Graduated 2015 - shock of loan cost!

[goingmadinthecountry]

Dd1 graduated last year and her fees loan (didn't have maintenance loan) has increased already from the £27,000 for fees to £30, 160! Obviously lots of people are in the same boat but I'm truly shocked at the amount of interest already. Next year's MSc will be another £10500 before living expenses. Can't see her buying a flat anytime soon!

I think it's the amount of interest that's shocked me the most.

NewLife: It would be much better if areas that aren't well served by the 'you must have a degree' mentality would stop seeing the degree as a must have. It's got to be about what's right for individuals and for different purposes.

To be clear, I'm not talking about any single named degree in particular. You can find universities that offer very high quality degrees in every subject (however much some people might want to look down on whole named subject areas). But, unfortunately there are lots of degrees (in a very wide range of subjects) that are really not high quality and which neither educate their students in any meaningful way nor improve their earning potential.

It really isn't a good idea to subsidise these kind of degrees. It also takes up funding that could be used for all those other possibilities that have been pushed out by the mass marketing of HE to everyone, however unsuitable it might be for them. You can see this quite clearly in the absolute disaster that is FE funding these days.

Ayeamarok, my figure of nearly £500pm payments on a salary of £60,000 was based on a postgraduate and undergraduate loan, so repayment at 15% above £21k income. Nearly all my dcs friends are going on to do postgraduate degrees this year, the all seem to think a masters or doctorate is needed to get a good job (or haven't managed to get one, so are doing the postgrad to strengthen their CVS). The repayment at £60k is I think £487 per month (nearly £500 in my book) which is almost a sixth of take-home pay. It's certainly not just a few quid.

Was talking to some of my young colleagues today - they owing nothing in even the same region as dd, despite 4 years at university already. This 12k really has changed it to a whole new level. Even (badly paid) teachers used to pay off their debt in 10 or so years.

I totally agree about the number of pointless degrees. Mine was in Music but from a top RG university - fellow students are working in all kinds of areas. I do wish in retrospect I'd entirely ignored my mum and done law however. Some of my best-paid friends don't have degrees. Ds's earning potential as a tree surgeon won't be bad and he's been nowhere near a university.

Just wish I had enough to pay the fees, but we have 4dc and not enough money right now. I'm in a better position than many of my friends with children at university - can support them to a certain extent.

I do agree actually on the pointless degrees for people who aren't academic being a waste of time and devaluing the rest of the degrees.

I despair at the number of so-called universities who do open book exams, give exam questions out beforehand, allow notes into the exams, allow resists of finals and mark essays and dissertations twice before they have to be formally submitted...

However, people with a joke degree from a joke university who didn't really learn anything while they were there are unlikely to get much benefit out of having it. So no, they are unlikely to ever pay back the fees and have that deduction from their pay. But that's because they'll be earning less than 21k.

Again, I know which group I'd rather be in.

Yes, those who will never work much or earn much pay nothing back. Those who earn a fair bit and work rather than say going part time or giving up work to have babies or marrying a richer husband and not working pay back a lot including interest - 9% is huge in my book given most mid income earners have masses of expenses with high house prices and very expensive child care costs.
And others who don't take out loans don't have the interest costs (in fact in my view should get a discount because we will actually pay the fees rather than end up with half the loan book being written off and funded by tax payers years down the line). My children have and will graduate debt free because I never gave up work and earn quite a bit although it's not easy and I am definitely not a millionaire. I am just a single mother who funds the children 100% alone.

The interest rate is not 9%.

Actually I don't think User1 meant the interest was 9% although it perhaps was not clear? Apart from that, I agree with everything she says.

The fact is that the 21k threshold is being frozen so more and more people will be paying back loans. This is essential as it is unsustainable for half the loans to be written off. So most people will be paying back 9% of their salary over 21 k, possibly for their entire working lives, as the loan just keeps increasing on a scale of RPI plus up to 3%.

I am really not sure how you can think this is fine.

9% is the effective graduate tax - it's not the interest rate although presumably if we got back to the 12% mortgage interest rates some of us used to hvae the fun of paying in the old days then it might be. If base rate were 7% say and you pay interest at a rate over base rate then that could be so.

