Student Debt

[denislawsbackheel]

So our government have sold finance to students registering for degrees that their education system is offering that are not worth the paper they are written on - Surely that is tantamount to fraud ?

You can buy a suit hand made in Saville Row or off the shelf in Primark.
Your choice.
Are Primark committing fraud?

 

[Citizen of Legoland]

Saw this thread so thought I'd look at my latest statement.

£26k owed, £2248 paid via PAYE last year but £1550 was added in interest so I only reduced my balance by £700.

At this rate it'll take 35 years to pay mine off and I left uni over 10 years ago. I'm on over £50k per year so I'll be paying far more than most. I'll also hit 65 long before that 35 years where then it'll be written off.

I'm on the older plan so kids nowadays will owe at least 3x more so the vast majority will never pay them off. I wonder if the treasury amortises the loans? If not it's an absolute monumental ticking timebomb, tens of billions.

This is the point, most people won’t pay it off, it’ll get written off for probably 80%+ so it’s a pointless figure in some ways. It’s really a “potential total tax bill” rather than a debt. What other debts just get written off in the same way? There’s no need to think about it. You could say I have £10billion debt with a payment plan of £200 a month but if it’s written off after 30 years it doesn’t really matter.

People just see big numbers and panic.

 

[inbetween]

This is the point, most people won’t pay it off, it’ll get written off for probably 80%+ so it’s a pointless figure in some ways. It’s really a “potential total tax bill” rather than a debt. What other debts just get written off in the same way? There’s no need to think about it. You could say I have £10billion debt with a payment plan of £200 a month but if it’s written off after 30 years it doesn’t really matter.

People just see big numbers and panic.

Where is the government finding the money to write off the loans given the new plans mean that the write-offs won't begin for at least 20 years?

Half a million students goto university every year and I presume a significant number take on at least £9k in debt. So that's £4.5bn every year and that's just for the tuition fees. This can potentially be nearly doubled when you add maintenance loans and then there is the interest on top....

The government must be sat on a massive ticking financial time bomb.

 

[Citizen of Legoland]

Where is the government finding the money to write off the loans given the new plans mean that the write-offs won't begin for at least 20 years?

Half a million students goto university every year and I presume a significant number take on at least £9k in debt. So that's £4.5bn every year and that's just for the tuition fees. This can potentially be nearly doubled when you add maintenance loans and then there is the interest on top....

The government must be sat on a massive ticking financial time bomb.

Tax.

That’s the thing, the system hasn’t really changed, the majority of the cost is coming from the taxpayers just like it used to. Countries still need to pay to educate its nurses and civil engineers and lawyers etc. and that’s absolutely correct. However now we can claw the cost back if someone goes on to earn a fortune. And for essential workers like nurses they will pay very little back in comparison.

 

[inbetween]

Tax.

That’s the thing, the system hasn’t really changed, the majority of the cost is coming from the taxpayers just like it used to. Countries still need to pay to educate its nurses and civil engineers and lawyers etc. and that’s absolutely correct. However now we can claw the cost back if someone goes on to earn a fortune. And for essential workers like nurses they will pay very little back in comparison.

This is perhaps why tax rises on the young are ridiculously unfair. If they earn enough then they'll be paying money to finance a student loan and then they're paying tax to pay for writing it off. So there is no such thing as the loans being written off because of the interest, anybody paying the full amount will have paid everything they borrowed and more.

The UK financial deficit is currently £120bn per year so either way whatever tax is paid by everybody isn't enough.

It'd make far more sense to make tuition fees free which kerbs the interest payable and that's fairer. Then the tax burden is spread evenly amongst the population instead of imposing a financial burden that in reality will never be repaid anyway.

 

[mexico1970]

Having a degree per se is not the important part, its having a useful and relevant degree. Without going down the rabbit hole of what is and isnt a mickey mouse degree, its fair to say not all degrees are valued equally by employers.

The new bar for the best candidates is having a masters degree from a top university and on the route to being chartered. Once you have been working for 5-6yrs, for the best paying roles being chartered is almost mandatory. Once you get beyond that being a fellow of an institution, which pretty much means you are nationally and in some cases internationally recognised in your field.

Which means that most degrees are pretty much worthless when many can't find a job at the end of said degree, and to make things worse they are saddled with debt.

