Middle class students 'should pay more'

[manic_man]

I'm not sure of the exact figure of current student loan debt in the UK, but I believe a few years ago it was around the 18 billion mark.

I was considering this the other day and had the thought, what if the government is working on the principle that, that money willl eventually come back to their coffers (with inflation added), because I dont think it ever will, I'd be suprised if half ever makes it back.

Now this is not because students wont pay it back, but because the repayment system simply doesn't allow it.

I have been through uni myself and have quite a few friends who have (and still are). Now the majority who have graduated have debt in the region of 12,000 (much less than a current student will walk away with) and have jobs that pay them between 25k and 40k. Going by last year, the ones closer to 25k literally broke even, their loan stayed still, the ones closer to 40k made a nominal contribution.

Now people on 40k salaries are not people in the lower echelons of the UKs salary rankings, yet we worked out it was going to take him a good 15 years of just allowing the repayment system to take his earnings (which oc he is going to do!) Before he was even close to clearing his 18k of debt.

Can the UKs coffers really absorb this kind of loss of money year on year for the next 3 or so decades? Some people will never repay their student debt!

Assuming the answer is no, then making students pay more is simply not the answer, seeing as all that is effectively happening is the government is shifting a large portion of its budget every year into University accounts.

I'm not sure what the answer is tbh, interesting debate though.

Also to those saying ex-polys should effectively be shut down, I don't agree whatsoever, they offer an important service to a large majority of the UKs general populace. Good education for all, not just a priviledged few is a very noble and agreeable goal, which is extremely difficult to get right. However going back to University snobbery of old is NOT the way.

And a company who bins potential students purely based on the fact they haven't come through a Redbrick or Ancient University? Thats pathetic tbh. I know it's hard to ween out potential candidates, but it has been proven that it is actually bordering on illegal as a practice (not that this will ever stop it) in the same way as getting rid of all women from a pile of CVs purely because they are a women would be deemed prejudice. I went through an ex-poly and knew some exceptional students. Some of whom have gone onto very prestigious careers in investment banking and large IT etc. It's your companies loss.

 

[DominicStar]

They could just keep the earnings threshold the same, as we will soon see with income tax, then fiscal drag will see a greater portion of earnings paid back.

 

[Indy500]

Now this is not because students wont pay it back, but because the repayment system simply doesn't allow it.

You can make regular payments to the SLC yourself by filling out a standing order form, or phone to make one-off payments.

 

[manic_man]

You can make regular payments to the SLC yourself by filling out a standing order form, or phone to make one-off payments.

Of course you can, I'm not saying people shouldn't pay it back, of course they should, it was a loan, they knew this when they said yes to it. I should have said "encourage it" and not "allow it", bad choice of words.

What I am saying is that, like any loan, unless you have masses of income to spare (and most people don't), who in their right mind would repay it beyond the required repayment levels when it is effectively interest free?

At current repayment levels it is going to take a very long time for the government to see even a small portion of that money back into their coffers again. Repayment levels of people on average salaries simply match inflation at the moment, and in recent years haven't even kept up with it, leading to a never ending cycle of the person paying back slightly less than inflation added, thus the loan never goes away and the government never quite gets back their original money (with inflation added).

I'm pretty sure raising repayment levels would be a very unpopular and in many cases, unworkable, solution. However, what is the solution? It just seems to me that the current system is making an absolutely amazingly large amount of floating debt, which although technically went back into the economy by it going to the universities and being spent by students, I imagine was underwritten as a loan and not spend money, thus the plan must have included it eventually coming back! At the moment, I just dont see how that will happen, and as student debt has almost doubled on average in the past 5 years alone, its only getting worse very rapidly.

I don't know what the solution is, I am a firm believer in trying everything possible to educate everyone who wants it, regardless of their economic background. If we went back to the systems of old we would be going backwards to a time when the rich were able to afford education and those who were poor, even those with brilliant minds, were consigned to less academic paths. However the current loan scheme seems to be a ticking time bomb to me. Very few things scare me that our governments do, however the student loan scheme seems so ill thought through with such massive repurcussions for generations of people in the UK that it really does worry me.

 

[Indy500]

<snip>

Debt in the economy is not an issue specific to student loans, though. I'd have preferred something akin to the older system with small numbers of students getting scholarships to pay for the degrees based on merit (in the 70s it was a grant system for those with good enough A-levels, essentially. Even the US has many more than here, where paid training seems to be almost extinct.

 

[Furton]

How do Wales and Scottish people manage to have free universities? If we want to go to a Scottish university we have to pay, but they don't??

It's not free in Wales anymore

 

[manic_man]

Debt in the economy is not an issue specific to student loans, though. I'd have preferred something akin to the older system with small numbers of students getting scholarships to pay for the degrees based on merit (in the 70s it was a grant system for those with good enough A-levels, essentially. Even the US has many more than here, where paid training seems to be almost extinct.

What I wonder though is did those systems really work? For my parents era for example (children of the 50s), the mere thought of reading a subject at University was totally alien to them as lower-middle class types.

Now of course it is the other way round, the thought of not attending a university as a lower-middle class type is actually considered unusual. This is definately the result of the loan system and given that was its goal, its a massive success.

However, you say debt in the economy isn't solely a student loan issue, while I agree, it is very different debt compared to the majority of the rest of it. Student loan debt is unique, you wouldn't find anything like it being offered by any commercial banking organisation. What I worry is that somebody sat down and came up with a way to allow even those who couldnt afford to, to go to University (admirable, very tough task), but in doing so they came up with a way that effectively makes the UKs government budget very much like a wealthy parent. They give all the money to their child, who in turn pays it back as and when they can afford it. For the parent to do this, without ruining themself, they have to sit down and effectively work out if they can afford to never see that money again.

