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Higher education

Talk to other parents whose children are preparing for university on our Higher Education forum.

Original poster

Student loans - anyone changed their view recently?

163 replies

jeanne16 · 29/07/2017 15:48

Following the recent furore over student loans, has anyone changed their view about whether to try to fund their DCs university via a route other than a student loan?

OP posts:
SittingAround1 · 01/08/2017 19:42

Sorry should have been clear their repayment calculator assumes salary inceases in line with inflation over 30 years. I put in 30k as a starting salary.

titchy · 01/08/2017 19:51

Very few graduates start on £30k!!!

Lucysky2017 · 01/08/2017 20:28

That is why it is so hard to generalise. Our family are mostly doctors and lawyers, incomes over £100k are not uncommon, certainly over £50k. In our case I think it makes sense my children don't have loans. One of my graduate children is or will be on about £30k including rent from his property (do they include rents in the calculations?) so perhaps in his case if he never earns much more then I was silly to fund him but I am still glad I did.

Original poster
jeanne16 · 01/08/2017 21:34

A graduate earning 30K today should be earning significantly more in 30 years time. As stated above, the repayment calculator assumes salary increases in line with inflation which is not unreasonable. That is where the repayment figure of 70K comes from.

OP posts:
titchy · 01/08/2017 22:15

But I repeat very very few graduates start on £30k.

ChristinaParsons · 01/08/2017 22:25

My daughters estimated loans are £126k. She wants to be a horse physiotherapist and will be self employed. I very much doubt even a penny will be paid back

SittingAround1 · 01/08/2017 22:33

There doesn't seem to be clear data on average starting salaries. However, 30K doesn't seem that unreasonable.
From the graduate-jobs.com website:

According to the latest High Fliers report, The Graduate Market in 2016, the median starting salary for UK graduates in 2016 is £30,000. However, graduate-jobs.com estimates the average starting salary for graduates is £19,000 - £22,000.

My main problem with the whole thing being sold 'as being like a graduate tax' is that it is so unfair on average earners. High and low earners pay less. Also unlike a tax the profits go to a private company not put back into further education.

This is being sold to 18 year olds.

Rufustherenegadereindeer1 · 01/08/2017 22:43

or women in your family earn very little and just serve men at home

What now?

A great post and then you have to make a comment like that...

titchy · 01/08/2017 22:46

Takes on average ten years post graduation to earn over £30k:

LEO

SittingAround1 · 01/08/2017 23:13

The problem is every student is different. Length of course, loan amount taken, earning potential, taking time out of work in the future etc. So it is very difficult to argue if student loans are worth it.

I would hope parents & students looking into it would evaluate how much the total cost is likely to be, like you would with a mortgage or any other financial product.

Some would argue a mortgage could land you in negative equity, others would say it's a good investment as you end up owning a property. Every case is different.

One thing for sure is that like mortgages, if student loans are going to be sold to private companies profits have to be made ( which hasn't happened so far with student loans, in fact the government has lost money with it).

It's a big financial commitment for an 18 year old to make.

Original poster
jeanne16 · 02/08/2017 07:47

It is true that it is the average earners who will end up paying back the most and over a gruelling 30 years too. High earners will pay it back much faster but will still pay a horrendous amount of interest on the sum, though far less than the average earners.

It is the low earners who will probably never pay back very much. So if you think your DC will never earn much, either because of the course they are taking or because they will be a SAHP, then obviously take the loan. Personally however, I would question why they are going to uni at all if it is not to help their employment prospects. And please don't all say for the love of the subject because there are very few students who have a genuine love of academic subjects, although obviously some.

OP posts:
titchy · 02/08/2017 07:58

One thing for sure is that like mortgages, if student loans are going to be sold to private companies profits have to be made ( which hasn't happened so far with student loans, in fact the government has lost money with it).

Not sure I understand this point. Are you suggesting the government would have to sell the loan book at a profit? It won't. They used to fund a hell of a lot more HE than now and by a quirk of accounting haven't had to include loans in their expenditure so the government are already quids in, even selling for a pound.

Lucysky2017 · 02/08/2017 08:08

I suppose that why anyone cross I am funding the chldren without loans can just realise I am paying as are all tax payers, particularly those who pay a lot of tax - 1. because the loans system is run by the state at a loss even when the student loans company sells the loan books off from time to time - I think it was to Erudio and 2. we fund higher education anyway as 9250 a year does not cover all the costs. Foreign students pay about £15k.

