UKC

Wonder what all those young Tory voters are thinking now they are in debt up to their eyeballs?

The government have sold off student debt to a loan company. Could they cook the books any better?

In reply to The Lemming:


?? I find the opposition to student loans very strange. Yes, they are debt but not in the same way that a credit card or a loan is a debt. You only pay them back when you are earning a certain amount and you stop paying them back if you drop below that threshold, you don't pay interest on them (in real terms anyway) and you choose whether to go to uni in the first place. Would you prefer to pay more tax so you can subsidise students to go to university? That doesn't seem very progressive to me.

And what have the Tories got to do with it? Tuition fees were introduced by Labour and Labour would also have increased them, as the Conservatives did, had they won the election in 2010. I would have thought the most aggrieved young voters would be those who support the Lib Dems.


What do you mean by this? I've seen the news story but interested to know why this is 'cooking the books'.

In reply to Edradour:


+1!
Martin Lewis, of MoneySavingExpert.com positively raves about their reasonable terms and conditions.

Those jumping on the 'student loans are bad' bandwagon should take a long hard look at themselves. Are University numbers down because of student loans, or because of your usual band of renta-protest half wits, and politicians and academics, who should know much better, misrepresenting the things?

In reply to Edradour:

You do pay interest on them though, and all the time you are not able to pay them off they continue to acrue interest. I'm not arguing one way or another but I think you are wrong about the interest.

In reply to puppythedog:

I thought the interest was set at the rate of inflation? So in real terms it's just to keep the "value" of the loan in line with prices. Otherwise you could just sit on the loan until inflation eats it away.

In reply to puppythedog:

This is true but the interest rate is currently so low that you don't have to be particularly creative at investing with any spare money to make a net gain.

In reply to puppythedog:


Indeed, the interest rate is significantly higher than my pay rise for the last 3 year.

In reply to gethin_allen:

ditto,

to the others. I'm not sure. i'd have to dig out some paperwork but I remember thinking that the interest was more than that.

In reply to The Lemming:

When they sell it off any investment company will want to make a profit, right?

So they'll either pay a lot less than the loans are "worth" (but the government can wipe the debt off - even though the proper amount won't come into the Exchequer); or the pledge from the government about not the investor not being able to raise the interest rate is as watertight as, well, a government pledge.

In what other way could an investor recoup their costs?

In reply to puppythedog:


It changes each year depending on inflation and the base rate - it's currently 1.5%, which is less than inflation, so the "debt" is effectively getting smaller (although I accept if your pay's not increasing that's not the case for you personally - wage inflation's currently about 0.8%, so there is "interest" albeit not much).

In reply to Andy DB:


So...invest some money and use the interest from that to pay your student loan interest?

In reply to Stuart (aka brt):


>
Yup, these particular loans had a face value of £900mn and are being sold for £160mn. Only about 20% of them are currently being repaid as per the loan agreement.

In reply to Edradour:


I have given up explaining this. The facts do not fit in with the preconceived ideas and, frankly, vendettas that some people hold.

When the Tories raised the "looks a bit like a debt" threshold to above the national average wage point set by the previous bunch, they should have called it a graduate tax. Not doing so gave a lot of people a massive "point" to bandy about politically. Now I think the name was chosen mainly as a way of cooking the books mind you.

In reply to Postmanpat:

So they're effectively writing off £740 million? Certainly creative...

In reply to andy:

But of course for many people having moeny to put aside to pay it off does not apply. That only applies to people who could afford to pay their tution fees etc outright and then ISA the money so the rich can benefit in this way but people like myself cannot.

In reply to Stuart (aka brt): It's 15 year old debt, and nobody's paying it back. It's written off anyway - so 20p in the £ is better than 0p - plus they get £160m to build a nurse with, or something.

In reply to Postmanpat:


It's scandalous that the students aren't being made an offer to buy out their own loans at a discount. That would be a much better way of cashing out than selling to banks who will sell on to debt collection companies that will be sufficiently unpleasant to collect on a far higher percentage of the loans without the government getting its hands dirty.

