CUT OUT CAPPUCCINOS TO PAY OFF YOUR LOAN, SAYS POLITICIAN – BUT DOES HIS MATHS ADD UP?
A government minister who implied that graduates could pay off their debt easily by simply cutting out cappuccinos has been slammed for minimising the true scale of today’s typical graduate debt. In reality, to pay back a basic £27,000 loan, a graduate earning £30,000 needs to cut out 12,000 coffees – over 24 YEARS.
Earlier this week, Conservative universities minister Greg Clark angered students and graduates by insisting that university is a “phenomenal investment” as their loan repayment works out as less than the price of a “posh coffee” per day.
But critics say that although some of his maths is sound, he ignores the fact that a graduate paying back their debt at this rate would be doing so for more than two decades.
Clark claimed that, “If you earn £30,000 as a graduate, you pay back £2.22 a day; now, there are people who buy cups of posh coffee for less [it seems he meant ‘more’] than that.” But the Guardian’s Tom Meltzer says Clark has ignored a few key facts:
“According to the Student Loans Company’s payment calculator, a graduate earning £30,000 a year pre-tax will pay back £98 a month, or £1,176 a year.
“If we take Caffe Nero’s medium cappuccino — at £2.35 a cup — as our standard “posh coffee”, that means a graduate paying back £1,176 a year would be forgoing 500 ‘posh coffees’.
“That’s about a coffee and a half a day. Hardly a difficult sacrifice, you might say. But Clark’s assertion masks how long it would take to repay even a modest loan at this rate.
“A total debt of £27,000 for a three-year course, for example, would take around 24 years to pay off. And that back-of-a-fag-packet maths is only anything close to correct if interest rates stay at the current level of 2.5%, which is highly unlikely, and coffee prices don’t increase at all, which is almost inconceivable.”
Here are those numbers again:
500
Approximate number of “posh coffees” a graduate earning £30,000 would need to forgo every year to repay their student loan.24 years
Approximate length of time it would take to pay off a £27,000 loan on an annual income of £30,000.12,000
Total number of “posh coffees” it would take to pay off a basic £27,000 loan in full.
Graduate Fog’s readers are divided on whether a university degree is a good investment. While some of you are thriving in well-paid jobs and busy reducing your loan, others are struggling to make your qualifications pay off, and are resigned (sometimes relaxed) about the idea that you may never earn enough to pay off your graduate debt in full. Graduate Fog doesn’t have all the answers to this complicated question. But we do know that the scale of most graduate’s debt is big – and it is extremely unhelpful to pretend that it isn’t.
*Note: Tom Meltzer’s article has been updated since we wrote this post, clarifying that Greg Clark was referring to the repayment plan offered to students post-2012. Our post (and Tom’s original piece) refers to the repayment plan taken out by student pre-2012. For post-2012 students, repayments are smaller, but will take even more time to pay off.
*WHAT DO YOU THINK ABOUT GREG CLARK’S COMMENTS?
How do you feel about your graduate debt? Could you pay it off more swiftly if you cut out life’s little luxuries, including ‘posh coffee’? Or do you feel his words belittle the scale of the financial burden you have taken on? Have your say below…
The best answer is to not make any extra effort to pay off Student Loan Company student debt at all, and just treat it like the de facto tax it effectively is of 9% over your threshold (mine’s c £16k, so haven’t paid any loan back).
It gets written off eventually anyway, and those of us trapped in low paid work will have effectively got free university education – so take that 😉
As long as Parliament doesn’t retrospectively change the repayment terms, of course.
The commercial debt a lot of graduates have is far more of on issue.
@Alex W
God forbid if they do try and retrospectively claim any money from us. I wouldn’t put it past the Tories and their Victorian workhouse ethos though. The pitchforks will definitely be out then. And I’ll be there, joining them. burning things.
What makes me laugh is when my uni keeps asking for money!!Footsteps fund they call it, so education is accessible for all. Sod off!! How bout you help by not charging them 9 grand each a year!
File bankruptcy like I did and you will have no debt. I am not stupid enough to pay back a 50K student loan for 2 decades like my peers. After all, why would you pay back a 50k student loan debt if you end up unemployed or underemployed after graduation?
The system is rigged to load young people with massive debt to get the skills necessary for jobs that do not exist? Brilliant idea baby boomers!!! and if you are lucky enough to find a job, the government will tax the shit out you!!!
In addition, university is slow, expensive, and a complete waste of time. We live in an age of space age technology with a government stuck in a stone age philosophy.
What’s really funny is that if you have an iphone or a touch handheld device, you have complete access to universal knowledge from your fingertips.
I have learned to think for myself and only do activities now that make financial sense. If I want to learn something, I use Khan Academy, Google, or Youtube.
