What would be interesting to know is what % of graduates would be expected to repay their loans in full if the interest rate were just RPI, or even CPI, rather than RPI plus (0 to 3)%. And how that percentage increases if the salary threshold is reduced to £20k.

Enough to make you up sticks to Dubai.

It's interesting as the Unis are supposed to be non profit charities (excl ulaw and BPP). Where is all the money going?

We should prob go back to free uni places for UK kids, cap numbers and force the less bright into fruit picking or trucker college.

I think EU students skewed the stats quite a bit.

Loads left and never paid it back.

Scrap loans, fewer courses at fewer unis, tougher entry requirements, fee-free education for certain courses with grants for those who need them, shorter and more flexible courses for those who have to pay, more focus on non- uni routes into work.

I think people are taking the medicine

Credit risk is a good point. If the yoonis were in the hook for 1/3 to 1/2 the default they would soon start thinking hard about the value of their courses in the employment market post degree and whether or not everyone they take on is a good or necessary punt 

I'm seeing an increasing divide on the student loans between two groups:

(1)  Those who are not earning and never expect to be earning more than £30-35k per annum. Student loan debt not such a big deal. Will be written off in their early 50s.

(2)  Those who are earning or by early/mid 30s are earning £50-65k per annum. They're paying about as much as the interest accruing on the student loan but they're hardly touching the principal. They're not getting child benefit. The additional amount they're paying as a result of student loans might only be £3k per year but that can be quite meaningful as a percentage of what they have left after housing and other costs.

I'm convinced that the difference between (1) and (2) fed into electoral realignment in 2017 and 2019 but was overlooked because everyone wanted to explain everything by Brexit.  Essentially, it's not about whether you have a degree it's also about what you expect to earn. Where average earnings and housing costs are lower, e.g. red wall, even a chunk of degreeholders in their 20s and early 30s were not so pushed about voting Labour because of tuition fee promises. On the other hand, where average earnings and housing costs are higher, there are more degreeholders in category (2) rather than category (1) (and I expect also more parents of degreeholders in category (2) rather than category (1)) who are much more inclined to vote for a party that is committed to changing/fixing the current system. 

It's interesting as the Unis are supposed to be non profit charities (excl ulaw and BPP). Where is all the money going?

More and more lavish facilities? Spiralling costs of access for journals etc? Luxury accommodation? Soaring VC and senior staff wages? 

The size of my student loan increased during my two years as a City trainee due to the 5.6% interest rate. No wonder 88% of people never pay it back in full. 

Just put the cost on employers that demand graduate qualifications. Could also supplement it by charging private school students international fees and penalising universities that don't have students in particular categories of vocation or further education at certain standards of university within 3 years. 

I think where the money is going is that it is covering what the government used to fund directly. Also on the systems for charging fees.

It would be interesting to know if the 'saving' to public funds from student loans outweighs the cost of implementing the system + picking up the tab on defaults/ unpaid loans.

I suspect not but that it moves the costs offbook in some way so it looks better.

No idea tho.

I think it is a fair system. Those who earn the most pay the most. Those who don't earn much never pay at all, but can still go. It is free education for the majority of students. 

The alternative is to raise general taxation, which would probably have the same effect. 

Isn’t interest like 1%, don’t understand whinging 

I didn’t pay university fees 

The university actually paid me to go to it one to think of it

It's classic can kicking by a govt not willing to front up, creating a regressive "taxation" system trading off misleading those without a vote. 

This is another reason though isn’t it?

come back to the U.K., date a younger girl, boom they have 200k of student debt even if they have a respectable job…our assets are never going to be close

might as well bang a 9/10 stripper turned air hostess on emirates and make her dependant on me

friend of mine moved to belgium after graduating and after ~3 years the SLC wrote off his loan because they couldn't find him

dunno if that was worth living in brussels

Its frankly sickening. The system is bad enough but to move the goal posts on people already in it is disgraceful. If any other FS business tried to change its terms like that it would lose its licence.

The govt have realised that the young have no effective voice due to the state of the opposition and so can be fooked over endlessly to protect the financial position (and/or the health) of the old and wealthy.

I think it is a fair system. Those who earn the most pay the most. Those who don't earn much never pay at all, but can still go. It is free education for the majority of students. 

But crypto, this is exactly the problem.  It whacks taxes on to university graduates who earn £50-80k in order to subsidise university graduates who earn less. 

(1) Scrape a 3rd in your degree (or drop out) and get a non-graduate job paying £30k or less - free university. 

(2)  Work hard at university, learn a lot, get a good degree, get a graduate job that pays you £60k by the time you're early 30s - pay extra tax to cover the fees of the person in (1).

The current system is perverse.  It's hitting middle earners a lot.  This was slow burn for a while but the cohort hit by the jump to £9,000 per annum fees are now reaching late 20s/early 30s.  