It brings me back to the point that if you know you wont be able to earn enough money to clear your debt then why go anyway? And if you do go then it's all on you if you decide to go.

 

[Citizen of Legoland]

This is perhaps why tax rises on the young are ridiculously unfair. If they earn enough then they'll be paying money to finance a student loan and then they're paying tax to pay for writing it off. So there is no such thing as the loans being written off because of the interest, anybody paying the full amount will have paid everything they borrowed and more.

The UK financial deficit is currently £120bn per year so either way whatever tax is paid by everybody isn't enough.

It'd make far more sense to make tuition fees free which kerbs the interest payable and that's fairer. Then the tax burden is spread evenly amongst the population instead of imposing a financial burden that in reality will never be repaid anyway.

I don’t understand why a young person should not be subject to tax rises when an old person does. People will be paying their student loans off well into their fifties and sixties and then do you tax young people who didn’t go to university more than those that did?

The problem I have with the discussion of “debt” and “burden” that people choose to use is it will impact those who fear these words the most, those from poorer backgrounds. And that is putting them off from gaining education and skills that can get them out of poverty.

 

[inbetween]

I don’t understand why a young person should not be subject to tax rises when an old person does. People will be paying their student loans off well into their fifties and sixties and then do you tax young people who didn’t go to university more than those that did?

The problem I have with the discussion of “debt” and “burden” that people choose to use is it will impact those who fear these words the most, those from poorer backgrounds. And that is putting them off from gaining education and skills that can get them out of poverty.

Here is the unfairness and I might be working it out wrong so I'm happy to be corrected.

As in my previous post I pay around £2200 per year towards my student loans through PAYE and the remaining balance is £26k so by my logic I could clear the loan in around 10-12 years. I'd be happy to pay that balance directly monthly so that I could clear it asap.

The problem is they add on £1500 a year in interest so I actually only pay off £700 from the balance per year. That means it'll take over 35 years to clear the balance and I earn over £50k so I'm paying a lot more than most.

The interest is a killer and I'll pay FAR more than I borrowed if I paid it all off over time (£2200 per year for 35 years is over £70k). I'm also paying tax which in a roundabout way will pay to write the loan off eventually as there's no way that I'll pay it off before I turn 65 (I'm 36).

This is the burden that I'm talking about and I'm on the older plan on £3k fees with the other half being maintenance loans. Christ knows what it's like for students today with the fees 3x higher but then they'll definitely never pay it off.

The only solution I guess is to overpay but this makes no sense to me because it is diminished by interest. It only makes sense to pay it all off in big sums and who has that amount sat lying around?

 

[Kompany Car]

Which means that most degrees are pretty much worthless when many can't find a job at the end of said degree, and to make things worse they are saddled with debt.

It brings me back to the point that if you know you wont be able to earn enough money to clear your debt then why go anyway? And if you do go then it's all on you if you decide to go.

Having a degree has never been a golden ticket to instant wealth. There are some areas such as teaching and pharmacology to name two where they are valuable to society but they dont pay massive salaries (50-60k after a number of years).

I agree that universities should be more streamlined in their offering, with degrees much more generalised. Specialisation should be done at Masters level. I cant speak for every degree but I'll be honest 95% of my job, even when it was more academic could be done with not much more than first year degree level Physics. The things I covered beyond this are next to useless for the majority of the time and I did do an exceptionally technical, specialist role, for a number of years.

I also believe that direct access to university should be for the most academically gifted, but there should be alternative pathways for mature students, following time in industry and often time to mature. At present the almost open door of having a place for everyone regardless real apptitude isnt right, but as universities are now run as businesses, it will be difficult to sort this out.

 

[Citizen of Legoland]

Here is the unfairness and I might be working it out wrong so I'm happy to be corrected.

As in my previous post I pay around £2200 per year towards my student loans through PAYE and the remaining balance is £26k so by my logic I could clear the loan in around 10-12 years. I'd be happy to pay that balance directly monthly so that I could clear it asap.

The problem is they add on £1500 a year in interest so I actually only pay off £700 from the balance per year. That means it'll take over 35 years to clear the balance and I earn over £50k so I'm paying a lot more than most.

