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    (Original post by jneill)
    No because the current loans are means tested so not everyone gets the full amount. Under your system everyone gets the full amount increasing the loan book significantly.

    Crunch the numbers - I'm sure you can do it...
    The second half of the second paragraph and the third paragraph of my post (that you omitted when you quoted me) already address this point.
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    (Original post by tazarooni89)
    The second half of the second paragraph and the third paragraph of my post (that you omitted when you quoted me) already address this point.
    Nope. The total annual debt (the book) will increase significantly.

    And you haven't modelled the "economically viable" repayment terms.
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    (Original post by jneill)
    Nope. The total annual debt (the book) will increase significantly.
    Yes, and I've already explained why that is not a problem.

    The debt increases significantly, and the amount to be repaid also increases significantly. The whole point of the interest rate on these loans is that, overall, more is repaid back to the lender than was borrowed in the first place. The book is therefore an asset of positive value held by the lender. Increasing the size of the book is a profitable rather than a loss-making venture.

    The only way this would be a problem if the new loanees are expected to be more likely than average to end up repaying less than they borrowed, which is not the case.

    And you haven't modelled the "economically viable" repayment terms.
    Increased lending under the existing repayment terms is already economically viable.
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    (Original post by tazarooni89)
    Yes, and I've already explained why that is not a problem.

    The debt increases significantly, and the amount to be repaid also increases significantly. The whole point of the interest rate on these loans is that, overall, more is repaid back to the lender than was borrowed in the first place. The book is therefore an asset of positive value held by the lender. Increasing the size of the book is a profitable rather than a loss-making venture.

    The only way this would be a problem if the new loanees are expected to be more likely than average to end up repaying less than they borrowed, which is not the case.

    Increased lending under the existing repayment terms is already economically viable.
    It's only a positive asset if the lender knows it will be repaid otherwise it becomes a liability.

    Tell me, how much bigger would the book be? (It's significantly bigger but you must have figured out a more accurate estimate otherwise you wouldn't be able to recommend this strategy...)

    And how does the significantly increased book get repaid with economically viable repayment terms? What would those terms be for students specifically earning say: £20k pa, £25k pa, £30k...£50k... £100k.... £150k pa ? Unless they are significantly higher repayment levels than at present the write-off level will be even worse than it already is. But if it's significantly higher the default rates will also increase. So who then covers the increased loan write-offs? (Answer: the tax payers).

    Uh oh.
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    (Original post by jneill)
    It's only a positive asset if the lender knows it will be repaid otherwise it becomes a liability.
    No, that's not true. It's a positive asset if, on average, the lender expects more to be repaid than they lent out in the first place. They don't have to know with 100% certainty that it will be repaid in full plus interest. Some will repay more, which makes up for the risk of some repaying less.

    Tell me, how much bigger would the book be? (It's significantly bigger but you must have figured out a more accurate estimate otherwise you wouldn't be able to recommend this strategy...)
    It doesn't really matter; since the book is currently an asset of positive value (we can assume this as it has just been sold to a private company for a positive amount), scaling it up by lending to more students makes it an asset of even more positive value; especially given that students from high income households are less likely, rather than more likely than the general population to end up under-repaying.

    And how does the significantly increased book get repaid with economically viable repayment terms? What would those terms be for students specifically earning say: £20k pa, £25k pa, £30k...£50k... £100k.... £150k pa ? Unless they are significantly higher repayment levels than at present the write-off level will be even worse than it already is. But if it's significantly higher the default rates will also increase. So who then covers the increased loan write-offs? (Answer: the tax payers).

    Uh oh.
    The repayment terms would only need to be exactly the same as they are now. Of course there will be more write-offs than there already are, but there will also be more students repaying in full plus interest than they already are, which more than makes up for it.
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    (Original post by tazarooni89)
    No, that's not true. It's a positive asset if, on average, the lender expects more to be repaid than they lent out in the first place. They don't have to know with 100% certainty that it will be repaid in full plus interest. Some will repay more, which makes up for the risk of some repaying less.

    It doesn't really matter; since the book is currently an asset of positive value (we can assume this as it has just been sold to a private company for a positive amount), scaling it up by lending to more students makes it an asset of even more positive value; especially given that students from high income households are less likely, rather than more likely than the general population to end up under-repaying.

    The repayment terms would only need to be exactly the same as they are now. Of course there will be more write-offs than there already are, but there will also be more students repaying in full plus interest than they already are, which more than makes up for it.
    No there won't.

    The evidence is that students from higher earning households are more likely to also end-up in higher earning jobs (ie. there's not as much social mobility as was expected). At the moment those students don't get full loans, but under your scheme they would. Whereas the students in lower earning households are pretty much unaffected. So, the increased loan book comes from increasing the value of loans to higher earning students. They would therefore have to repay more than they currently do when they graduate (because currently they get free money from the bank of mum and dad). Those graduates repay 9% of their income at present. What repayment % do you estimate they will need to repay at to meet the demands of the increased loan.

    The lower earning graduates can not pay more than they already do, so the extra repayment HAS to come from higher earning earning graduates. It's not that there are loans to more students... it's that the level of loans to high earners has increased. The number of loans is unchanged. There aren't more graduates who have to repay... just some graduates will be repaying a lot more. They happen to be the high earners. You know the ones who already have a higher tax burden.
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    (Original post by jneill)
    The evidence is that students from higher earning households are more likely to also end-up in higher earning jobs (ie. there's not as much social mobility as was expected). At the moment those students don't get full loans, but under your scheme they would. Whereas the students in lower earning households are pretty much unaffected. So, the increased loan book comes from increasing the value of loans to higher earning students. They would therefore have to repay more than they currently do when they graduate (because currently they get free money from the bank of mum and dad). Those graduates repay 9% of their income at present. What repayment % do you estimate they will need to repay at to meet the demands of the increased loan.

    The lower earning graduates can not pay more than they already do, so the extra repayment HAS to come from higher earning earning graduates. It's not that there are loans to more students... it's that the level of loans to high earners has increased. The number of loans is unchanged. There aren't more graduates who have to repay... just some graduates will be repaying a lot more. They happen to be the high earners. You know the ones who already have a higher tax burden.
    Yes, that's all true. So what's the problem?

    Students from low income families remain unaffected, whilst students from higher income families get the option to take out more of a loan than they otherwise would have (which they would only use if they need to), whilst the student loans company makes a higher profit since a greater proportion of their loan book gets repaid in full plus interest.

    The students who benefit are those who have a high household income, but for whatever reason are unable to put that household income towards their university costs.

    Who exactly are you suggesting is losing out here?
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    (Original post by tazarooni89)
    Yes, that's all true. So what's the problem?

    Students from low income families remain unaffected, whilst students from higher income families get the option to take out more of a loan than they otherwise would have (which they would only use if they need to), whilst the student loans company makes a higher profit since a greater proportion of their loan book gets repaid in full plus interest.

    The students who benefit are those who have a high household income, but for whatever reason are unable to put that household income towards their university costs.

    Who exactly are you suggesting is losing out here?
    Hmm... perhaps you have cracked it after all....

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    (Original post by spark12)
    If my parents didn't give me money, would it mean I couldn't go?
    No, you get a job like everyone else does
 
 
 
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