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Surely we'll never pay back our Tuition Fees. Have I made an error here?

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    (Original post by redferry)
    They also made the mistake of assuming a lot of people will be walking straight into £30000 a year jobs after uni - in this current economic climate it just isn't really happening.
    The average salary sixth months after graduating in 2008 was £19,000. I'm assuming it is now lower than this. I for one am doubtful that I will pay off my 18 grand of debt that I will have when I leave next year.
    Depends on your course.
    If you're doing a degree in English Lit or Art History or something else not useful to many employers, then yeah, sub £20k salaries are the norm.

    For Engineering/Maths/Physics/Chemistry/Biology/Medical/Dental grads the salaries are much, much higher.
    Typical grad salaries for my current course are £24-35k depending on the exact field you go into.

    (Original post by ch0llima)
    Nobody has ever answered my (what I believe) to be simple question:

    Where is this money coming from? Isn't there going to be some kind of black hole if the entire system is built around the idea that some people might never pay it all back? Given that the current economic climate is such that there are fewer jobs and salaries are a good bit lower in real terms, even including inflation/deflation surely this means that, yet again, future generations will be shafted?

    I'm not an economist but something seems amiss here and I can't find a clear answer.
    It's coming from the rest of the £20,000 per year per working adult that the government takes from us in taxes :P

    (Original post by Tommyjw)
    http://www.prospects.ac.uk/secondary...her_salary.htm

    As before, no1 gives a **** about what people you know earn. The fact is that below 30k is the average.
    That's an awfully nice chip on your shoulder.
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    It's unlikely you'll be earning the same amount 30 years later as you did when you first started working, inflation and promotions/changing jobs needs to be factored in.
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    (Original post by TShadow383)
    Depends on your course.
    If you're doing a degree in English Lit or Art History or something else not useful to many employers, then yeah, sub £20k salaries are the norm.

    For Engineering/Maths/Physics/Chemistry/Biology/Medical/Dental grads the salaries are much, much higher.
    Typical grad salaries for my current course are £24-35k depending on the exact field you go into.
    At the moment a pretty common grad salary is the dole though. Even for engineering and science graduates.

    Out of my friends from home that have graduated one person has a graduate job (22k atm, graduated with a 2:2 in physics at Durham, something to do with marketing) one is working in costa (2:2 in Biology from York) one is doing a masters in the 18th century (1st in English from York) two have been unemployed for six months and are now applying for PGCEs (first in maths from Cambridge, 2:1 in English from Oxford) one is unemployed (2:1 in history from Sheffield). It's not looking great. There is huge inflation going on in the value of qualifications, as people are being forced to stay in education, getting masters and PhDs when they cannot get a job. The way things are going degrees will be worthless.

    I work at Cadbury World in my holidays and the amount of people that work there full time who have respectable degrees is frankly worrying.

    Me, I study Zoology so will probably never hit the 30 grand mark. I'm off to Australia when I'm done, they're crying out for graduates to fill jobs over there.
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    (Original post by PrinceyJ)
    Depends on the opportunities presented to them. For example graduate entry as a Lieutenant in the Royal Navy starts at £37,000 after training, and with exceptional performance, there's no reason this couldn't rise in a few years.
    Yeah, we're talking in general here. Not special cases.
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    (Original post by redferry)
    At the moment a pretty common grad salary is the dole though. Even for engineering and science graduates.

    Out of my friends from home that have graduated one person has a graduate job (22k atm, graduated with a 2:2 in physics at Durham, something to do with marketing) one is working in costa (2:2 in Biology from York) one is doing a masters in the 18th century (1st in English from York) two have been unemployed for six months and are now applying for PGCEs (first in maths from Cambridge, 2:1 in English from Oxford) one is unemployed (2:1 in history from Sheffield). It's not looking great. There is huge inflation going on in the value of qualifications, as people are being forced to stay in education, getting masters and PhDs when they cannot get a job. The way things are going degrees will be worthless.

    I work at Cadbury World in my holidays and the amount of people that work there full time who have respectable degrees is frankly worrying.

