Government to lower threshold for repaying student loan

[whatareyalaffinat]

Article in the Financial Times late last night, reporting that the government is considering a number of measures relating to student loans. They want to lower the point at which a graduate starts repaying their loan to £20k down from £27k.

This is to push more people into ‘useful’ and vocational subjects. They want to decrease the amount of debt that is never repaid.

This is not a graduate tax, this is another slap in the face for our young who have given up so much these past few years. This also hits those most who don’t come from families with wealth. This is in essence a tax on being poor.

What other loan contracts can be changed by the lender at a second’s notice?

The government can borrow money at 0.5% but student loans are 6%+ and set to rise.

A complete farce.

I thought maybe someone thought you needed a degree in Teapot Studies to work at Bettys.

@TheHouseILiveIn

Someone taking out ~£21k in their first year will have a grand in interest added to it by the time they've done their first year. If they took the same out the next year their original loan is already £3k higher than the amount they took out by the end of their second year. It's a scary interest rate. And don't get me started on the fact interest accrues from the moment you take the loan out....why not from when you graduate?

..."why not from when you graduate?"

Presumably because some people don't graduate. I withdrew from my post-grad because I didn't feel the course was very good quality. That seemed like a responsible thing to do - it was saving the government and myself money after all. I didn't realise that meant that Student Finance would immediately demand the entire amount, regardless of the threshold level.

How many of us really looked at the small print on our student loans? I certainly didn't and have paid the price for it since.

The idea that the government are out of pocket by billions because people are unable to earn enough to pay back their loans isn't entirely true either, because the government sell on the loans anyway. My undergraduate student loan has been sold on twice already as far as I'm aware. My post-grad loan has been sold onto to a company known to behave very badly.

The government already has the money. commonslibrary.parliament.uk/research-briefings/cbp-8348/

It's the companies they've sold the loans to who want paying.

Well that would be just great, currently on mat leave, barely worth going back to work as it is with nursery fees, hubby has never earned enough to pay his student loan back so what wonderful timing it would be to start paying that back now we have only just been able to afford to buy a house and start a family in our pissing forties.

One thing that has always irked me (as well as the interest rates relating to these loans) is that originally there was a cap set on how much universities could charge for tuition. All institutions took that to mean we must all charge the maximum.
But how in the world does tuition and a degree from Oxford equate to a third tier university? Both charge the same yet the level and quality of teaching will be so divergent.
I'm not putting down the 'lesser' unis but it seems insane that they all cost the same.
There is no option for someone to go to a cheaper (or less expensive) institution when the cost is the same but the degree can be worlds apart.
I would be able to make my point better if I were to use direct comparisons but that would be casting dispersions on individuals.
Degrees are NOT all equal so why should they all charge the same???

9k is wayyy too much.
So i did 16h a week but over a hundered per lecture more like a few hundred. No smaller groups. Actually there was IT labs but that was done by the post grads. And only an exam and 1 piece of coursework a term.
18.75 per hour that would.
Probably 1-2-1 would be cheaper.
It may be that more students need to live at home.if they can - but that is rubbish really as the only useful bit is the independence.
I do think everyone having to pay is good because otherwise lots of parents would either stop work or fudge their figures. The only issues are the 9k! And the interest rate.
Probably 3-4k would be reasonable.
9k is also too much considering a comparison to private school which is full time etc and for kids and with classes of 20.
Maybe wome courses coukd look.at having even more students - maybe distance or online if it really is so expensive.
Even a 27k loan is huge.

20k is not a good salary! I graduated 25 years ago and new grads average was about £24k then.

The median grad starting salary in 1996 was just over £14k.

£20k is a good salary for a single person a couple of years out of university. But for a single parent supporting a family on one wage? Not such a good wage and would involve benefits too up in the majority of cases. And this will not differentiate between the two.

This will negatively effect poor students the most, because they are the ones who were eligible for bigger student loans for maintenance. This absolutely will keep poor people poor.

I agree drivein. Also though both dp and me were taught useless programming languages/programs. I did fortran. It was luckily changed to vb the next year. Despite working in a business i never used any of the business studies just the IT. So they know nothing of how businesses do function.

What is it now eko?

@drivinmecrazy I think it’s because the cap was set more in the region of what it costs to give a standard university education. Oxbridge make a huge loss on undergrads because the tutorial/supervision system is so expensive.

I graduated in 1982 and had my first trainee law job in 1983 which was £6250 a year (after inflation that is £21,500 today). These days the same law jobs pay about £40k so trainee lawyer wages in those very very hard to get into big London firms (most lawyers do not train there) have doubled in real terms since then. In my day my parents made up the minimum grant to the maximum so similar to the minimum maintenance loan of today except there were no loans and the state paid the fees and some people even got a full maintenance grant of about £900 a year - about 5k today (and my exact university halls by the way now cost well over double what I paid even after allowing for inflation)

Notthemessiah - I have had conversations in the past where some friends have said that they are more than aware that they will never pay it back and have no intentions of finding a graduate role. This was mainly due to the belief that it will be scrapped if they fail to pay it off over x amount of years (I can’t remember how many).

