Student debt - a lifelong millstone for some.

[Greybeard]

Am I reading this Independent article correctly ? It seems that outstanding student loans are to be revalued annually in line with the Retail Price Index.

 

"...up to 60 per cent [of graduates] will never pay in full"

 

"...the combination of inflation and interest charges meant many graduates, including teachers, would never reduce the amount owed. "

 

Presumably the debt will be written off on retirement, ....or perhaps left as a charge on your estate when you die

[Alex C.]

My (2005) student loan will expire when I reach 65 if I have not earned enough to pay it off. I haven't seen a statement in a long time, but I think it's fair to say the interest every year so far since 2005 has been more than the repayments.

 

2006+ student loans are written off 25 years after graduation, regardless of how much is remaining to pay.

 

The extra tax I do pay is very little (around £90 for every £1000 I earn above £15,000) and certainly not sufficient to pay off the interest, let alone the loan for a long time. Even earning a salary of £30,000 I'd only be paying off £1,300 a year. It would still take me 15+ years to clear the loan and interest, and much more if they start charging interest at proper rates.

[jongo]

No one is forced to go to Uni.

[HJL_Shef]

I was doing a few calculations the other day, for fun. I presumed a three year degree, a payback of 9% of earnings above 21,000 and an interest on the loan of 5%, and a hypothetical (Northern) salary curve between age 21 and 51/retirement [£21,000 to £40,000/£50,000].

 

Over 30 years to 51:

- Student Fee Loan rises from £29,791 to £69,486 (before possibly disappearing)

- Based on the hypothetical salary curve, one would pay £33,300 out of their pocket during this period

 

Until retirement: values would be £101,296 and £72,290

 

Obviously, I haven't even thought about Student Loans (for living) here, just the Fee Loan, and hopefully my maths is correct. So, I think the main question is: "do you think that completing the degree that you want to do will give you enough of an advantage within the employment market to justify £11,000+ per year of study, or an average of £1,100 off your annual salary?"

 

On an aside, I think that works out about the same as a 0.5% graduate tax on your salary.

[Mr Gobby]

No one is forced to go to Uni.

 

But there are jobs that will only look and graduates, so really you have to go to uni to get the qualifications .

[Twiglet]

What I currently don't understand is, who is going to pay for it? Surely this is a false economy?

 

I'm assuming that if a university charges £6,000 per year, this will be paid upfront by the Student Loans Company. I also came to the conclusion the other day that probably more than 50% of students will never pay off their loans. Even if they do, it will take decades. Who is going to make up the shortfall?

[HeadingNorth]

I'm assuming that if a university charges £6,000 per year, this will be paid upfront by the Student Loans Company. I also came to the conclusion the other day that probably more than 50% of students will never pay off their loans. Even if they do, it will take decades. Who is going to make up the shortfall?

 

That would be the taxpayer, as it always has been. The only difference is that people who end up earning a lot of money will pay for it themselves; anyone who does not, will not.

[Twiglet]

But all the government have done is double their up-front costs, prolong the amount of time before they will see any return by raising the salary required for repayments, without increasing the percentage of salary paid. They're going to start charging a real rate of interest, but all that does is increase the amount owed, not the amount being repaid. Very few students will have any chance of ever paying it off.

 

I can't really be bothered to actually work through the calculations but it just doesn't seem to make financial sense at all.

[jongo]

But all the government have done is double their up-front costs, prolong the amount of time before they will see any return by raising the salary required for repayments, without increasing the percentage of salary paid. They're going to start charging a real rate of interest, but all that does is increase the amount owed, not the amount being repaid. Very few students will have any chance of ever paying it off.

 

I can't really be bothered to actually work through the calculations but it just doesn't seem to make financial sense at all.

 

So dont go to Uni, and get a job instead

[HJL_Shef]

So don't go to Uni, and get a job instead

 

Over 50% of 18 year olds do. Depends what job you want though, doesn't it!