The interest is a killer and I'll pay FAR more than I borrowed if I paid it all off over time. If I don't then I'm still also paying tax to write the loan off eventually. There's no way that I'll pay it off before I turn 65 (I'm 36). The only solution I guess is to overpay but I'll be mightily pissed off if this is just diminished by interest.

It all depends on what a student goes on to earn as to whether it’s worth paying off early or not. Having additional monthly costs can drive people to ask for pay rises or find jobs that pay more, I’ve had to do it many times in my life (although not because of a student loan) when I had kids and when mortgage rates shot up. So I understand that by looking at it as “a loan with interest” must be frustrating.

For me, if the degree got you a job that pays £400 a month more but it’s costing £200 a month in loan fees then it was a good decision. Only the individual can quantify that.

 

[I'm With Stupid]

This is perhaps why tax rises on the young are ridiculously unfair. If they earn enough then they'll be paying money to finance a student loan and then they're paying tax to pay for writing it off. So there is no such thing as the loans being written off because of the interest, anybody paying the full amount will have paid everything they borrowed and more.

I assume this is why they added the interest. My generation got loans with no (real) interest, and they realised that because so many people were never going to pay them off, they were creating a ticking time bomb of debt. So basically they've restructured it to add commercial-level interest, and basically the richer graduates are paying off the debt of the poorer graduates, because the government are effectively making a profit on the more financially successful graduates' student loans.

The problems with student loans is that they were effectively a promise of future taxpayers money. We can cut government spending on universities and enjoy increased spending in other areas by effectively putting a vast swathe of public expenditure on credit. It's in some ways similar to pensions. Pensions should be people paying in, the money getting invested, and that money being used to fund their retirement. What it is in reality is people paying money in all their life, that money immediately being spent on immediate needs, and their pension then being taken from future tax earnings.

 

[I'm With Stupid]

You can buy a suit hand made in Saville Row or off the shelf in Primark.
Your choice.
Are Primark committing fraud?

If they're charging the same money as the shop in Savile Row, arguably.

 

[I'm With Stupid]

I agree that universities should be more streamlined in their offering, with degrees much more generalised. Specialisation should be done at Masters level. I cant speak for every degree but I'll be honest 95% of my job, even when it was more academic could be done with not much more than first year degree level Physics. The things I covered beyond this are next to useless for the majority of the time and I did do an exceptionally technical, specialist role, for a number of years.

One of the biggest issues with a lot of universities is the lack of flexibility of what is required for something to be a master's or bachelor's degree. A BA has to be 3 years. It has to include however many credits. So it can end up including a lot of filler, with people studying things that they don't feel are particularly relevant because, well, you need to pick something and those were the modules that were available that term.

A master's needs to be 180 credits and needs to include research. How many people doing master's are doing it because they want to be a researcher? But they all have to do it anyway, because that's what's internationally recognised as a master's degree.

Honestly, it would be good to see more widespread recognition for partial degrees. I know that you can get a certificate and diploma for 60 and 120 master's credits respectively, but that's usually a sign that you've dropped out. Manchester University aren't opening up their modules to someone who's only doing that module and getting a certificate at the end of it, for example. Maybe they should. There are a lot of valuable things taught at university that shouldn't need a full year or 3 years of study to participate in. Especially at post-graduate level.

 

[Kompany Car]

If they're charging the same money as the shop in Savile Row, arguably.

You have a choice assuming you meet the entry requirements. If you're daft enough to pay Saville Row prices for a rubbish product, then all I can say is a fool and his money are easily parted.

 

[inbetween]

I assume this is why they added the interest. My generation got loans with no (real) interest, and they realised that because so many people were never going to pay them off, they were creating a ticking time bomb of debt. So basically they've restructured it to add commercial-level interest, and basically the richer graduates are paying off the debt of the poorer graduates, because the government are effectively making a profit on the more financially successful graduates' student loans.

The problems with student loans is that they were effectively a promise of future taxpayers money. We can cut government spending on universities and enjoy increased spending in other areas by effectively putting a vast swathe of public expenditure on credit. It's in some ways similar to pensions. Pensions should be people paying in, the money getting invested, and that money being used to fund their retirement. What it is in reality is people paying money in all their life, that money immediately being spent on immediate needs, and their pension then being taken from future tax earnings.

So in effect it's some weird massive inverse Ponzi?

