UKC

/ Why do American's have college funds etc.?

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elliot.baker - on 14 Feb 2018

How is University funding different in US to UK? e.g. why do you always hear American parents talking about kids "college funds"? I read they can get loans to go to Uni just like we can (so why do they have college funds), does anyone know if these are vastly different to our system (of repayment etc?)....

 

Just curious thanks!

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Tall Clare - on 14 Feb 2018
In reply to elliot.baker:

They've had the system of students funding their own education for a lot longer than we have, and, if I remember rightly, there's also a two tier system in the US whereby some universities (e.g. Ivy League) are *much* more expensive than other universities.  With the system having been in place for longer, ways of parents supporting their children through university have been prioritised differently than in the UK - where I imagine, if the tuition fees situation continues, parents will also be saving to support their children, where possible.

Post edited at 12:12
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Spengler on 14 Feb 2018
Coel Hellier - on 14 Feb 2018
In reply to elliot.baker:

> I read they can get loans to go to Uni just like we can (so why do they have college funds), ...

They can get loans, in that banks will lend to them, but there isn't a national system of loans like we have with a "pay only if you're earning over XXX" clause. 

Thus it is normal for parents to save up to support their kids, and it's also normal for people to "work their way though college" by taking waiter/waitress jobs etc. 

Large fees are relatively new in the UK, but have long been the case in the US, to this culture is more established.

ClimberEd - on 14 Feb 2018
In reply to Spengler:

> Because it's really really really expensive.

>

 

This. 

That's it really. 

 

Tall Clare - on 14 Feb 2018
In reply to ClimberEd:

I'm sure I've read articles (don't ask me to find them right now!) suggesting that UK tuition fees are getting very close to US levels (for some, not all, US universities). Are ours second most expensive in the world now?

MG - on 14 Feb 2018
In reply to Tall Clare:

There are many grants and similar available in the US to the expensive places. Few pay the full amount, so you could be right.Many  state universities will be cheaper for in-state students than English fees.

ClimberEd - on 14 Feb 2018
In reply to Tall Clare:

I believe America has more of a tiered system, so whilst some might be not too expensive, the better ones (perhaps 'non-state, or Ivy League as a generalisation) are eye watering. 

1
hokkyokusei - on 14 Feb 2018
In reply to elliot.baker:

As other people have mentioned, it's really expensive.

But when people refer specifically to a college fund, it's a special savings account which attracts tax benefits if used for paying for education. Google "529 plan".

MG - on 14 Feb 2018
In reply to ClimberEd:

Some info on Harvard here

https://college.harvard.edu/financial-aid/how-aid-works

Unless you are seriously rich, it actually sounds quite reasonable

Dave B on 14 Feb 2018
In reply to Tall Clare:

A home student at university of wisconsin madison would pay fees of just under $11000 per year.  Pretty comparable to our fees. 

Out of state students pay more. This is a common system.

 Also, many students do 2 years at community college and then transfer to the state uni for two years . That saves about 5-6 k per annum for those two years,  especially as they can live at home at the same time. 

?

Angrypenguin - on 14 Feb 2018
In reply to Tall Clare:

Yes and no. A lot of people just look at the UK headline figure and think it is expensive but the way it works in the UK is much more like a graduate tax.

UK fees are £9000 a year now, add in living costs and a 3 year degree is ~£50,000. But this is only paid at 9% of any income over £21,000. It is not "real" debt. You only have to pay it if you are earning and it is not considered as part of your credit record for example it is not considered when you apply for a mortgage (aside from the small decrease in income due to payments). The repayments are also done automatically before tax so it also decreases your income tax. If you don't pay it back in 30 years it is written off.

Making it appear that students foot the bill is an effective way for the government to kick the thorny issue of university funding into the long grass. Since many loans wont be fully paid off the crunch will come in 20 years when the first loans start to be written off.

In the US on the other hand, student loans come from a variety of sources, both government and private sources and repayment terms vary from a percentage of income to what we would consider "real" debt where they seize your assets if you don't pay it. Another difference is that there are many more scholarships and funds than in the UK, especially for those on lower incomes.

lithos on 14 Feb 2018
In reply to Angrypenguin:

want to take a guess on how much the interest is on that 50K ?

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Tall Clare - on 14 Feb 2018
In reply to Angrypenguin:

I heard about a recent case in which a UK graduate was unable to get a credit card because of the level of outstanding credit from student loans, as they are now owned by private companies rather than the government - apparently it's going to court. This suggests the start of a much bigger problem for UK students, longer term.

Post edited at 19:38
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summo on 14 Feb 2018
In reply to Tall Clare:

> I'm sure I've read articles (don't ask me to find them right now!) suggesting that UK tuition fees are getting very close to US levels (for some, not all, US universities). Are ours second most expensive in the world now?

I don't think they are even close. I have a relative who graduated as a pharmacist from an average uni with $180k debt. They did some working and lived at home whenever time allowed. 

Rob Exile Ward on 14 Feb 2018
In reply to lithos:

I think you may be missing the point Rob, this is potentially the biggest governmental financial scam... Ever. Apparently the student loan book is already £100 billion? 