I'm trying not to be patronising as im positive you know this but I think the distinction between debt as we know it ala credit crunch, and debt ala student loan is very important. Banks chase for loan repayments, the student loan company can do no such thing other than in very exceptional circumstances, once that money is out there they then rely on the students finding a well paid job quickly in order that the automatic repayment system can bring that money back to the coffers. At the moment, looking at my friends and my own loan balances, this is not happening, and we have all been out of uni for nigh on 6 years now.

IF the government is clever (and wealthy) enough to be able to be that parent who can give out the money and write it off if they never see it again, great. Sadly I somehow doubt this is the case.

 

[Indy500]

It's not free in Wales anymore

The Welsh assembly and local authorities seemed to pay the fees just fine for one of the guys on here...

<snip>

The state props up, among others, people with children and now mortgage holders (especially those who get their interest paid directly via IS). So, essentially taxpayers collectively support the least responsible as well as acting as corporate welfare in some cases. I can't see this being sustainable too much longer as small businesses continue to collapse in numbers (those with 25 or less employees account for the bulk of UK jobs).

 

[philjohn]

I was actually referring to your choice to swear instead of putting forward an argument as to why the policy is wrong rather than your choice of Uni.
We used to employ from any background and Uni, but after several employees we hired on the strength of their degree failed to understand even the basic requirements of the positions in which they were hired (to our considerable cost) we brought in this policy. It's as simple as that. We have numerous people who work for us who have degrees from non-russell universities, but these were hired on their experience and reputation, not just the strength of the university degree they hold.
In fact we have one project manager that doesn't have any formal qualifications at all and he is excellent, But if someone straight out of uni with no experience sends us a CV, then the russell policy applies. It's not fair and I'm sure we miss out on some excellent candidates, but until the exam system is overhauled we have no choice.

I had a comment together about how short-sighted your policy was if it applies to all applicants, irrespective of relevant experience but fortunately I see the policy isn't as clear-cut as you were making it out to be.

I know many people who didn't do particularly well at university who are absolutely amazing at their jobs - some people just aren't academic but when it comes to having to "get stuff done" are amongst the best out there.

 

[Gaidin109]

I had a comment together about how short-sighted your policy was if it applies to all applicants, irrespective of relevant experience but fortunately I see the policy isn't as clear-cut as you were making it out to be.

I know many people who didn't do particularly well at university who are absolutely amazing at their jobs - some people just aren't academic but when it comes to having to "get stuff done" are amongst the best out there.

The reason for our apprentices and intern system. No policy is as clear-cut as it first might seem. If, for example someone without a degree or experience can demonstrate a willingness and aptitude we will consider them, but the responsibilty is on them not us. This year we had over 200 applications for just two apprenticeships, and we turned away some excellent prospects because we cannot fund more than we can employ at the end of their internship.
It is a shame that more companies do not do this. I do think the Russell policy is unfair to some, but we must protect ourselves from the mistakes made before. As a company I do not consider us to be short-sighted in our overall employment strategy, the opposite in fact.

We interviewed all 200 applicants regardless of their GCSE results. One of last years intake did not have any qualifications at all due to personal reasons, we allowed her to sit the exam and she showed us she had serious potential and we made an exception and allowed her to sit her GCSE's while on the program.

 

[Johnny Girth]

At current repayment levels it is going to take a very long time for the government to see even a small portion of that money back into their coffers again. Repayment levels of people on average salaries simply match inflation at the moment, and in recent years haven't even kept up with it, leading to a never ending cycle of the person paying back slightly less than inflation added, thus the loan never goes away and the government never quite gets back their original money (with inflation added).

£25k is an average salary. That's 9% of 10k in student loan repayments in a year = £900 repayment.

If the average student comes out with £12k in student loans then that's £360 in interest at 3%, which is considerably higher than what it actually is at the moment.

So that's a reasonable chunk of £540 a year. However, most university graduates are going to go on to earn considerably more than this so eventually it will all be paid back. I think on the whole most people will succeed in paying back their student loan.

 

[manic_man]

£25k is an average salary. That's 9% of 10k in student loan repayments in a year = £900 repayment.

If the average student comes out with £12k in student loans then that's £360 in interest at 3%, which is considerably higher than what it actually is at the moment.

So that's a reasonable chunk of £540 a year. However, most university graduates are going to go on to earn considerably more than this so eventually it will all be paid back. I think on the whole most people will succeed in paying back their student loan.

I think you overestimate the average salary in the UK for a graduate. 25k is actually pretty good as far as computing and many other vocations go. Perhaps for a lawyer etc. it might not be, but how many graduates are going to be lawyers or private doctors?

So at 25k and using your 3% value we are talking around 13 years to pay off the loan, assuming they walk straight into said 25k salary. For new students, who will leave with around 21k (brother just started so i have the numbers to hand), we are talking over 23 years assuming all the other numbers are the same.

So ok, peoples salaries dont stay at 25k, some will go up, some will go down, some may never even get that high! But if we assume that, on average, people make 30k in the first few decades of their working life then that still only brings it down to around 9 years for a 12k loan and 15 years for a 21k loan. This is a very long time for that money to be away from the governments coffers.

IF they worked to this and made sure that money was expendable, great, well thought through. However I'm afraid I simply dont trust their competency that much. I still maintain that over the next 20 or so years they will see half of the debt back at the very most. That's an enormous deficit, can the countrys wealth take that?