I've even considered what I'd do if I came into some money and it wouldn't make any sense to pay it all off. £180pm saved is nothing compared to parting with £26k, I think even bank interest rates would beat that over a long period. The monthly due is also deducted before tax so I wouldn't gain £180pm back anyway.

I wish they'd just simplify it and call it for what it is. If you goto university then for a subset who earn enough you will have to pay a tax that is specific to you for most of the rest of your life.

 

[Kompany Car]

One of the biggest issues with a lot of universities is the lack of flexibility of what is required for something to be a master's or bachelor's degree. A BA has to be 3 years. It has to include however many credits. So it can end up including a lot of filler, with people studying things that they don't feel are particularly relevant because, well, you need to pick something and those were the modules that were available that term.

A master's needs to be 180 credits and needs to include research. How many people doing master's are doing it because they want to be a researcher? But they all have to do it anyway, because that's what's internationally recognised as a master's degree.

Honestly, it would be good to see more widespread recognition for partial degrees. I know that you can get a certificate and diploma for 60 and 120 master's credits respectively, but that's usually a sign that you've dropped out. Manchester University aren't opening up their modules to someone who's only doing that module and getting a certificate at the end of it, for example. Maybe they should. There are a lot of valuable things taught at university that shouldn't need a full year or 3 years of study to participate in. Especially at post-graduate level.

A masters does not need to include research it can be fully taught. It does however normally include some form of short dissertation. I know this because I used to lecture on them at UCL, Warwick and the University of York. It may of course be different for non STEM areas.

 

[I'm With Stupid]

You have a choice assuming you meet the entry requirements. If you're daft enough to pay Saville Row prices a rubbish product, then all I can say is a fool and his money are easily parted.

Well yeah, but 17 year-olds aren't exactly discerning customers, are they? No 18 year-old in the country is getting a 50 grand loan from a commercial lender. But not only do we allow them to take that out for literally any degree, we actively encourage them to do so.

 

[Mazzarelli's Swiss Cheese]

So in effect it's some weird massive inverse Ponzi?

I've even considered what I'd do if I came into some money and it wouldn't make any sense to pay it all off. £180pm saved is nothing compared to parting with £26k, I think even bank interest rates would beat that over a long period. The monthly due is also deducted before tax so I wouldn't gain £180pm back anyway.

I wish they'd just simplify it and call it for what it is. If you goto university then for a subset who earn enough you will have to pay a tax that is specific to you for most of the rest of your life.

Unfortunately I think we'll look back to this as 'the good old days' as we head towards a US style system of rich families saving for college or crippling debt.
Either that or a huge increase in part time distance learning online.

 

[I'm With Stupid]

So in effect it's some weird massive inverse Ponzi?

I've even considered what I'd do if I came into some money and it wouldn't make any sense to pay it all off. £180pm saved is nothing compared to parting with £26k, I think even bank interest rates would beat that over a long period. The monthly due is also deducted before tax so I wouldn't gain £180pm back anyway.

I wish they'd just simplify it and call it for what it is. If you goto university then for a subset who earn enough you will have to pay a tax that is specific to you for most of the rest of your life.

I've still got student loan debt (nowhere near your level). I could pay it off tomorrow with spare cash, but I'm not doing so, because having a spare 7 grand for emergencies is far more valuable to me than clearing a debt that isn't attracting real interest.

I paid my master's in cash though, because I'm not getting sucked into this new world of proper interest rates.

 

[117 M34]

Saw this thread so thought I'd look at my latest statement.

£26k owed, £2248 paid via PAYE last year but £1550 was added in interest so I only reduced my balance by £700.

At this rate it'll take 35 years to pay mine off and I left uni over 10 years ago. I'm on over £50k per year so I'll be paying far more than most. I'll also hit 65 long before that 35 years where then it'll be written off.

I'm on the older plan so kids nowadays will owe at least 3x more so the vast majority will never pay them off. I wonder if the treasury amortises the loans? If not it's an absolute monumental ticking timebomb, tens of billions.

Did you not earn enough in the 10 years prior to be paying much of the loan off?

I left uni in 2008 and finished paying my loan off a few years back and was a teacher so wasn't earning as much as you are now. I took the maximum loan available l, which was the highest one anyone could have.