Student 'loans' have enabled govt to perpetuate the nonsense that university is both a right and the highest possible objective for everyone. In fact, the way the sector is organised, it's mostly a tax on middle class parents, used to offset unemployment for a few years and sustain city centres. Cardiff, Liverpool, Manchester... Without 'tertiary' education they would be ghost towns.

'Loans' have enabled govts to perpetuate this nonsense by pretending that the cash they are paying out is in the form of a loan, so it's not part of govt expenditure. That's a lie. Future generations will inherit a loan book that will never be recovered.

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neilh - on 14 Feb 2018
In reply to Rob Exile Ward:

It is only a tax on middle class parents who choose to pay.I personally do not understand what the fuss is over. 

neilh - on 14 Feb 2018
In reply to elliot.baker:

USA fees are confusing. There are all sorts of scholarships available and a lot depends as to whether you go to your local state uni or out of state.

if you want to go to one of the ivy leagues it’s expensive if you have the money. If not and you are seriously bright then money is thrown at you as they want the best.

it is a bewildering system.

neilh - on 14 Feb 2018
In reply to Rob Exile Ward:

It is only a tax on middle class parents who choose to pay.I personally do not understand what the fuss is over. 

1
Deadeye - on 14 Feb 2018
In reply to elliot.baker:

We need to compare like with like.

There are (at least) two tariffs in operation in the UK, and also often internationally.

The first is for domestic students.  England has capped this at £9250 and, in reality, almost all universities charge this for all courses.

The second is for overseas students.  England treats UK/EU nationals as domestic but fees for non UK/EU students are significantly higher.  As an example, York's (a good but not exceptional university) fees are here: https://www.york.ac.uk/study/undergraduate/fees-funding/international/

You'll notice that costs vary - Medicine £33k/year; sciences £20k; arts £16k.  All much more expensive than capped tariffs and more indicative of contact hours and costs.

Other countries provide varying amounts of support to domestic students - from none (US) to quite generous (e.g. Netherlands £1750 max: https://www.studyinholland.co.uk/a_comparison_of_costs_in_uk_and_netherlands.html)

The preferential rates are differentially applied to "foreign" students on a country by country basis - for example consider Scotland, England, US and Netherlands.

The final complexity is added by highly variable schemes for both grants/scholarships and loan arrangements.

Overall I'd argue that a good degree in a meaningful subject from a quality university will be worth the payment.  By "meaningful" I mean one that is recognised as developing all the skills it should - analytical, critical thinking, creativity, investigation, evidence weighing etc.  Applicability helps significantly.

A weak degree from a weak university in a poorly recognised subject, even if completely free, is a waste of several years of your life.

A final point - because we're generally very familiar with the UK we forget the extraordinary, really quite unique, concentration of world class universities we have.  There is nowhere else on earth that has such rich provision of high class teaching and research endeavours.

TobyA on 14 Feb 2018
In reply to Rob Exile Ward:

I recently paid off my loan that I took to pay my fees for 2014/2015. So some people are paying them off! I did this part because we had to get a mortgage in the UK and I presumed, perhaps wrongly, that they a mortgage provider would be happier to lend to us if we were debt free.

lithos on 14 Feb 2018
In reply to Rob Exile Ward:

hi Rob,

not sure how im missing the point.  Those people who don't if off as you say burden the rest of us when written off/covered by future gov. But the interest on that 50k loan is currently 6%,  which compounded means that 50k turns into a tad over  300K in 30 years time at write off time!

of course i maybe totally wrong and missing the point - but it seems a brilliant scam to benefit the bankers 

 

The New NickB - on 14 Feb 2018
In reply to lithos:

Having benefitted from paid fees and a grant (plus a small loan each year), I find the idea of my step-daughter having to borrow £50,000 pretty abhorrent. At 1% interest would be bad enough, at 6% it is criminal. Thankfully, I’m able to offer a high degree of support, but that really isn’t the point.

Post edited at 22:55
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captain paranoia - on 14 Feb 2018
In reply to elliot.baker:

Maybe in the hope that if their children go to college, they might learn to use the apostrophe correctly...

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Babika - on 14 Feb 2018
In reply to The New NickB:

If you read Martin Lewis very well written articles you are utterly mad to offer support. He equates it to saying ^I'll help you pay the 40% tax when you earn a big salary" 

I also have 2 sons at Uni racking up massive debt but if I choose or can afford to help them it will be with a Help to Buy deposit not reducing student loans.I think that will be more helpful.

 

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TheFasting on 14 Feb 2018
In reply to Coel Hellier:

> it's also normal for people to "work their way though college" by taking waiter/waitress jobs etc. 

Wait, people don't do that in the UK?

 

The New NickB - on 14 Feb 2018
In reply to Babika:

At 6%. I don’t really care what Martin Lewis says, it’s robbery.

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peppermill - on 15 Feb 2018
In reply to elliot.baker:

Also worth remembering that US/Canada students can find themselves spending much longer at university that our lot. Professional careers like Medicine/Dentistry/Veterinary are often postgrad rather than going straight in at 18.