The thing about university tuition fees is that they are the same for every degree even though the costs are different. There are massive cross-subsidies within the overall system and within universities themselves. Charging the same amount to a student studying English and a student studying engineering involves a significant cross-subsidisation.

This is one of the things that is quite distorting in the UK.  A combination of in work benefits, tax credits, student loan repayments and a relatively low starting rate for higher rate income tax combined with sky high child care costs means that the difference in living standard between earning 25k a year and 60k a year if you have kids is really nothing like as big as you might first think.  Combine that with much more generous pension provision (and often more flexible working) in the public sector and 'mid level' private sector jobs are just not terribly attractive.... 

Not sure that is great for productivity or for making progress on gender equality or social mobility tbh. 

Agreed DD. Just hunting around now for a 2022 version of that graph showing marginal tax rates on £0-100k of gross salary.

I don't disagree with any of that, RC. 

However, there appears to be a drive to have as many people as possible having a university education. This started with Major and was accelerated by Blair. The argument is that we need to have a better educated workforce since the traditional school-leaver manual jobs have gone. I'm not really sure this is actually true, however. People can and should be trained on the job. 

It would certainly be possible to fund University from general taxation but there would have to be fewer of them and fewer courses. I don't think this is politically acceptable. 

@ Mr Darko: Spot on. The UK subsidises low pay (£30k or less) employment and overtaxes mid pay (£50-80k) employment.  Another factor in the mix is (fake) self-employment in the private sector which many of those in the mid pay range were using to reduce their tax burden but which has now been hit by IR35. 

The regional aspect is massive: London/SE England are feeling the hit much more; north of England/south Wales not so much because incomes/living costs are lower so one can have a much better lifestyle being a dual earner couple on £35k each than one can have in SE England. 

This is a wave moving through the system because those who have full student debt burdens are only now starting to hit late 20s. In a few years this will feed into ability to purchase properties and decisions to have children. I think some of what is happening currently in London/SE England re demand for first time buyer properties falling and prices falling, which we are being told is Covid-related, may be the first signs of this happening.

So education is basically free. 

Good to know. 

What Crypto said . Some of the university facilities are incredibly luxurious and over the top, with many buildings being designed by a fancy architect, with facilities , fixtures and finishing that Goldman’s would be proud . I’m talking Reading , Coventry , and Manchester for starters.

"where is the money going"?

I thought they packaged these up as income investments and flogged them to get a bag of cash for now, i.e. it just goes on whatever vanity project the PM has this year

One of my uni cohorts declared bankruptcy after he graduated from his masters. I thought that a student loan survived bankruptcy but he swears that he has had his loan written off. 

I’m fairly sure it does survive bankruptcy. It’s not like a personal debt. 

I feel like such a mug for paying mine off. 

Just give them grants, ffs. 

What DDS explained above.

I call this evolving policy framework, “income socialism” or more accurately “earned income socialism”. If you depend upon an earned income your earnings ability is effectively a state asset and the proceeds will be redistributed “from each according to their ability to each according to their needs”. However capital and land remain very much within a capitalist system with little public ownership and relatively low taxes.

Its been evolving for at least 10 years (since Brown removed the personal allowance for higher earners etc) but is now in full swing. Its the only way to pay for the Boomers long generous retirement and stop the poor from rioting without hitting wealth owners.

The ruling classes have realised quite rightly that most Britons working for a living under 50 have no choice and can be readily taxed in this manner.

Its astonishing there havent been any riots already but the ruling classes have done a great job of camouflaging it all to date. The Left is either complicit (coz they basically like any taxes innit or are middle class with assets already) or are just really really stupid, or a bit of both

Just think how many articles youve read on income socialism? None. You do now have at least some voices calling for wealth taxes but there was total silence when I started writing about the need for wealth taxes probably 10 yrs ago. Even now the idea is only getting going. We’re a long way from a change to this system.

@Canary Worf  Spot on (as always).  

Yeah, good comment CW. I think a lot of people do genuinely perceive those in the “mid-pay” range described by RC as being “rich”. This is what drove the Corbyn Labour policy of increasing tax on those earning >£80k. For the average person there is a lack of awareness of the vast gulf between, say, mid-career professionals and the actually wealthy.

The average pay in the U.K. is something like £29k. £100k puts you nearly in the top 1%. 
 

While £100k is peanuts to roffers to mr average it must seem like a fortune. 

I think it's much higher in London crypto and give the economic disparities within the UK you are best off thinking of it as lots of separate economies, within some of those 80k doesn't look too tasty.

Fair point. 

CW spot on. Tories have completed it in capping the lifetime allowance, removing SIPPing as the last refuge from the PA removal, additional rate squeeze. Also remember child benefit is removed, tax free child care is removed, most of what's left in a year when you buy a house is taxed, and we continued to have a 20% emergency VAT rate. 

