2012 Tuition fee rise: Facts, links and mythbusters.

Martin Lewis, a blogger from moneysavingexpert.com, has just posted a really useful resource with links and mythbusters about the changes to student finance.

For those of you interested in the full article, follow this link.

For the rest of you, here's an abbreviated version:

STUDENT FINANCE 2012

10 QUICK MYTHBUSTERS

1. You don’t need the cash to go to university. Fees are automatically paid by a Student Loans Company loan. There are loans for living costs too and those from families with income below £42,600 will get living grants.

2. You only repay if earning over £21,000. From the April after graduation, full-time students will start repaying at a rate of 9% of everything over £21,000 (this figure will rise with average earnings from 2017 – the year after repayments start). If you never earn over the threshold, you never repay anything.

3. Monthly repayments are the same, whether fees are £6,000 or £9,000. The course fee size doesn’t impact monthly payments as they’re set at 9% of earnings above £21,000.

4. The loans are wiped after 30 years. If the loan hasn’t been repaid within 30 years, the borrowing is wiped.

5. There are no debt collectors. Repayments are collected via the payroll from employers, just like tax. This means they never see the money, it’s paid automatically, so there are no debt collectors chasing.

6. Repayments are £540/year LOWER than now. The relevance of this isn’t political, it’s about answering the question many students and their parents are asking: "how will I survive day to day owing that much money." Well in cash flow terms, while current graduates repay 9% of earnings above £15,000, the new threshold’s £21,000, so future graduates will have more disposable income up until the point where today’s graduates will have paid it off.

7. They will owe money LONGER and may pay MORE. Yet to balance out the point above, compared to current graduates under the new scheme, as you repay less each year, the original debt’s much bigger and you pay higher interest (as much as inflation plus 3%), it’ll take MUCH longer to repay the loan than now and depending on earnings may cost more.

8. The effect on getting a mortgage is likely minimal. Many worry about the ability to get mortgages under the new system. Actually student loans don’t go on credit files and are likely to have little impact compared to now. In fact the disposable income increase in the early years is a mild improvement for the ability to build a deposit and earnings multiples, though as they’ll still be repaying long after today’s graduates clear their in later years its mildly negative.

9. Many will repay all working life, but NOT pay it all back. Many starting even on £25,000 salaries won’t repay all owed within the 30 years (see www.studentfinancecalc.com ) meaning you repay for much of your working life, and won’t need to repay all that’s owed.

10. Many won’t pay any more in total on £6,000 courses than £9,000. As many, even some on starting salaries as high as £30,000 (and rising after) may not repay their combined fees and living loan at the £6,000 fee level before its wiped after 30 years, there is no increased cost to them of taking a £9,000 fee course.

SEE OUR Student Finance Hub FOR MORE USEFUL LINKS AND INFO

(edited 12 years ago)

Reply 1

folksie

From the article:

I worry the political fallout and language of fighting the changes is possibly more damaging to pupils’ aspirations than the changes themselves.

I agree with this point 100%. What matters at the end of the day is what your life will look like if you go to uni and take a loan. And the answer to that is 'really quite ok' - the impact of the loan repayments is really minimal (albeit rather persistent) no matter what your future earnings. Meanwhile the potential positive impact of a university education on your career and your life in general is *massive*. Sadly, very well-intentioned people who want university to be absolutely free are doing so much (highly misleading) doom-saying about the effects of fees that it is leading young people to make decisions that are really not in their long-term interest.

A while back I put up a post covering a very similar issue. In addition to the points here, it includes a useful reference table to check out future earnings vs repayments and some case studies to give a feel for the tangible effects of getting a student loan under the new system. Find it here: http://www.thestudentroom.co.uk/showthread.php?t=1694323&page=15

Reply 2

BeckySmith

I totally agree with the previous opinions.
Also the number of EU students applying to British universities has decreased this year because of the high tuition fees.
Universities may have problem finding students.

Reply 3

username471863

1. You don’t need the cash to go to university.

Unless you're me, that is. Student Finance is utterly useless.

Reply 4

lost91

Please anyone help I'm desperate to find out ...

I am applying for a direct third year transfer to Hull University.

I am currently a second year student on the old fee structure of £3,450.

Hull University have said they are awaiting confirmation of the fees for transfer students however I thought that if I am a continuing student, I would still pay the old fees?

Any information on this issue would be very helpful!

Thanks.

Reply 5

anony.mouse

I had a sudden thought but this answered it for me

2. You only repay if earning over £21,000. From the April after graduation, full-time students will start repaying at a rate of 9% of everything over £21,000 (this figure will rise with average earnings from 2017 – the year after repayments start). If you never earn over the threshold, you never repay anything.

I hadn't been told this before and my form tutor didn't know if it did !

I thought it might be a sneaky way they catch us out. Wages aren't rising much at the moment, but if you think that about 40 years ago, my dad was earning jsut over £2k which was about average apparantly. And now the average is nearly 10x that, by the time we're in our 50s/60s we'll be earning way over 21k even if we're on the minimum wage !

Reply 6

electriic_ink

This is only true until the government decide to sell off the current system's student loan book, as they're doing it with the 1998-2012 batch of loans.