My children are very lucky I never gave up work and picked a higher paid job than I might have done plus am choosing to pay BUT it is not an easy choice now the fees are £9k a year and I have twins coming up to that stage so double trouble. It's £9k plus £7k rent plus probably another £7k maintenance (£23k a year against current school fees of £16k a year)x 2 x 3 years (then post grad years to fund). which is £138k for the two over 3 years plus they will probably do post grad stuff like their sisters after. Then need a bit of help with a flat deposit.

Also if you think your child being female will give up work anyway and never earn much again (still quite commmon even amongst the London lawyers I mix and work with) then it could be silly for a parent to pay or if the child wants to follow their heart and earn a pittance doing art or something again you'd be a fool to help them avoid a loan they may never have a legal obligation to pay back. I may be putting money down a drain here when I could instead force other tax payers to pay it through the loans which the teenagers may never actually have to pay back. It's ironic that if the child makes a very unwise degree choice and/or pursues a low paid career they won't pay a penny back but if they sensibly choose something that might mean they earn more than a non graduate they get this massive debt - as if the state is saying make a bad degree choice and we shall reward you. Be sensible and 9% of your wages will be gone for years. (And mortgage lenders' affordability questions do ask about loan commitments)

My main issue is why is it OK to increase marginal tax rates for above average earning graduates by 9% but not non-graduates or older graduates on similar income levels?

I have 3 DDs and have misgivings about helping to fund their education as I would want them to be on a level playing field with a potential partner.

StepAway

That was my point really. Not that Degrees in the Arts were particularly bad but they can be useless.
I think if going into Admin they could be quite useful but for teaching you'd do a teaching qualification etc.
The only thing that an artist should be judged on is their ability, talent, portfolio etc. So auditions and interviews should determine progression and employment, not a degree.

Unless I'm mistaken it would cost in excess of 80k for a four year undergrad degree in London, including fees, rent and living costs.
It's a difficult decision as future govs could scrap existing loans so if you'd paid outright you'd be pretty pissed off. Or they could mess about with interest or move goal posts to wherever they liked.

People have already started offering free accommodation in London, even though we've years to go yet, but not sure if that would work out for the full 4 years. Would save a fortune though.

No government is going to scrap existing loans.
In fact they will sell them off for an undervalue. And the buyer of said loans will never abandon them. Why would they?

Maybe not abandon existing loans, but as you have just identified, sell them on.
Then anything could be applied to repayments.
It's ok people saying don't worry it's just a tax, it isn't it's a loan with interest and quite unstable prospects for the future.
There is no way I'd encourage my children to do this nor would I or could I put up the money myself.
I suppose we can all hope for another labour gov to make it nice and easy for us again
I studied up to PgCE and was paid to do so, it didn't cost me a penny from 2001 - 2010.
So bearing this in mind I'm hoping for a turnaround within the next 6 years.

NewLife. You will have to explain your comment about people offering free accommodation in London. Where on earth have you heard that?

Also I can assure you we are not all hoping for the return of a Labour Government.

My main issue is why is it OK to increase marginal tax rates for above average earning graduates by 9% but not non-graduates or older graduates on similar income levels?

Student loans for maintenance began in 1992, and gradually escalated to become larger loans for maintenance/fees. So many older graduates have had to pay back student loans themselves, contributing to their own education.

I don't agree with the student loan policy but all major parties have manifestos committed to not increasing personal tax or decreasing it. This is what people vote for. So if as a country we vote for low tax (relative to the rest of Europe) then the consequence is that the younger generation have to pay a graduate tax. In effect the country is choosing to pay less tax now and make our children pay more in the future. (And thus in the future we will be screwed, as we will be using chunks of their tax to pay for services which have already happened, instead of paying for services in the future.)

I would prefer to increase tax rates a bit (and decrease the percentage going to university significantly) rather than have the current system of graduate tax for higher education but only a minority of people vote for parties which pledge increased taxation.

