Graduates 'could pay back double their student loans'

[Dinomania]

Oh, for pity's sake.

http://www.bbc.co.uk/news/education-12767850

And then they have the nerve to snuggle this little quip into the main body of the text:

The figures do not account for the way the value of money will change because of inflation over the period during which the loan is paid off.

THAT'S THE WHOLE POINT - IT SHOULDN'T INCREASE IN REAL TERMS!

Over 20-30 years, the real-world value of the nominal amount will change HUGELY.

The idea is that if we could buy a nice car with the money we owe student loans - then by the time we've paid it off, we could still only buy a nice car with that which we paid back - not a small house.

 

[Dinomania]

I'm confused by your comment. It shouldn't increase in real terms?

Aye. That's what I meant.
http://en.wikipedia.org/wiki/Real_versus_nominal_value_(economics)

So you don't think interest should apply? You think it should only track inflation?

Why should that be the case? Who is supposed to subsidise this?

My main beef with the story is that they're getting all uppity about the students paying back rather a lot more than they borrow but COMPLETELY ignoring inflation. That's just ludicrous.

Whether I think the students /should/ pay back a little more than inflation isn't something I was thinking about. Maybe they should.

I know my own student loan will only increase in real terms or not too far off - as it tracks either RPI (I think, might be CPI, cannae remember which is which), OR the base interest rate + 1% (again, I think), whichever is /lowest/. Which is nice.

 

[Dinomania]

i imagine that assumes someone earning 50k a year will still only want to pay the minimum amout back each month - which would be silly?

Well, given the way my own loan works (I realise they're changing/have changed), should I ever want to borrow for a mortgage or get a loan for a car - it'd be a complete waste me paying off my loan - I'd be paying back a cheap loan only to take out another one at a higher rate of interest.

Also, if I stick my money into (even the more rubbish) savings accounts, I get more interest than my loan is currently growing by.

 

[Dinomania]

As I read the article, I was hearing "whine whine whine, students may pay twice what they borrowed ohh nooooeeeess - oh, by the way, we're not bothering about inflation's effects on the value of that money".

So I thought - OK, so they're talking about 25 or 30 years, here.

The worst example it cites is this:

The second student gets a £2,000 per year rise over and above average pay, and clears the debt completely in 25 years, paying a total of £83,791 in cash terms.

So, 25 years.

So I go and look at past data, 25 years ago was 1986.... I find a site that shows how UK prices have inflated since then... Well it only goes up to 2010 so let's look at 1985 to 2010. The price converter on http://safalra.com/other/historical-uk-inflation-price-conversion/ reckons that £39k in 1985 would be the same /real/ value as £90k in 2010.

So, really, if we make the (admittedly huge) assumption that inflation averages out to a fairly linear increase over the years - really, that 'second student' with the raw deal is actually paying back LESS than he or she borrowed in real terms.

Big deal, huh?

THIS is my beef with the article!

 

[Dinomania]

No-one (UK citizens) currently pays tuition fees.

Eh?

I'm fairly sure I paid £1,175 tuition fee per year the first time I was at uni - now I'm back doing my PGCE, the fee is something like £3,400... Not as much as £9k but not /nothing/ by any means.

Or are you talking about an up-front cost specifically?