In reply to puppythedog: But the rich can buy Ferraris and exotic hookers but people like yourself cannot. Some people have more money than other people - that's life.

But the fact of the matter is that the system's set up so that in "today's money" the debt isn't increasing (or decreasing) - so people pay for their education, after they've had it, when they're earning enough to pay for it.

Apart from disagreeing with the specific criteria of the scheme such as how the rate's calculated, I'm not sure why you'd have a problem with it in principle. And if someone can be arsed to take out a student loan when they already had the money, then put their money in an ISA (which I don't think you can get enough into each year to cover a full loan?) for the sake of an arbitrage of about two hundred quid (1.5% of £15k) a year I'd be surprised.

In reply to Edradour:

They are more of a graduate tax in terms of the way they are implemented.

TBH, I think one of two things is possible:-
1. Have the fees or a graduate tax. I think the idea that everyone pays the same but in retrospect once earning is fairer than means testing based on parental income, as it puts everyone on a reasonably equal footing.

2. Push apprenticeships etc and stop aiming at so many people going to uni.

I kind-of prefer (2), but if people want to go it is probably fairer that they all share the cost.

Neil

In reply to Neil Williams: Agree with (2).

Interesting that in my mate's son't year at Ermysted's Grammar (pretty well-respected exam factory of this parish) there are quite a few lads choosing to go to college to do BTECs etc rather than come back to school for A-Levels. Signs of a change?

In reply to The Lemming:


Sorry but is this new news? My student loans from 1996 - 98 were sold off to two different companies, who both decided to start taking money meaning that instead of taking £100 over 5 years I was paying double! That said, they were paid off sooner.

In reply to andy:

No bad thing, either. Going to uni is fun, but the taxpayer definitely shouldn't be subsidising it if that's the only reason - you also have to work hard to get a useful, marketable degree to make it worthwhile.

Neil

In reply to andy:

BTEC doesn't even compare with A level in most (if not all) subjects. I've taught Level 3 Btec applied science to 6th form and most candidates expected to just walk through it, and they could because they are so badly executed.

In reply to wintertree:



Sorry, you've lost me here. Are you agreeing or disagreeing?

In reply to higherclimbingwales:


I assumed they were going to do something more "vocationa" in subjects they don't offer at school - could be wrong mind.

In reply to Dispater:


Neither. Numbers going to university are not down (despite all the doom-and-gloom predictions of those opposed to the fees/graduate-tax).

In reply to andy:

I was merely counterring the arguments expressed in this thread that the interest rate is an opportunity for people to make money. it is an opportunity for some people not most to abuse a system set up to help those iwth less money.
I repeat that I have not said I am in favour of or against the student loans system.

In reply to wintertree:


Exactly. If the money is spent now to be recouped by a "graduate tax" then it is government spending and adds to the deficit and government debt. If it is "loaned" to students to be recouped by loan repayments then it isn't and doesn't!

In reply to The Lemming:

You mean like the previous Labour Government sold my student loans?

Didn't change the ts&cs so not sure it made a difference (other than I got to deal with a professional company instead of the SLC

In reply to Neil Williams:


So no History of Art degrees on Planet Williams?

In reply to Postmanpat:


This suggests the government are doing a really crap job of deciding who to give loans to. Basically they are forking out 160 million for good courses and students and getting it paid back and 740 million on bad courses/students and losing it.

If government looked closely at the statistics of which courses and demographics actually paid loans back they could predict who would be in the £160 million group of students that got a job which paid well enough to make loan payments. They could then fully fund their studies with a grant for £160 million and not fund the other £740 million at all. Like the way it used to work with far fewer University places and grants rather than loans.

The numbers suggest it would actually cost the taxpayer much less to offer grants for a closely targeted group of students and courses than to offer loans to everyone without any diligence on the likelihood of repayment.