    Me, I study Zoology so will probably never hit the 30 grand mark. I'm off to Australia when I'm done, they're crying out for graduates to fill jobs over there.
    This is why I can't help thinking that the whole 'everyone should go to Uni' mindset that everyone has been trying to enforce has just not worked, I really don't think that making all Polytechnics into Universities was a good plan.
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    (Original post by NuclearFusion)
    This is why I can't help thinking that the whole 'everyone should go to Uni' mindset that everyone has been trying to enforce has just not worked, I really don't think that making all Polytechnics into Universities was a good plan.
    Yeah I think maybe there should be a bit of a reassessment of what jobs you actually need a degree for...
    But I also think what would help is if they stopped raising the bloody retirement age so that there was more jobs available to young graduates
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    (Original post by tinman1)
    I know so many middle class people whose parents use their life savings to pay them all off in one go. These are the same fools who vote Tory.
    From an economic point of view though, the net saving for the family would be:

    (f*1.03^n) - f

    Where f is the fee due and n is the number of years needed to pay back. In the case of somebody borrowing £27k and going on to earn an average of £35,000 through their career this would be saving of £23k (not taking into account inflation).
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    (Original post by Sbapu)
    You are taxed 9% of what ever you earn over 21000, not of 9000.
    You won't pay anything though, I assuming you're not going to university?
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    (Original post by PrinceyJ)
    From an economic point of view though, the net saving for the family would be:

    (f*1.03^n) - f

    Where f is the fee due and n is the number of years needed to pay back. In the case of somebody borrowing £27k and going on to earn an average of £35,000 through their career this would be saving of £23k (not taking into account inflation).
    Though your model assumes that they wouldn't be receiving any interest on their savings that they would otherwise have. And the interest rate on their savings might well be higher than 3%, so they would infact have been better off not paying it off.
    Also, by having their savings, they might be able to help with a deposit on their children's house, whereas not having a student loan won't really help. If for some unfortunate reason, their children lost their job and needed help, not having a student loan won't help, since you don't need to pay it if you earn under £21,000. But having savings will certainly help with financial support in emergency situations.
    So really, even if you do have the money lying around, it isn't a very smart plan to pay it off, since you could probably make more money by putting it into a nice little savings account.

    Also, I forgot to say that the student loan is quite cheap debt, by which I mean the interest rate is comparatively low. Therefore, it would make much more sense to pay off much more expensive forms of debt (Putting down a bigger deposit on their children's mortgages) rather than paying off the student loan.
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    In case anyone's interested, I was listening to the Today programme on Radio 4 the other day and they mentioned that the £21,000 threshold for paying back the loans will only hold until 2016. Sounds pretty ominous to me...I wouldn't be at all surprised if they then lowered the threshold.
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    (Original post by glittersticks)
    In case anyone's interested, I was listening to the Today programme on Radio 4 the other day and they mentioned that the £21,000 threshold for paying back the loans will only hold until 2016. Sounds pretty ominous to me...I wouldn't be at all surprised if they then lowered the threshold.
    They have said it will rise in line with earnings, not be lowered.

    The same goes for the current 15k threshold.

    Of course, this doesn't mean they won't move the goal posts in the future, but that's what they've said, for now.
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    (Original post by jimfrederikson)
    You won't pay anything though, I assuming you're not going to university?
    What makes you think that?
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    (Original post by I Wanna Be Adored)


    Nope. It's only on earnings over the threshold.
    Thanks for clearing that up for me.

    Interesting. That actually doesn't sound like an unfair system.
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    (Original post by cmas123)
    According to various sources, the tuition fee loan is wiped out after 25 years - anything you haven't yet paid back is written off.

    You are taxed 9% per year on everything you earn over £21,000

    If you earn £30,000 per year, you will be taxed 9% of £9,000, which is £810.

    Theoretically, if you walked straight into a £30,000 a year job straight after graduation (obviously in reality, your starting earnings will be lower than this) then you will pay back £810 a year for 25 years, which according to my maths is £20250 in total. Seen as tuition fees are £27000, hardly anybody will pay the full amount back?

    Have I made a massive error here, or is this totally correct?
    You've missed one important fact... interest will be added to the loan at 3% above inflation per annum from the moment you take the first payment on the first day of university until you finish paying it back or after 30 years. This would currently be c.7% per annum or approx. £630 per £9000 debt per annum. You will owe an additional £1800 in interest on fees alone by the end of your degree. This is a rip off. The three percent above inflation is so that they can sell the loan book to private business later and make it profitable. (Its definitely their plan; they've already said so)

    This means the amount the loan increase each year may well be more than the amount you pay back each year so not only will most people never manage to pay the loan back but it will be bigger at the end than when it started however much you have managed to pay into it and even with rises in income over the years.