Many of my friends had to catch up after college to learn the skills necessary for their jobs (on YouTube) because it was not taught in school lol.
I want to make it clear, I was not forced into bankruptcy. I voluntarily filed for bankruptcy on purpose! It wasn’t until I graduated college, I realized what was going on?
Watching many of my friends with 6-figure student loan debts move back on with their parents while working the same part-time job they had in college.
Then I chose to learn about how the “real world” works by using Google, Youtube. I then realized their was a massive economic bubble in education.
Therefore, I made the smartest strategic move of my life which was to file for banktruptcy.
I have learned to think for myself and when a Government passes a law. I literately adapt my life (in real time), to make sure I am on the better side of the transaction.
My friends hate my guts because I have no debt and earn more than they do lol.
So, the moral of the story is to think for yourself and only do or pursue activities that make financial sense and adapt your life accordingly when the Government tries to screw you over.
I have learned to think for myself and when a Government passes a law. I literately adapt my life (in real time), to make sure I am on the better side of the transaction.
I want to give you guys an example of what I mean.
Let’s say the Government announces on T.V. that it has passed a law which states “Everyone who is collecting Job seeker allowance will receive $2000 per week until they find a job”
The question you need to ask yourself, is how do I respond to this law? Well naturally I would hand in my resignation the next day and jump on the job seeker allowance. Why? because I would be financially better off not working than actually working a 9 to 5 job.
Here is another example.
Lets says the Government announces on T.V. that it has passed a law which states “Everyone who earns over $40,000 a year will have an income tax of 100% for each dollar earned above $40,000” Well, you will look at your situation and if you earn over $40,000 a year, you should either find a new job that earns less than $40,000 or negotiate with your employer to pay you exactly $40,000 a year and the rest in shares.
My point is that you adapt your situation any way you can to make sure you are on the better side of the transaction.
This is Economics 101. The difference I actually apply it. Economics is all about incentives.
@JC: “What makes me laugh is when my uni keeps asking for money!”
Same here, they keep e-mailing me asking too. The cheek when the Vice-Chancellor earns over £300k! (£12,000 a month after tax).
@Chris: File bankruptcy like I did and you will have no debt.
Since it isn’t really a normal debt, I don’t think student loans are wiped by bankruptcy.
I’m not quite at that stage, but bankruptcy really is a last resort regarding my commercial debts because:
* It costs money I don’t have (c £500 I think)
* I’m getting involved in a political party (which since my degree was Politics, is progress), and may even stand as a paper candidate at some point, which bankruptcy can affect
* Most importantly, my parents have said they might be able to help consolidate my debts, with me then paying them back. Which I’m very grateful for, and surely sounds like the best course of action.
@Chris:
Also if – as it sounds like – you’re talking about America, I’m sure I’ve heard bankruptcy doesn’t necessarily wipe out student debt – where it much more onerous than Britain – there either.
@JC:
“God forbid if they do try and retrospectively claim any money from us”
I’d like to see them try to get blood from a stone.
Anything any government politician says in this election year is simply electioneering and shouldn’t be taken seriously.
@Alex W
When I filed for bankruptcy and my student loan debts were completely wiped. The Inland Revenue Department issued me a new tax number and I was a free man.
I got to start all over again and as you could imgaine being a student I did not have any assets so the government could not seize anything to get their money back lol.
It is true, that bankruptcy can affect your employment opportunities if your employer does a credit check as part of their hiring process. However, there are many jobs that don’t do credit checks and only do criminal checks. Bankruptcy does not show on your criminal record.
Also, keep in mind this whole economy is based on debt. Everyone, I know has some form of debt and they never seem to get out of the cycle of debt.
What’s funny is now I have a degree with no debt and I make more money than my friends who have 6 figure student loan debts and work the same job they did back in college lol.
I love corruption when it works in your favor. It feels great to be free!!! I don’t owe money to anybody!!!
Yea baby!!!
@Alex W
Also, keep in mind this whole economy is based on debt. Everyone, I know has some form of debt. So it is not uncommon for people to have declared bankruptcy.
Besides, if an employer does do a credit check and asks you about it. You do what everybody does in a job interview…you lie your f**king ass off.
For example, I would say to the employer that my wife left me and file a divorce which forced me into bankruptcy. Nobody is going to know? and they are likely going to take your word for it lol.
If you want to be a successful politician or get involved in a political party. You better get used to lieing thats how polictians get a head. You should have learnt this in politics 101. Just look at Nick Clegg who you guys voted for to scape tuition fees. Once he got your votes what did he do? He decided to triple the tuition fees and live a luxury life with his billionaire friends.
I mean just look at the guy. He still believes that tripling tuition fees was a good thing? Wtf? lol
Welcome to the real world, what they don’t teach you in school