In reply to seankenny:

A well-researched degree of that type from a red brick university can prove your ability to research, lead into academia perhaps, or into other jobs that need you to prove you can work hard. So I'm not going by subject as such.

What I'm against paying for is people picking easy degrees, typically at ex-Polys, just for the life experience.

Neil

In reply to tom_in_edinburgh:

That's an interesting point. One option (playing devil's advocate) might be to target funding on degrees that will help the economy.

Neil

In reply to Edradour:


I am agreeing with your view that student loans are a very different class of loan, and that a lot of people are jumping on the word "loan" so sow Fear, Uncertainty and Doubt over the whole thing, at the expense of almost everyone and everything except their political points.

I am also suggesting that the use of the word "loan" instead of "tax" in the name "student loan" is actually about cooking books by converting the cost of paying for student education now into an asset instead of a black hole in the books. Nobody really knows how much will be repaid on the timescale of 10+ years, with various projections differing widely.

In reply to tom_in_edinburgh:



That's just re-instating the elitism of university that most people want to get away from. Who decided who would get the grants? The universities? That would be [sarcasm]really fairly[/sarcasm] distributed across the whole spectrum of candidates!

In reply to tom_in_edinburgh:


It also gives some interesting implications for the current set of student loans and the likelihood of that 27k each becoming bad debt.


But you would also need to assess other benefits. For example someone who then goes on to a phd then further research might have difficulty paying back the loan. However in terms of return on investment might be best for the government/country.

In reply to dissonance:


I'd have thought the risk is not "bad debt" (as in people who should be paying but aren't) but more people who perfectly correctly don't pay it back because they don't hit the threshold (or are "timed out" - I think there's a time limit on repayment?). But it is a potential hole in the sums.

In reply to andy:

It is an interesting issue because they are not like normal loans, what percentage is bad debt, what percentage is people still paying, what percentage is people who will never have to pay and what percentage does this represent of the total loan book for the period in question. I had student loans during this period, but finished paying them off 8 or 9 years ago.

In reply to dissonance:





Also take into account the number of people with any degree with jobs below the threshold for repayment and those with no degree and no job, claiming off the state. I'll bet there's more money spent on keeping the latter in flat-screen TV's, fags and heroin than the former's student loan.

I'm playing devils advocate, I know, but it would be interesting to see the figures.

In reply to The Lemming:

I was talking to a guy who worked for such a company, sometimes they buy the debts off at a nominal sum, and then decide the ones to chase. Snag it the debt remains live say for £5K, and they chase you for it, but it may have been bought for a pound.

Apparently some Charities have cottoned on to this, and have actually bought up dept cheaply , and cancelled it for people so they don't have that hanging over them.

However, I guess that the students loans will not be bought off cheap (mores the pity)

In reply to The New NickB:

>

On this tranche I believe about 20% are paying, 40% are below the threshold to pay, and 40% should be paying but are not.

In reply to dissonance:

The repayment threshold on these loans are much higher than on the newer loans so likely to be a higher percentage of people who never pay anything back.

Thresholds are

28,775 Pre 1998 loans (ones just sold)
16,365 1998 - 2011
21,000 2012

In reply to Jim C:

>
Do you think this is wrong?

In reply to higherclimbingwales:


Pretty simple. The government look at the statistics from the existing student loans and calculate the percentage of students from each course actually paying back loans. This is a measure of whether the course results in a job which pays enough to repay a loan. They might give extra points to a course which generates in lots of top rate tax payers. Then they rank the courses in order and decide what their budget for grants is: they start from the top of the table and fund places until they run out of money.

They could have a second pot of funding allocated based on the benefit to society rather than the economic benefit to the student. There's so much money being lost on unrepaid loans they could easily fund a bunch of grants on this criterion and still save money overall compared to a scheme where loans are handed out to everyone.

They might also want to apply demographic criteria on the students if there are particular markers that appear in the repayment statistics - like not funding people coming up to retirement age.