    It is probably better to think of the whole thing as more like an extra tax you will pay on your wages for thirty years. With normal income tax and national insurance coupled with the loan repayment 'tax' this will probably take your tax burden over the 40% mark. Ugh.....

    Only those who achieve very high wages will have any chance of covering the capital plus interest repayments and paying back the loan or those with private means.

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    (Original post by NuclearFusion)
    Though your model assumes that they wouldn't be receiving any interest on their savings that they would otherwise have. And the interest rate on their savings might well be higher than 3%, so they would infact have been better off not paying it off.
    Also, by having their savings, they might be able to help with a deposit on their children's house, whereas not having a student loan won't really help. If for some unfortunate reason, their children lost their job and needed help, not having a student loan won't help, since you don't need to pay it if you earn under £21,000. But having savings will certainly help with financial support in emergency situations.
    So really, even if you do have the money lying around, it isn't a very smart plan to pay it off, since you could probably make more money by putting it into a nice little savings account.

    Also, I forgot to say that the student loan is quite cheap debt, by which I mean the interest rate is comparatively low. Therefore, it would make much more sense to pay off much more expensive forms of debt (Putting down a bigger deposit on their children's mortgages) rather than paying off the student loan.
    Three percent above inflation on the student loan is certainly a lower rate than most credit cards, on a par with commercial loans but higher than most mortgage interest rates right now. I wouldn't call it cheap while we have such a high level of inflation. However I do agree that because the loan is time limited then it is obviously not a priority to pay down over and above other non-time limited debts.
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    (Original post by catoswyn)
    Three percent above inflation on the student loan is certainly a lower rate than most credit cards, on a par with commercial loans but higher than most mortgage interest rates right now. I wouldn't call it cheap while we have such a high level of inflation. However I do agree that because the loan is time limited then it is obviously not a priority to pay down over and above other non-time limited debts.
    Well I guess mortgages wasn't such a good example, but certainly having parents with lots of liquid assets will probably help with your credit rating when taking out secured loans against your parent's assets and will likely mean a lower interest rate on that loan.
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    (Original post by cmas123)
    According to various sources, the tuition fee loan is wiped out after 25 years - anything you haven't yet paid back is written off.

    You are taxed 9% per year on everything you earn over £21,000

    If you earn £30,000 per year, you will be taxed 9% of £9,000, which is £810.

    Theoretically, if you walked straight into a £30,000 a year job straight after graduation (obviously in reality, your starting earnings will be lower than this) then you will pay back £810 a year for 25 years, which according to my maths is £20250 in total. Seen as tuition fees are £27000, hardly anybody will pay the full amount back?

    Have I made a massive error here, or is this totally correct?
    If you take into account interest as well (which means your debt would be much higher than just 27k), then its no surprise that alot if not most people will never have to pay off the total amount owed. Still, based on your calculations, paying £20250 > paying £9000 (current system).
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    (Original post by Forum User)
    It was Buckinghamshire, I don't think that has a particularly good reputation.
    Oddly enough (and unintentionally actually), I just found this.

    http://www.thecompleteuniversityguid...gs?o=Prospects

    Perhaps a coincidence, but it should count for something.
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    (Original post by Shani)
    Given your example, you are in a way correct. However, you've failed to factor in the fact that someone earning £30k now is unlikely to still be earning £30k in 30 years time. Inflation needs to be factored in.
    True, but you're paying an interest rate above the rate of inflation.
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    (Original post by redferry)
    They also made the mistake of assuming a lot of people will be walking straight into £30000 a year jobs after uni - in this current economic climate it just isn't really happening.
    Nobody assumed this. The government knows the jobs situation and what graduates are likely to be earning. They know that a lot of graduates will end up not repaying the full costs of their tuition fee loan, for those students their education is largely government subsidised. Back in the day of grants, the government subsidised the full costs of everyone's education.

    The new system brings a market for HE, on the one hand government is paying more in terms of loans for these higher fees, but the fees are higher because the government's direct grant to universities has been cut so the government saves money that way. Now universities will end up making more money the more students they recruit so it's supposed to force them to taking a more student-focused approach to get students through the doors, rather than just complacently taking the government's direct grants every year and treating undergrads as a necessary burden.

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