[folksie]

Hi all,

Edit: Additional note on mortgages
The question of 'how does the student debt affect my chance of a mortgage?' has come up a number of times in this thread with a number of people making false claims about it's effect. As some have correctly pointed out, the total debt is not an important factor for banks deciding to offer you a mortgage, what they care about is 'what is this person's disposable income going to be and hence how able are they to keep up with the mortgage repayments?'. If you have have an income of £35,000 with a student loan, that means you're paying £1,260 in fees a year and hence you are identical in the eyes of the bank to someone who has an income of £33,740 and no student loan. It doesn't matter whether the total debt owed is £15,000, £45,000 or £150,000, what matters is your monthly income after tax/loans.

I'm someone who's recently been through university, without any parental support, graduated with debt and am starting to repay it. I've also been working as a teacher and have therefore been seeing first-hand the impact of the fee changes on current A-level students. I think this gives me a better feel than most on how fees actually affect one's life - before, during and after uni.

I am getting very frustrated with news reports that combine inaccurate reporting and misleading comments that make tuition fees seem far more harmful than they really are. The irony is that most of the statements come from anti-fees people who want to 'protect' those from lower income groups but in fact their effect is to put people off going to uni which is doing FAR more harm than the loans themselves.

Based on my own experience I wanted to share a couple of my conclusions:

1) There is no reason for fees to prevent or put off anyone going to uni.
2) In almost all cases, the bonus to your earnings from uni will vastly outweigh any future repayments you have to make.
3) No matter what your post-uni earnings, repayments are never high enough to have a noticeable effect on your living standards, or affect things like mortgage payments.
4) Yes fees have gone up, but to be honest the size of your total debt actually isn’t that crucial, far more important is the terms under which you have to repay it (see below).

Anyway, I think it's helpful to explain my conclusions with a couple illustrations. First, a table that shows how student repayments work according to different levels of post-uni income. Second, a few examples of different types of student/graduate and how fees and debt would play out for them.

Here’s the chart, I hope it’s quite straight-forward it let’s you check ‘say I get a job paying x amount after uni, how will my repayments look’:



Here’s the different ‘case studies’:

Joe goes to university, finishes with £45k debt, ends up getting a job in his dad’s garage – earning a salary of £24k over the next 30 years.
Stats:
Starting debt: £45k
Weekly wage: £462
Weekly loan payment: £5
Total amount paid over 30 years: £8100

Betty goes to university, finishes with £45k debt, gets a job as a teacher – given her qualifications it’s not the best pay in the world, but hell, she’s helping out society and feels better for it, she earns an average of £32k over the next 30 years.
Stats:
Starting debt: £45k
Weekly wage: £615
Weekly payment: £19
Total amount paid over 30 years: £29,700

Sam goes to university, finishes with £45k debt, uses his degree to land a well-paid job in the city, earns an average of £90k over the next 30 years, then has a heart-attack because of stress and dies (but that’s another story).
Stats:
Starting debt: £45k
Weekly wage: £1731
Weekly payment: £119
Total amount paid over 30 years: All of it (taking account of the 3% interest, this would mean paying roughly £49,500 which would take Sam about 8 years).

I hope the above is useful. My intent with it is to allow people to actually get a feel of how uni fees and the corresponding debt actually affect the lives of those who go to uni. They aren't going to put an anchor round your neck after you graduate, they aren't going to make you live in poverty or have bailiffs at the door if you lose your job, they aren't going to stop you saving for a home or going on holidays. At the end of the day, that’s far more important than a bunch of bamboozling facts and figures about interest rates and fee levels that in my view give a very misleading view about how these loans work.

Addendum:
These are a couple small notes on how I’ve done the above calculations. They aren’t necessary to read unless you had a particular interest in how the calculations have been done.
1) I haven’t included inflation. This is because although loan interest is index-linked to RPI and this will make debt grow faster, it is reasonable to expect this is (at least) cancelled out by inflation in wages (e.g. teachers get paid an average of maybe £32k now but in 30 years time inflation will have increased this to maybe £58k. There is arguably an effect of ‘fiscal drag’ due to the fact as your wage is increased by inflation the % of your wage paid towards loans will increase but this will only happen if the government doesn’t increase the point at which repayments start in line with inflation.
2) The figures for annual/weekly salary are gross (i.e. before tax has been deducted). This also applies for the calculations of proportion of salary paid towards loan. So for example, Betty pays £19 out of a gross salary of £615, which translates to an after-tax salary of £463 (this still works out as 1/25th of her after-tax salary, so I don’t think it impacts the significance of the figures.

[FinalMH]

wow nice

[A-K-J]

Good post.

Really clears things up.

[EternalDoom]

+REP Cheers

[Indian_Prince]

I dont want to pay weekly for 30 years of my life :/

[TitanicTeutonicPhil]

... oooor you could learn a language, study in continental Europe, broaden your horizon, enjoy higher quality of life, and pay absolutely nothing for your higher education

[Alimbo95]

Originally, I wanted to become an airline pilot and as you may know, the fee for obtaining the airline pilot license is around £80,000. I can't afford to pay that, so I would have had to sort out a loan with the flight school and their partner bank, which would be secured over my parents' property. I also wanted to get a degree before embarking on my flying training purely due to the huge possibility of not getting an airline job after the first year of graduation from flight school. So, university fees were the least of my worry. With the fees rising, I would have found myself in a HUGE debt of approximately £100,000 at just 23 years old. I have established that, even though I have a strong passion for flying, it would not be ideal to go into all that financial mess just to fly, so I have decided that I will be going into law instead. Now, university fees just seem like a minor burden to me, even though I will need to get a loan for it. It's a sustainable repayment and, as you said, it won't have a heavy effect on your standard of living.

