NEW £9,000 FEES POLICY SET TO COST MORE THAN THE SYSTEM IT REPLACED
How confident are you that you’ll be able to repay your entire student loan? The proportion of graduates struggling to pay back their student loans is now so high that experts predict the new £9,000 fees system could soon cost more than the old one it replaced.
As hundreds of thousands of UK university graduates struggle to find paid, permanent work, large numbers have not even started paying back their student debt. As the Guardian’s Hugh Muir puts it:
“There is simple economics here; too many graduates chasing too few jobs in a labour market slimmed down by government austerity measures. Many who have taken out the loans can’t find jobs, so they don’t pay; but those who do find employment are paid so little in an over-supplied market that they don’t reach the threshold at which they have to pay.”
The universities minister David Willetts confirmed that the write-off figure is rapidly approaching the 48.6% mark. This is the threshold at which experts calculate that the government will lose more money than it would have saved by keeping the old £3,000 tuition fee system. Against a backdrop of serious student violence in December 2010 ministers said that the tripling of tuition fees was necessary to save money in a time of austerity.
Lower pay for young adults, an over-supply of those with degrees and the worsening economic outlook have all contributed to the revised civil service forecasts which conclude that far fewer graduates will earn enough to pay back their loans over their working lives. Four months ago Willetts notified parliament that the rate had risen to 40% from 35%. In 2010 the estimate was 28%.
Shadow education minister Liam Byrne said the new figures represented a “descent into chaos”, adding:
“This is fresh evidence that our university finance system is turning into a money pit. The system is now haemorrhaging cash that will never be repaid and reinvested in the next generation.
“It’s high time David Willetts came out and told us exactly how much this strung-together system is costing the taxpayer, rather than dress it up with clever accounting tricks… Their funding model fails the sector, it fails our students and it fails those whose hard earned wages continue to prop it up.”
Under the new system graduates repay their loans only when they are earning over £21,000 — and repayments are linked to earnings. But readers of Graduate Fog tell us that in many sectors graduate starting salaries are well below that threshold – with many university leavers starting their working lives not being paid anything at all, in the form of unpaid internships. In time, your salary may be pushed up to the minimum wage (or perhaps around £15,000 – £17,000) but from there it is still a long way to £21,000.
*HOW CONFIDENT ARE YOU THAT YOU’LL PAY BACK YOUR WHOLE LOAN?
Have you started making repayments yet – or aren’t you earning enough yet to have to? Do you expect to repay the full amount? Are your friends struggling too? Share your views below!
Well it was inevitable. I’ve mentioned countless times on here that the government is SELLING OFF THE STUDENTS LOAN COMPANY(everyones loan except those under the £9000 system). This is happening in 2015. Who is to say that these private companies will not lower the repayment threshold and demand repayment. The government is allowed to change the terms and conditions of the loan, it’s written in the small print.
I cannot believe so few people are aware that student loans are being privatised.
What happened to rail, water, gas and electric et al. when it was privatised? Why would a private company buy this debt off the government? David Willetts I hope you burn in hell.
I remember working out that to merely service the interest on the student debt I owe I would need to earn something in the region of 19k-20k. This being the nice “old” system without a real rate of interest. Thankfully it gets wiped after 25 years. I doubt I’ll get anywhere close to paying it off.
I’ve paid back £6 of my c £20k student loan – so far less than the interest 😀 And that was only cos a week’s full time wages and left over holiday pay leaving a temp job took me over the weekly income threshold (my threshold is c £16k).
It seems to be a de facto graduate tax already – but one a vast number of graduates won’t ever pay. I no longer think about it – I suspect it’ll be written off – overdrafts from uni are rather more of concern.
But you probably will have to start paying if off. The government has sold your loan to a private company (all loans prior to 2012). The private companies will lower the repayment threshold. Trust me this is going to happen!
They’ll have to reduce the threshold to full-time minimum wage or just above to net me. Though for some of my last job I was part time so didn’t even pay tax & NI, let alone student loan repayments.
And at the moment, my temp job has just finished so good luck raising it from someone on the dole – though knowing this government I wouldn’t put that past them 🙁
I’d better double check the small print of the agreement I signed in 2006 I suppose. If I can find it online anywhere, I doubt I still have it.
Some publicity on the issue:
http://www.dailymail.co.uk/money/cardsloans/article-2513129/How-I-know-student-loan-sold-rate-up.html
I don’t think there is a need to worry about paying back all the loan. The government will want to let sleeping dogs lie and, even when a private company takes on the debt, government and Parliament will make sure that graduates are not pushed to the wall. After all, millions of graduates have a relatively high disposable income through a combination of graduate overdraft, salary and credit, who spend money in pubs, restaurants, KFC, coffee shops, fashion stores, etc etc. If squeezed, then the economy is threatened as people will cut back further. The Student Loan scheme is a gravy train that politicians, banks, universities, student housing companies, insurance companies, etc all benefit handsomely; they will all make sure the train doesn’t grind to a halt.
Graduates should keep their nerve, listen to family and friends, and don’t jump into an agreement of regular monthly repayments regardless of situation. As a body, graduates and their families are a force to be reckoned with – if pushed too far, people will push back; the government doesn’t dare to push us around much more than it already does.
If they make the repayment terms anywhere near too harsh then i can see thousands and thousands declaring bankruptcy – only on your record for 7 years isn’t it?
I graduated 10 years ago in 2004, and have still yet to earn enough to start paying the 15k threshold after deduction that was set at that time (2004) 🙁
What you need to remember is that although 21K is a reasonable salary now, fast forward about 10 years from now, with inflation, it will probably be the equivalent of what 15k is today??
Hi Rich you are a real encouragement. Seriously. I graduated in 2008 and I will never be on a graduate salary.
@ JOhn,
Never say never John. Remember that this is one of the worst recessions in history, and almost 50% of graduates are in similar situation and very angry, but as long as you keep learning and working on yourself you have a chance to eventually break free from the precarity/poverty trap.
I can potentially earn a pretty decent income from my work, however this is difficult at the moment as business is very slow; I have to do about 30+ hours a week unpaid work such as admin & marketing & research, social media posts & reports for clients, for the privilege of getting payed work from my clients.
It took me 5 years of working in the shitty jobs to get to that place where I could set up my own business, and thanks to government cuts to the arts, and austerity it’s making it much harder, but eventually I will work out a way to get decent wage, and have learned more by simply working for myself (in addition to other part time temp jobs) than I did going to uni.
Great that you persist, Rich.