Angrypenguin - on 15 Feb 2018
In reply to The New NickB:

Yes but it's not real debt. Even if they said it was a million pounds it doesn't make much difference. You only pay on what you earn. Even if I were to pay 9% of my total income for the next 30 years, I'm sure I would be (financially and skillswise) better off with a degree than without.

Roadrunner5 - on 15 Feb 2018
In reply to Tall Clare:

> I'm sure I've read articles (don't ask me to find them right now!) suggesting that UK tuition fees are getting very close to US levels (for some, not all, US universities). Are ours second most expensive in the world now?

Depends on the state, but yes at some colleges it's now the same. In NJ it was about 12-15000 dollars which is pretty similar to UK rates.

Private schools are more and states like NH are crazy expensive.

MY wife's an MD and has $250,000 in college debt and she's in much less than most of her classmates. and that was largely all just in medschool.

AndrewHuddart - on 15 Feb 2018
In reply to elliot.baker:

I did a year at a US uni and my wife's American so we've a decent idea of costs.

Assuming that you live on campus, Penn State (our old US uni) will cost you around $33k-48k per year (depending on if you're from the state or not). 

Also remember this is per year and an undergrad degree course lasts for at least 4 years.  And this doesn't include all of the costs of living, just dorm room and meals, plus some text books. Scope of the figure is at https://admissions.psu.edu/costs-aid/tuition/

So total minimum at the main campus would be $132k which is around £94k

While yes, there are lots of scholarships etc available, they're not anywhere near universal and only go to kids/parents who can manage the paperwork. And any loans you need will be at commercial interest rates payable as soon as you graduate rather than in a graded way in the UK.

Irk the Purist - on 15 Feb 2018
In reply to Angrypenguin:

You're wrong on so many points.

Student loans are paid AFTER tax. Not before.

It DOES affect your ability to get a mortgage as your net earnings are less and this is assessed in affordability tests. It doesn't affect your credit record, yet.

It is REAL money. I watched a programme called generation gifted last night. When the girl found out how much uni was she was crushed. When £20 is a lot of money, spending £40000 is just mind blowing. 

You DO notice a significant reduction in spending power. 9% of gross salary isn't much but when you calculate it as a % of disposable income it's huge.

I've just paid mine off and my disposable income after essentials has gone up 300%.

 

 

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neilh - on 15 Feb 2018
In reply to Irk the Purist

 

it is based on your earnings above 21 k.and you pay 9% on the balance. It is deducted gross not net. Any student loan calculator will tell you this

it is simply a tax on your earnings above 21 k.

wintertree - on 15 Feb 2018
In reply to neilh:

> it is simply a tax on your earnings above 21 k.

Indeed, wish they’d bloody well called it a tax.  But then they couldn’t defer the liability on repayments for several election cycles...

People were also well aware of the deal when they chose to take the loans out.  (Or should have been...).

A nit pick - it’s not quite “simply a tax” as wealthier people can buy out of it early reducing the total lifetime cost 3x to 5x or more.   

wintertree - on 15 Feb 2018
In reply to Irk the Purist:

> I've just paid mine off and my disposable income after essentials has gone up 300%.

I don’t normally link up posters across threads, but weren’t you recently speaking on another thread in favour of PCP for cars, stating you’d got one on PCP?  Apologies if I’ve crossed wires but if not, you and I have very different definitions of essentials.  If I was pissing money up the wall on PCP back when I was paying my loan off, my loan would have represented a lot more of my disposable income too...  But my loan wouldn’t have been my problem.

Post edited at 20:05
neilh - on 15 Feb 2018
In reply to wintertree:

You have to be very wealthy to pay it off in which case you would not even bother with a loan, otherwise the advice is just to let its run it’s course and use the money for other things. 

wintertree - on 15 Feb 2018
In reply to neilh:

> You have to be very wealthy to pay it off in which case you would not even bother with a loan, otherwise the advice is just to let its run it’s course and use the money for other things. 

True, true but any tax vs income graph that has a turning point in it offends me.  It’s a maths thing. Also in terms of total cost, being very rich is a net win regardless of paying in advance or arrears unlike with a more sensible tax.

Post edited at 20:18
Irk the Purist - on 15 Feb 2018
In reply to neilh:

It's calculated on gross pay, but you pay it after tax. It is not the same as a pension deduction, which is taken before tax.

The last 13 years of my pay slips tell me that.

Irk the Purist - on 15 Feb 2018
In reply to wintertree:

Maybe. I regard a reliable car as an essential as I have a young family and live in a rural area.

You'll also note I said I've paid off my loan. 

But my personal circumstances were an illustration that 'it's just 9%, you won't even notice' are utter lies. You do notice it, a lot.

Angrypenguin - on 15 Feb 2018
In reply to Irk the Purist:

> It's calculated on gross pay, but you pay it after tax. It is not the same as a pension deduction, which is taken before tax.

I hadn't appreciated that distinction. The repayment is calculated on gross but paid on net. Doing another degree so haven't actually started paying mine yet!

 


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