In reply to Jim C:





The Occupy movement in the US apparently purchased $15m worth of debt for $400,000 and cancelled it (mainly for medical bill debt).

An interesting concept to say the least.

http://www.bbc.co.uk/news/business-24953535

In reply to higherclimbingwales:


Maybe not deciding which students get grants but which subjects get grants, based on unfilled graduate posts in industry / research / big wide world. If in a few years time we have a dearth of art history graduates to fill the positions available and a glut of nuclear physicists, grants could be made available for history of fine arts degrees and removed from physics degrees. You know, encouraging education to fit with societies needs...

In reply to teflonpete:

"That's just re-instating the elitism of university that most people want to get away from"

Who does? The *whole* *point* of university is academic (not financial) elitism. That's why there are many other types of further education available.

Neil

That's naive. University's are far more financially motivated than ever.

In reply to teflonpete:


But surely education is different to training. You seem to be getting the two mixed up. I am surprised business does not put more emphasis on training, but then in a world market, you just import or outsource what you don't have.

In reply to ByEek:


Yes, education is different to training, but if there is a gap in the careers market for graduates in a certain field, should we not encourage people to learn in the right fields to fill the gaps?

For instance, what use is it having 1500 graduates a year leaving university with degrees in forensic science but none with physics degrees if there are no vacancies in forensic science but a range of jobs and careers in nuclear power are vacant?

In reply to Philip:

"That's naive"

No it's not. Or maybe reword it as the whole point of universities is *supposted to be* academic elitism.

I don't see what is wrong with elitism provided it is based on what you do rather than what you inherit. Why should people not strive to better themselves rather than just comply to some sort of mediocre across the board standard?

Neil

In reply to Edradour:

People are 'anti-student loans' because they have to pay them. Generally, people in favour are people who've never had to pay them because they benefited from free education or never went. The people against are those who have been paying them off for years and realise what it has in common with swimming through treacle.

Why am I anti them?

1) Divisive and unfair a. Graduates with £36k of debt are competing with graduates with 9k of debt. Sometimes, children within the same family are leaving university with life changing amounts of debt and reasonable debt.
2) Divisive and unfair b. Graduates with debt with the same job as someone without (common in pay graded jobs in the public sector) are earning the same but take home 10% less a month. They compete for the same houses, the same goods and services but have less money to do so with and are priced out.
3) The interest. People who've never paid a student loan write off the interest as 'paltry' but people who've had one know that combined with the high repayment thresholds this interest means your capital compounds very quickly. The interest starts after your first year at uni and if you have a year out, 5 years of interest could have been added without you earning. Once you do earn, all but the very top earners won't earn enough to cover the interest every month so it compounds further until you have progressed up the career ladder.
4) People who claim it's affordable because you only start paying when you earn enough. These people miss the point that you will probably never pay the capital off, more so for the newer loans. I borrowed ~12k. It was £14.5k before I started a job and at the current rate it will have taken me 14 years to pay off. Imagine how long it will take to pay off £36k with a higher threshold. I pay a few hundred pounds a month that I would otherwise be putting in a pension. This debt does mean something for my future, regardless of what you think.
5) It makes university subject a financial consideration. Only degrees that pay are now worth doing. But subjects like art, literature, philosophy are important to a civilised, educated country.
6) It's a tax in all but name. But a tax that only applies to people under a certain age. It should be retrospective.

In reply to XXXX:

"6) It's a tax in all but name. But a tax that only applies to people under a certain age. It should be retrospective."

What, even on people who paid up front? Or people who studied abroad? Or just those of us who got it free (which wouldn't be wholly unfair)?

Neil

In reply to XXXX:

It is a tax in all but name, yes. Most of the problems you cite are typical of problems that occur when new taxes or new rules are introduced - there will always be winners and losers.

It's better than a tax though because if someone drops out then there is still a chance that they will repay the money that we have loaned them to get that far.

