When the ‘soak-a-student’ policy was first announced no one had a proper grip of the issues.
The main point to bear in mind is that this is totally different to all conventional loans. Most will not be paid off in full because the debt cancels 30 years after graduation. It might be better to think of the student loan as a graduate income tax. You will pay 9% income tax more than a non-graduate on everything you earn above £21,000 per annum. Earn £33,000 (lucky thing!) then the bill will be £90 each month. And now it doesn’t start to sound so bad.
If you are like me then you will probably be thinking about an ever-increasing loan and the impending bankruptcy. You’ll have a mental picture of a disastrous credit rating, house repossessions and either the police or a couple of illiterate heavies knocking your front door down. And this is the impression we all had when the policy was first announced, no wonder there were so many protests going on.
- If a student’s household income is below £42,600 a year, then some of their loan entitlement is replaced with a non-repayable grant. Parents receiving benefits are advised to check how they are affected when a son/daughter goes off to University. The £21,000 p.a. threshold for 2016 will increase each year by the ‘general wage inflation’.
- In 2011 the General wage inflation was below 2%.
- For the tax year 2017-2018, expect the threshold to increase to about £21,400, so the wage deductions will change.
- It is normal for graduates in employment to have an annual rise above 2%.
- The 9% payback starts at the beginning of the tax year i.e. April 2016 – 2017.
- Earn £18,000 in this year, i.e. £1,000 below the threshold; nothing will be taken out of your wage.
- Earn £25,000, i.e. £4,000 above the threshold; pay £30 out of your wage each month.
- Earn £40,000, i.e. £19,000 above the threshold, have £143 taken out of your wage each month.
- There are very few who will earn above £40,000 p.a., but those that do may well finish paying off the full loan before the 30-year period expires.
- Most graduates will not pay their entire loan back, after paying your student loan for 30 years the debt is cancelled.
- The student loan debt will increase each year by between the RPI and RPI + 3%, in 2011 the Retail Price Index varied from 5.1 to 5.6%.
So, you have a University debt, which increases at an alarming rate, but then it is unlikely that you will ever pay it off. The debt will not affect your credit rating. The main worry, during the 30year payback time, is that Governments can change the Terms and Conditions!
This information goes a long way to calm fears of debt but I must still encourage you to check out my website and seek out degrees that lead to a better chance of employment at graduate-level wages.
On my main website http://university-fees-and-student-finance.info I stress that getting well paid employment is one good way of paying off your debt from University tuition fees. Just in case we follow the Americans, I gave a list from their ‘Bureau of Labor Statistics’ of the fastest growing occupations for 2018. It is obvious that a well paid graduate job helps student finance by debt-killing.
In my eBook, I suggest where to find the best U.K. statistics so that you can rate your degree in both job-rate and pay terms. And now the American ‘Georgetown University’s Centre on Education and Workforce’ provides us with an interesting table on pay. The data has been extracted from the US census.
Start with the top 5 earners:
- Petroleum Engineering $120,000
- Pharmacy and Pharmaceutical Science $105,000
- Mathematics and Computer Science $98,000
- Aerospace Engineering $87,000
- Chemical Engineering $86,000
The bottom 5 are:
- Counselling and Psychology $29,000
- Early Childhood Education $36,000
- Theology and Religious Vocations $38,000
- Human Service and Community Organisations $38,000
- Social Work $39,000
At the time of writing, $1,000 is worth £644. So their lowest earning ‘major’ would be a median value of about £19,000, and their highest comes close to £77,000 per annum. Since emigration is clearly becoming a serious option for many UK graduates, it pays to know what is happening in other countries of the world.
One good thing is that a UK graduate earning £19,000 p.a. or less will not be expected to pay anything off their University debt
– but beware, because the unpaid debt grows all the time in line with the annual inflation rate!
You are advised to be very suspicious about League Tables and job shortage advice given in our newspapers, all of this is covered in a short article here. And if you wish to view an earlier article written when the idea of soaking our students was new then click here. The last article starts to list the steps you can take to avoid a lifetime of miserable debt from the hiked-up University fees.
About to choose a course at one of the UK’s Universities? Worried about being mugged – you should be! Our big, bad Government is about to saddle you with a massive debt to cover those Tuition fees. Think its unfair? Well we are up to our eyeballs in a debt that is growing every day and somebody has to pay for Higher Education – you!
America are a long way down this road, their students have always had to take loans out. £600 billion is owed over there. That looks like £600 000 000 000, give or take a few noughts! Not a problem if loans are paid off on time, but that is exactly the worry – about 6% of their graduates cannot afford the repayments. This is partly because of a high graduate unemployment rate. They sit on a debt time-bomb and – where America goes today we will surely follow.
So what does that matter to you? Well, this is a genuine plea to stop you from sleep-walking into a pile of distressing debt. There are options – buy an up and running Franchise business for a lot less than University loan and you won’t have to go grovelling for a job in 3 years time. Check out an apprenticeship or degree sponsoring employer – if you can find them.
Quite rightly many will opt for University, make sure that you take as much precise advice as you can. You are strongly advised to mistrust and ignore ‘lazy’ comments like these:
- “Study what you most enjoy, having any degree gets the job not the degree subject.”
- “Better prospects with the Sciences or Engineering.”
- “Graduates of all disciplines get the best paid jobs.”
- “You are bound to land a good job in the long run if you have a degree”
- “We’ve been here before – our country always pulls out of recession.”
These are comments from the 1980’s, when a degree was worth an unbelievable extra £400 000 after a lifetime in work. Get yourself better informed, sharpen up your course search and get clued up with the real issues on this impartial website.