So if as a country we vote for low tax (relative to the rest of Europe) then the consequence is that the younger generation have to pay a graduate tax

This is the long & short of it. People have voted for governments which promise to lower taxes.

As a university lecturer, I don't like this new fees regime. There is ONE silver lining however - let's hope that it teaches students what their degrees cost (although £9k doesn't actually cover costs) so they won't just piss about. They will appreciate the value of the opportunities they're being offered.

And pigs might fly ...

newlife companies that but the loan book can't do anything they like; they are bound by the terms of the sale.

That said, what I suspect we may see in the future is the state handing over the loans system to outside providers in full. Loans from such providers may not be as favourable as they are now.

Hoping for a government to arrive and provide free tertiary education is just daft. The writing has been on the wall for many many years now and lots of parents have been organising their finances accordingly.

Whether all this is right or wrong is moot.

We have had a good few threads on mumsnet about those in the oldest student loan book which has already been sold on and then I think there was a second sale of later loans too. It's all extremely complicated.

I am not sure it was fairer when I went when we just had to find our rent and food/book cost (and no in those days many of us did not obtain a full grant for that - we had to hope our parents would pay). In my day 85% of people didn't go to university so the 15% of us who did were subsidised by all those others who never got the chance and who earned less as a result. I am not sure that was fairer.

jeanne

We have colleagues, friends etc who live there and have always said they'd put dd up for her education. But obviously it would be bed hopping for four years. Maybe a year at one place would be doable and might provide her with some work too if it fit in with studies.
Just something offered that we hadn't considered as an option, just put to back of mind as she's still only 12.

GetAHaircut

All my education was free, in fact I got grants too, wtc, and was paid 6k to do PgCE it was only a few years ago. I started off at HND, then Degree, then PgCE. That nice Tony Blair paid for it
I was failed as a child so I eventually gained the education I should have had over thirty years ago.

All my education was free, in fact I got grants too, wtc, and was paid 6k to do PgCE it was only a few years ago.

There are always unusual cases and exceptions. If you want to be a physics teacher, you can currently get a 30k bursary to train to be one after your physics degree, effectively allowing you to pay off all your tuition fee loans.

In the period 2001-2010 most students had to take loans which only partially covered maintenance and then had to take loans for fees after these were introduced. You were the exception, not the norm.

Free/almost free higher education is unusual and will remain so unless people vote for significant tax increases (several percent).

This wasn't unusual at all and was the same for all students.
The wtc was unusual but I happened to be working too.
The younger students had exactly the same as me, nothing unusual at all.

For most undergraduate courses you have had to pay fees since 1998. Student loans gradually replaced maintenance grants for undergraduate courses from 1992 onwards. I was educated in the 1990s and I had student loans to cover my costs, as did most of my Cambridge contemporaries whose parents could not afford to pay upfront.

I'm not sure why you would persist in saying that your case was not unusual, when googling quickly tells you that it was?

My daughters' fees were £1k a year and my older son's £3k. The twins will be £9k each. It's a big jump. Althoug in a sense it's cheaper now because I think you can get loans whereas before Ibelieve you had to fund some of it and pay up front so it's debatable which is worse - requirement to pay something up front you don't have or being obliged to take out loans (no up front cost) which you may never have to pay back.

esornep

My peers must have been unusual too then as none of them had loans.
Most worked so covered any fees this way.
The ones who were parents had the same as me, those who worked also got tc and cb. I'm not making it up. Fees and financing were not seen as a problem and maybe different depending on what subject and level you were studying too.

Or your DCs could leave the country and let the tax payer repay the loan. Newspaper today says 26000 British graduates have absconded and cannot be traced for payment of loans. Add this to all the EU students who also absconded. The British graduates apparently now owe a total of £367million and the EU ones owe £89Million.

newlife the situation you're describing is not recent though. Fees were low then, and you're not describing a full time course, living away from home.

By the time your DD goes to university I suspect tuition fees will be in the region of £11k per year. Living costs in London at least £11,000 per year.

Is your DD really going to be able to earn that each year whilst studying?

You seem in denial about the whole thing. Sorry, but there's no such thing as a free lunch.