Disclaimer: My eldest, public sector employed son has just paid off his loan, 9 years after he graduated, just in time for his wedding! And my youngest son has just embarked on a 4 year MSc, I don't think he's troubled by the loan at all, he'll either earn a fortune and pay it off easily or not, and just see it as an extra tax until it gets written off.

it's worth also noting that the UK is basically the only country in Europe where you pay tuition fees at ALL.

Every single other country charges an admin fee (which is in the range of a few hundred quid a a year) plenty even have free bursaries for students.

Compare that to the £35k over debt for a standard degree...better be something worth it. I dont agree with the ideology that if someone thing doesn't show an immediate net gain in money that it has no value.

Which is a very American way of thinking (and billing people)

I'm glad there are people studying poetry, philosophy and pottery. It's not for me. But we're all a little richer for it.

In reply to XXXX:


This is owing to the change of system and will sort itself with time.


Well yes, and one has availed themselves at public expense of three years university whereas the other one hasn't.


And if it was a tax -- the only alternative -- you would also never pay it off.


That's an advantage. If people value the degrees that they do they can pay for them; if they don't value them that much then perhaps they shouldn't do them?


There is indeed a fair argument for that, yes. There are, though, big practical reasons why it is hard to do, and there are big advantages of the "personalised" graduate-tax approach, where the amount you pay depends on your own decisions.

In reply to Postmanpat:

What! I had a student loan and paid it off (not the size of the loans people are faced with now but it had less favorable conditions) and don't see how you avoid paying it is you're paid through PAYE?

SLC are totally incompetent though so I can see how they'd lose the money.....

In reply to XXXX:


I have a student loan, in case you were inferring that is why I don't understand the opposition to them.




There are very few graduates now who don't have student loans so I don't think this argument holds true. A graduate now will not be competing for the same jobs as someone who graduated in 1998, the last year without tuition fees. Yes, some people are from rich families and were paid through uni by parents etc but these are in the minority. Is it also 'unfair' that these same people probably have better cars than you and I? No. Equality of outcome is a utopian ideal.


There isn't any interest on a student loan. This is a fundamental misunderstanding on your part. The loans are index linked to ensure that they don't diminish in real terms but you don't pay interest on them/


The counter argument being that your choice to go to university will probably mean that you will earn higher salaries throughout your working life than someone who didn't. Why should the taxpayer subsidise your tertiary education to allow you to earn more and contribute to a pension? There is a separate discussion about whether so many people should be encouraged to go to university, and whether the value of degree level qualifications are lessened as a result but that is not what this thread is about.


I don't disagree but not sure why finite tax resources should be used to pay for them (further than they already do). Would you rather pay an extra couple of hundred pounds a month in tax now that you are earning (and still not be able to contribute to a pension) in order to allow free higher education at point of delivery? Because, in simple terms, that is the choice.


People under a certain age who chose to go to university fully cognisant of the financial implications.

In reply to Postmanpat:


How do that last 40% avoid paying? I was under the impression it was deducted by employers in the same way as PAYE?

In reply to Coel Hellier:

It's not a tax. Get a good graduate job, the kind you work hard for and you can pay of 20k of loans before you think of having kids.

Alternatively, get a graduate job paying average and it take a longer time and you don't even cover the interest for many years.

I'd be in favour of a tax if universities were more academically elite. Instead of encouraging students to build up debt.

In reply to The Lemming:

Is there *anything* the UK wont sell?

In reply to Kemics:

The best option for student loans are government programs because they typically offer the best loan repayment terms. The reason for this is because the government is not trying to make profits off of your loan as a bank would. If you receive a government student loan, repayments will not be necessary and you will not build up interest until you file a tax return that show that you are making over 40,000 dollars per year. This is the best type of government student loan because it gives you the lowest cost option for funding your study.

http://www.australia.edu/admissions/educate-yourself-about-student-loans.ht...

See also;

http://www.ird.govt.nz/studentloans/


http://www.canterbury.ac.nz/enrol/fees/tuition.shtml

In reply to Saor Alba:


Scotland? ;0P