In school it was presumed that if we were in top sets that we would be going to university and that was the path that was set for us. It was ok to go because you could just take out a student loan and get a student bank account with an overdraft. I can’t really remember it being sold to us as a path to a great career, it just seemed that it was what 18-21year olds did and had a great time partying.

@drivinmecrazy

One thing that has always irked me (as well as the interest rates relating to these loans) is that originally there was a cap set on how much universities could charge for tuition. All institutions took that to mean we must all charge the maximum. But how in the world does tuition and a degree from Oxford equate to a third tier university? Both charge the same yet the level and quality of teaching will be so divergent. I'm not putting down the 'lesser' unis but it seems insane that they all cost the same. There is no option for someone to go to a cheaper (or less expensive) institution when the cost is the same but the degree can be worlds apart. I would be able to make my point better if I were to use direct comparisons but that would be casting dispersions on individuals. Degrees are NOT all equal so why should they all charge the same???

I think there's an expectation that Oxbridge will be allowed to charge more soon. Perhaps some other universities as well? You can be sure that this government won't be lowering fees - just raising fees for some institutions. We're not at the American level yet. I can imagine members of the cabinet grumbling that Oxbridge fees aren't high enough to remove the competition for their own offspring.

OK, here's' some stuff about average and median starting salaries.

www.graduate-jobs.com/gco/Booklet/graduate-salary-salaries.jsp

Bringing the repayment starting point down below about 25k certainly brings in some interesting fields.

To be honest, I've come to the conclusion that student loans are simply a giant Ponzi scheme set up to keep lots of middle class academics in jobs that would otherwise simply not exist.

It's another way of creating jobs for the boys/girls by loading the aspiring working classes with thousands of pounds of debt they will spend their entire lives being chased to pay off.

The evidence shows that there are a limited number of degrees (mainly vocational) and a limited number of universities (mainly Russell Group) that are worth the effort for the aspiring working class young person. The rest are simply part of the Ponzi scheme. Choosing wisely is not made easy.

Sorry, that's probably not what people wanted to hear...and I should be clear that I believe education is a valuable, joyous thing in itself. The majority of student debt might just not generate the value some people might try to claim it does.

When I graduated from uni in 1990 a graduate job paid £18-20k if it was ok but not great, £25-30k for banks accountants and £16.5k ish for low paying but desirable arts grads jobs like publishing, art galleries, advertising (although the latter increased quickly within the first few years).

£20k for a grad job is not what we used to call grad jobs. Those are jobs that never previously needed a degree. Grad jobs are paying £27k at the low end, early £30s for better, mid 40s for top end law trainees, £90s for data scientists and merchant bank grads.

And in no universe is £20k a good wage for a graduate, 30 years after I graduated. Imagine trying to live in London on £20k AND 9% being taken for grad tax. Sheesh.

That simply isn't true : the improvement in lifetime earnings and even life expectancy for working class people (especially white males...) who gain a degree is totally measurable.

Sorry delphi, that was to makingM

£9.70 an hour tips you past £20k pa if your work 40 hours a week.
That's not a "good salary". Not by a long way.

@Piggywaspushed

What is it now eko?

It’s around £25k. Published figures can tend to be skewed by the top 100 employers that compete with each other for the top graduates.

Yeah, I found a link. Hmmm....

@Piggywaspushed

That simply isn't true : the improvement in lifetime earnings and even life expectancy for working class people (especially white males...) who gain a degree is totally measurable.

Not on the last data I read. A working class male studying English at an ex-poly could expected to see no uplift whatsoever. That's not to say they shouldn't do it, but they should know they are doing it for love of learning, not money. The uplift really is degree and university specific.

Hmmm....Sutton Trust wouldn't agree although admittedly they obsess over RG. It's specifically white males who do best, I believe. English at a so called ex poly would get grads into teaching, for example and definitely an uplift in earnings from non graduate earners of similar backgrounds. .

SickAndTiredAgain Thank you for posting that. It seems to follow what I was saying about how it's changed over the years so statements like 'graduates repay their loans from 27k is largely inaccurate for most (and if we're taking interest into account, some on the earliest plan on low wages may be getting close to similar debt amounts).

I can see why some seeing headlines of it being lowered from 27k to 20k or 23k probably isn't going to upset many when many are paying from a lower threshold and whether it's a "good wage" depends on context. It's interesting how there was a big jump when things started - from 10 to 15k - then it trickles up and then with Plan 2, there is another big jump from 21 to 25k. I can see that being used as reasoning to drop it back down going forward.

When I graduated from uni in 1990 a graduate job paid £18-20k if it was ok but not great, £25-30k for banks accountants and £16.5k ish for low paying but desirable arts grads jobs like publishing, art galleries, advertising (although the latter increased quickly within the first few years).

I graduated in 1987 and my starting salary was £6k - lower than the median but it was a small employer and a difficult time for grads in my discipline. By 1990 I had a Masters and 2 years experience and was on £14k with a much larger company.

The median grad salary in 1990 was £12k for major recruiters.