had free education with no fees to pay back and there is already a recruitment crisis.

How come Scotland manages to give its students free education?

Yet another thing the Tories have completely screwed up. Add it to the list of Brexit, NHS, school education, libraries....... List just goes on and on. Utterly incompetent unless you’re part of their private school rich brigade. One day we’ll wake up and hopefully put them in the wilderness for a very long time.

I'm sure I read (Martin Lewis maybe) that there was no financial advantage to paying the fees/loans upfront unless you were going to be getting a job with a starting salary of over £35k

We have to be careful of these articles which will drive education back to exclusively for the wealthy

N0rdicStar - to be fair, people knew that the Tories were the party of low tax and austerity when they voted for them, yet they still voted for them. It's a bit much to act surprised at the inevitable result of their openly stated policies.

Tony BLair (Labour) introduced student loan fees so perhaps let us change that around a bit. "Yet another thing the Labour party have completely screwed up. Add it to the list of....."

Scotland is having a few problems with its free system I believe - fewer places etc.

ninja, that is correct. Eg my daughters are lawyers and trainee London lawers are on about £40k a year for 2 years, then £60k as soon as they qualify etc. My son h as chosen a low career path but even then I don't care at all that I paid his fees and he might not have paid them all back. He is free of that possibility and it is better I pay than tax payers are burdened - we Tories are nice like that.

Its a tax because it is based on earnings not the loan itself.
It starts at 25k not 21k and based on a percentage of earning above that. It is also written off after a certain date or death.
HMRC now collect student loans because its based on earnings.

Since the percentage of parents paying fees upfront is higher at universities like Oxford and Cambridge and the London universities, I suspect it correlates quite well with families who expect their children to earn enough in the future for upfront fee paying to be easier and cheaper in the long term than taking a loan their child does not need - and even if it doesn't, it doesn't matter much, anyway, to those who can afford to pay it. It's just getting rid of an unnecessary irritation.

bruffin - how it works and when you start paying depends on when you went to university. Unlike a normal "tax," you are borrowing a specific sum of money for a specific purpose for your sole benefit, you do not have to borrow the money to get the benefit, and when and how much you have to pay back is fixed at the time of borrowing in your loan contract. There is nothing to say you will not in future years end up paying back this loan and paying more genuine tax to help cover the cost of other people going to university.

No thanks Xenia. The scheme labor brought in was far less damaging. £1k a year, which was manageable;less likely to end in a huge debt and many more could afford to save up to pay it up front.

The Tories mangled it with scant regard for Joe average, pretty much like they do with anything they handle.

bruffin - how it works and when you start paying depends on when you went to university
I know but the way the current student loan works is more like a tax than a loan
Its no point giving advice if you are under the old system and dont understand how the new system works.

For current student loans they are written off after 30 years, so probably by early 50s

@N0rdicStar, Scotland has far higher spending per head than England. This is funded by English taxes.

NOrdicstar
Dont agree I think the system works well now for people who are on lower wages. If you earn average wage you will pay virtual nothing back a month, the more you earn , the more you pay back.