As said above it needs to be a calculated decision. I am not sure many 17 year olds are able to make those kinds of decisions by the way. I was advising a new client this week and had to find out at the start if he were under or over 18 as it makes a massive difference legally. If you deal with an infant consumer even for a necessity like education consumer law requires particularly for complex financial services that you really explain in very simple terms what is happening and what is payable. I would not be surprised if in later years it were suggested some of the obligations 17 year olds are taking on are not fully explained nor understood.

Rufustherenegadereindeer1 · 02/08/2017 08:57

lucy

Someone high up in a bank (so a completely uncollabarated source Grin)

Said that he thought student loans would be the next misselling scandal

SuperBeagle · 02/08/2017 09:03

It's been this way in Australia for almost 40 years. They've closed the loopholes though (such as emigrating, it being written off after x number of years etc).

I support student loans, and obviously I say that as someone who has been through the system.

Rufustherenegadereindeer1 · 02/08/2017 09:04

Oh my god corroborated obviously!!!

Its early...im tired...in a rush

And a crap speller Grin

GetAHaircutCarl · 02/08/2017 09:08

Yes, middle earners will be the ones clobbered the worst. Particularly couples with both on modestly good incomes paying off two sets of loans for 30 years.

And whilst it is what it is, and of course not the end of the world, I feel that as a parent who can afford it, I'll avoid saddling that cost on my DC. Many parents I know are doing the same.

BananaSandwichesEveryDay · 02/08/2017 12:38

DC has student debt of around 50k. Some at the 'old'rate and a post grad year at the 'new'rate. Realistically, on the salary DC is likely to earn, it will never be paid back. Their degree is in a subject they genuinely love and their career choice (teaching) is one where a degree is a necessity.
Personally, I get very angry that students have to pay for their education, especially when that education is then being used for the benefit of society ( medicine, law, teaching etc), however DC is much more philosophical about it and just regards it as a small extra tax.

SittingAround1 · 02/08/2017 14:02

titchy I meant that up until now the government has controlled student loans but the repayment terms were miscalculated by them and many loans will never get fully paid back. They have lost money.

They are now looking to sell off the loans, hence the increase in interest rates to make it more attractive to investors.

As soon as student loans go private they need to be profitable for the investors. So money will be made off the backs of 18 year olds educating themselves.

This already happens in America.

I think it's morally wrong.

titchy · 02/08/2017 14:43

When the loans are sold (and yes of course they will be - though I'm not sure why you think they're trying to get rid of them right now...) the purchase price for the book will be what makes them attractive to investors, not the interest rate - which cannot change for existing borrowers as it is written into legislation as RPI + 3.

I'm not sure I entirely agree about the Government miscalculating btw - the RAB was always expected to be quite low (by civil servants anyway...), but as they don't appear as Gov borrowing the Gov aren't actually too bothered. Remember this was funded in full a few years ago and DID appear as borrowing commitment.

Lucysky2017 · 02/08/2017 15:02

Exactly Erudio (see many MN threads) would have bought the original loan book at a massive discount because of the very poor recovery rate. The state gets the cash from Erudio and then it is up to E to try to recover as much as it can. blog.moneysavingexpert.com/2014/05/06/the-government-has-sold-people-out-over-erudio-student-loans/ (That is the older loans, not the current ones which are still with the SLC)

awishes · 02/08/2017 15:09

My son has just received his re registration for his course if he had started this course in 2012 he will be paying c£3k as it is he will be paying £9250, up £250 from last year, his first. I wonder what next and subsequent years will cost. His estimate of £120k may be conservative :(

BananaSandwichesEveryDay · 02/08/2017 15:18

Somebody upthread said that if students move abroad student loans can't chase them for the money. That may be try but when DC went to university, they had to give the name and address of someone (NOT a parent) who would effectively guarantee the loan in such circumstances. The form that had to sign was very clear that if student loans couldn't recover the loan from a student who'd moved abroad, they would seek to recover from the guarantor.

titchy · 02/08/2017 15:42

Awishes - 18/19 fees likely to be £9500, possibly £9750 the year after.

awishes · 02/08/2017 16:17

And yet there are still people paying £3k, makes my blood boil!!! Not at them but at the system.