I wasn't sure about the policy when it was first introduced (as you can tell by my numerous blogs around that time) and it is not a policy I would have adopted or even voted for. Yet at the same time, I am happy to defend it when it comes up in conversation. I have had many conversations in the last few months with people whom I consider to be rather intelligent and up to speed with the news, yet they are amazed to hear that I feel that £6 - £9k tuition fees are fairer than when I went to University paying just over £1k.
The major reason for this is that my fees had to be paid UP FRONT. They were means tested, however my father had just seen a rather significant increase in income a couple of months before the means testing which pushed my parents just over the threshold of having to pay the full whack (over £1k a year up front). Since I was born we have never been poor, but we were never rich either, they got by well mainly because the area itself was fairly poor. Fortunately for me they had been saving since the day I was born to give me all I would need should I wish to attend university. If it hadn't been for them saving money for me I would have not been able to go. I tried getting jobs during the summer etc, once I turned 16 however my area had large unemployment and I was never successful. I am sure without them I wouldn't have been able to get myself into the position I am today.
Many conversations I've had have implied that the same situation would be the case under the new system, only 9x worse - parents having to fork out £9k a year just for their children to study. The key is here though that the student will be the one to pay it (not their parents in advance) and only IF they earn enough over their life. It is effectively an additional tax (which the NUS has been calling for - but better than this as it is time limited at 30 years).
Then on top of this you have the preferential repayment terms. Yes, they get charged interest, but this only becomes an issue once they would have otherwise paid off the principle. No matter what the student's background, they don't have to pay any money back until they are earning £21,000. If their income ever falls below this then they stop paying this back. I know people are worried about being saddled with debt, but this isn't debt in the conventional sense, it's effectively something that stops your disposable income rising by as much as it could when you get a pay rise.
Many people I have spoken to brought up the difficulty of trying to save for a mortgage. I can vouch that this is difficult, but the changing repayment plans makes this EASIER. I am now going to do two scenarios, one with my situation, the other if I had been under the new system. I have kept the living allowance constant for illustrative purposes (and because I don't know the exact amounts - but it will be much higher when this system is in place than the amount I received). I have also assumed that there is no time value of money.
My Current Situation
Fees Paid (in advance): (£3,255)
Student Loan received: £9,275
Student Loan Repayments made to date: (£1,449)
Balance: £4,571
In other words, under my system I have effectively net received £4,571 to date from the government. I still owe to them £7,826 + whatever interest I have accumulated. Now if I had been under the newly introduced system:
New System
Fees Paid (in advance):
Student Loan received: £9,275
Student Loan Repayments made to date: (£0,240)
Balance: £9,035
I know this is rather crude, but the net effect under this new system would be that I currently would have effectively received £9,035 net from the government to date. This means at this point in time (had I been good with my money) between my parents and myself we would be £4,464 BETTER OFF.
Notice also the difference on the student loan repayment. This repayment difference is increasing every month, anyone on the new repayment plan will be £45 per month BETTER OFF than I am. This will continue until I reach a balance of £0 on my student loan account in many years time. It is only then that my method is better per month. It will still be worse overall until the new students have paid back enough to cover both their student loan and the amount of my fees.
If you think about it this way, I graduated four years ago. In the same circumstances that I found myself in they would have paid back £240 having been given over £9,275 as a loan in cash (I think it is now closer to £12k). They may owe a lot more but wont start paying any of their actual fees off until they pay back the cash that they actually received. To manage this before they reach their 40s they would have to be earning a rather large wage - and aren't these the sort of students that everyone has been saying should contribute more - those who benefited most from their university education?
I really wish the Government could actually show people that the ones who will be worse off are those that do well for themselves - the people the tabloids are quick to criticise and say should be contributing more!
So those who say they can't afford to go to Uni, trust me you can, it cost me more to begin with, I'm paying back more than you will be and I'm doing all right for myself! Although my advise would be, make sure you are going because you want to go and are interested in your subject. As a (basically) qualified accountant (I passed my final exam, result came through on Monday) I can say I could be in the same sort of job without a University degree as there are other training options out there. Choosing not to go to University doesn't mean you can't be successful, I've come across plenty of people in my professional studies who skipped the Uni stage and are now working in very good roles at very big companies.
(*Note, the bold capitals are there for emphasis purposes, not due to any jealousy or anger)
Good piece - and thanks for the mention also, appreciate it
ReplyDeleteThanks, and you're more than welcome.
ReplyDeletehttp://www.studentfinancecalc.com/
ReplyDeleteThat is a good illustrative tool, however I was trying to set out above an actual comparison.
ReplyDeleteThe first is what I have paid to date, the second being what I would have paid under the current system (with this I could have borrowed more and therefore be in an even better net cash position).
That tool looks good, however there is a flawed assumption in the sense that incomes do not rise in a steady fashion from entry level. Mine for instance have risen quite steeply from the initial £12,000 (in a career related role) - which I have to predict large constant rises for that to have me paying back anything at all.