[NGC773]

(Original post by Indian_Prince)
I dont want to pay weekly for 30 years of my life :/

Dont get a degree then

[Aisha~~]

(Original post by TitanicTeutonicPhil)
... oooor you could learn a language, study in continental Europe, broaden your horizon, enjoy higher quality of life, and pay absolutely nothing for your higher education

Maybe for masters. Not really practical for undergrad.

[Antimatter]

My problem is the market rate they're charging on interest. And that they're effectively saying it's fine to have debt that you will never be able to pay off - when it's not, it never has been, and that is the attitude that gets many people into lots of trouble.

[muffingg]

(Original post by folksie)
X

More people should know about this and stop moaning.

[Derfel]

On its own the debt isn't terrifying, sure it's a large amount, but it can be managed on its own. If you were only paying back the loan then over 30 years it wouldn't be a problem.

However, coming out of university doesn't get you a high paying job, most people will start off at the lower end of the spectrum. Throw in rent, tax, utilities, bills, food etc.. and the Student loan is a huge pain. It's a nice post, but it gives off the wrong vibe and tells people "Hey, don't worry about being £50k in debt, it's going to be okay".

[liam1994]

What about interest on the loan you take out?
Say you're earning £20,000 for two years, you don't need to pay anything for two years, but your debt just gets bigger and bigger over those two years until you've paid it off (in a few decades time, if you're lucky) ...

[nuodai]

Your post is very informative, thanks for that. But it doesn't show why the debt shouldn't worry you; at least, my objections are not based on the size of the monthly repayments -- my main issue with this is that it is debt. The repayments aren't horrendous, as you say, but the repayments are essentially like a tax, despite the debt being a debt. What kind of impact will this have on people seeking a mortgage? Or a loan to start a business? (And this is without mentioning the principles of it -- it works on the idea that people go to university solely so that they can get a graduate job.)

Also the penalties for early repayment are unforgivable.

[cambio wechsel]

(Original post by Aisha~~)
Maybe for masters. Not really practical for undergrad.

Perfectly doable:

http://www.guardian.co.uk/education/...europe-no-debt

[colabottles]

Why does Sam have to die in his example?

[Aisha~~]

(Original post by cambio wechsel)
Perfectly doable:

http://www.guardian.co.uk/education/...europe-no-debt

Well yes, for courses available in English that's fine. But the way he worded it implied the course would be taken in native language, which for someone like me who never did a bit of language past GCSE, is tricky business

[py0alb]

(Original post by Antimatter)
My problem is the market rate they're charging on interest. And that they're effectively saying it's fine to have debt that you will never be able to pay off - when it's not, it never has been, and that is the attitude that gets many people into lots of trouble.

This post applies to a whole host of recent replies.

This isn't normal debt, and to describe it as such is misleading. Normal debt you still owe no matter how much you earn and never goes away, and that's how people get into trouble. This is really just a small scale method of progressive taxation. Even if you are a complete moron, there is still absolutely no way you can get into financial trouble with it.

Really the government have brought this problem on themselves because they've sold it very badly to the public. It would be a lot clearer to everyone if they had gone along with what was being rumoured and called this system a "medium term graduate tax", whereby an extra 1-2% gets added onto your income tax once you start earning over a certain amount.

[py0alb]

(Original post by Derfel)
On its own the debt isn't terrifying, sure it's a large amount, but it can be managed on its own. If you were only paying back the loan then over 30 years it wouldn't be a problem.

However, coming out of university doesn't get you a high paying job, most people will start off at the lower end of the spectrum. Throw in rent, tax, utilities, bills, food etc.. and the Student loan is a huge pain. It's a nice post, but it gives off the wrong vibe and tells people "Hey, don't worry about being £50k in debt, it's going to be okay".

(Original post by liam1994)
What about interest on the loan you take out?
Say you're earning £20,000 for two years, you don't need to pay anything for two years, but your debt just gets bigger and bigger over those two years until you've paid it off (in a few decades time, if you're lucky) ...

(Original post by nuodai)
Your post is very informative, thanks for that. But it doesn't show why the debt shouldn't worry you; at least, my objections are not based on the size of the monthly repayments -- my main issue with this is that it is debt. The repayments aren't horrendous, as you say, but the repayments are essentially like a tax, despite the debt being a debt. What kind of impact will this have on people seeking a mortgage? Or a loan to start a business? (And this is without mentioning the principles of it -- it works on the idea that people go to university solely so that they can get a graduate job.)

Also the penalties for early repayment are unforgivable.

Read the above post. You are all confused about how the system works. This is a progressive tax, it is not a debt by any meaningful sense of the word.

[Casshern1456]

Very good Thanks