Outside of two salary London, private schools are a pipe dream for the squeezed upper middle class. In Victorian times these were the people they expected to FO to the colonies and sort shit out, and they got rewarded accordingly. Now they just bleed them dry. Luckily they have all taken advice, the council can't touch their parents' houses, grandad has his SIPP acting as a highly tax efficient trust and they are about to inherit the "business" operating from a 5 bed house by the sea that attracts 200k PA in AirBnB bookings. fook you Rishi. 

Yep. Shall we put it under the bed? Or just take out eyewatering debt

The lifetime allowance thing is disgusting. If you can actually afford to save you shouldn’t be penalised. 

Breaking their promise on student loans destroyed entirely the liberal democrats as any kind of political force and forced Nick Clegg to leave the country to go live in San Francisco and work for the internet. 

When did they change the rules on SIPP reducing income to get PA back? 

This actually worse than raising the principal amount of the loan as it goes to affordability and increases the actual amount students repay.

It means more students will pay more versus if you simply increase the principal it only affects the rich (and amusingly the more you raise it the fewer people it affects as each salary point has a 30 year limit at which they will never repay the loan and it just gets written off).

The debt system has two key issues - the first is that it’s called “debt” which has all the baggage of that word - even educated people mistake a student loan for say a 50K personal loan or a credit card debt - they function totally differently.

the second is the wierd quirk that middle high earners are hit harder than high earns due to the middle high earner paying more interest.

a super rich person may pay the fee up front say 50K flat, a very high earner may pay it down quick and pay 55K over 6 years, a middle high earner may pay 80K over 30 years (abstract figures but you get the point).

I would probably change it to a ‘grad contribution’, make it extra territorial, give it a cap on how much overall you have to repay so it’s even between how fast you pay it back and how much you pay.

I think targeting tax for it is fairer than general taxation as the grad gets the primary benefit of it (even with the tax you end up much better off if you get a good degree).

I don’t see getting non-uni educated builders to fund some luvies media course at an ex-poly to be palatable.

I don’t see getting non-uni educated builders to fund some luvies media course at an ex-poly to be palatable.

Agreed. However, the same applies to graduates who work hard and get good results studying for quality degrees at quality universities and, at least partly as a result, get reasonably well paid jobs. They should not have to cross-subsidise the student doing the luvies media course at an ex-poly through a 4.5% interest rate that is way above the government's borrowing costs.

The current position is that socialising university funding across general taxation is bad, but socialising university funding across all of those attending university is good. There's not a lot of logic to that.

There is also a separate point that those who come to the UK from abroad with a degree, or those from Scotland with a Scottish degree, effectively pay a lower tax rate than other graduates of UK universities. That would not be the case if universities were funded out of general taxation. It seems quite odd to me that, given the perceived concern in England and Wales regarding immigration, they have constructed a university funding system that results in immigrants getting paid more. I cannot think of another European country that has such a system. 

A wrinkle with CW's analysis is if this is a form of socialism, where are all the great public services?

But there are a few political red lines here which rather limit room for manoeuvre and likely end up with a poor result. 
 

There is a great reluctance to increase general taxation rates. See the current hoo ha about the social care tax rises, even through most people agree that social care needed better funding. Same thing with the “dementia tax”. With the average income at £30k any move to reduce taxes on those at £80k isn’t popular. 
 

It is seen as unacceptable to suggest that fewer people should be doing fewer degrees at fewer universities. This sparks allegations of elitism when the government and civil service are still Oxbridge dominated. 
 

There is growing anti-university sentiment amongst conservative voters, probably because of ridiculous stories about student unions and wokeism or the general hectoring we have all endured at the hands of “experts” over the pandemic. Therefore direct funding of them will not be popular. 

"A wrinkle with CW's analysis is if this is a form of socialism, where are all the great public services?"

It's socialism for rich people 

https://en.m.wikipedia.org/wiki/Socialism_for_the_rich_and_capitalism_f…
 

this is what we have in the U.K. now 

Heh at RR.

To be clear: I didnt say socialism worked to deliver good public services. 

Tho tbf it might be able to.

But we have a separate, bigger problem. The demographic bulge of the Boomers and their unfunded welfare requirements and their refusal to give up any of their undertaxed gains of the past 40  years.

So the income socialism is now just keeping the show on the road and theres nothing left to invest in quality public services.

The answer to the social care problem is - in broad terms - to simply to tell people we dont have any money left and they are on their own.

Income earners are tapped out.

The old and wealthy wont give up their houses or wealth.

Our fiscal position is a mess.

When you work through the options not funding it (beyond the threadbare we currently have) is the only option left.

People dont like that sort of messaging though as theyve been brought up to believe everything is always possible and the state can always provide (which it might have been able to tbh had it been run properly). So there is no politically acceptable way of saying there is no more money. Tbh the latest Tory proposal is the closest anyone will get to it - fund the NHS and make it look like this is a social care solution as well. The reality is there will be very little further money for social care but the can has been succesfully kicked a few more years and everyone is doing a bit of NHS clapping.