In the UK, 77% of 2017 university grads will never fully repay their student loan debt


#1

Originally published at: http://boingboing.net/2017/07/14/in-the-uk-77-of-2017-univers.html


#2

Well that’s okay. I assume the 1% got their tax break? How do you say 1% in Great British?


#3

“Aristocrat”.


#4

‘un y cant’ in Welsh
’aon às a ‘cheud’ in Gaelic
’one percent’ in Scots
And ‘one percent’ in English

Great Britain =/= England…


#5

Is this because 77% will be broke all their lives and unable to repay their entire debt?

Or because the rules have loopholes that amount to de facto forgiveness for some of the debt?


#6

Because student loans are working fantastically in the USA you had to emulate it in the UK. My suggestion: Scrap the NHS next and import M. Skrehli as Secretary of State for Health.


#7

Sounds like a little of both. Because they’ll always be broke, the rules forgive 'em. And that sounds reasonable enough. It sends the market signal that universities are overcharging by way of the people who are profiting from the inflated loan bubble.

Here in the U.S., they’ll just eventually start yanking it out of your tax refunds. Although if you could do arcane magic to calculate precisely how to set your withholding so as to end up with no refund, then they’d never get anything. But while the rest of income taxes are really quite simple, calculating the correct withholding remains a mystical black art.


#8

“Student loans are a de-facto graduate tax for 77% of people” is another possible headline, or more accurately, “richest 23% will receive graduate tax break under Tories”

The rule is currently that graduates pay 9% of their income above £21,000/year towards repaying the loan, but after 30 years (or in event of death, etc) the loan is written off. This isn’t a crippling repayment schedule. It’s designed so that most people will never repay the loan, but will pay an effective graduate tax.

To repay the loan in full on a 3 year course under the current rules, a graduate has to earn £44,700+/year each year for 30 years. Not many people are going to achieve this.

The real winners under the current scheme are rich parents, who can afford to pay the £9250/year university fees upfront, and thus buy their offspring out of having to pay the graduate tax, and the very high earning graduates who manage to pay off the whole loan during their working lives, since they are effectively exempted from further graduate tax payments, even though they are most able to pay.

This isn’t to say that the rules are stable. The scheme has only been in place a few years, and no-one who has a lifelong debt is getting close to retirement. I could imagine future governments deciding that student loan debt must be recovered from the estate of a deceased person, that the debt is inherited (to work corruption of blood) etc.


#9

Yes, the UK student loans and education fees system has been set up in a deliberately opaque and confusing way, for a number of political reasons:

  1. As the article hints at, if the system is set up as a loan rather than a tax, the outstanding balances count as individual debt, not government debt.

  2. The idea of a graduate tax polled really badly when this system was introduced, so all changes to the system, were performed as changes to the existing fees, rather than as a tax change.

  3. As it stands, the system can be used to increase the amount people are charged retroactively. This has already happened a couple of years ago

4- As my last link suggests, these loans can be sold off with no guarantees of the future repayment terms.This is already happening, and could cost people with outstanding debts dearly if these loans are sneakily converted to commercial terms.

Lastly, because this is always confusing, the fees that are the cause of all this debt vary across the countries of the UK, because of political choices made in each of the national parliaments, therefore if a student is from:

England- Annual fees of up to £9,250
Wales- Annual fees of up to £9,000, offset by a grant of around £5,000
Northern Ireland- Annual fees of £3,805
Scotland- £0.


#10

Maybe I’m overly sensitive, but why does it have to sound like a swipe at “rich” people? £9k a year is a fraction of what even many US “state” schools charge, graduates pay what they can, and the loan is eventually discharged (for the time being). As opposed to US student loans that will survive Armageddon.

How about this headline: “UK Gov’t Preserves Relatively Manageable Uni Financing Despite Austerity MPs Clawing at its Neck.”

I guess someone will now ask me why I hate America. sigh


#11

Not according to an article on BBC news last week:


#12

One thing that baffles me: if my podunk little country can afford free college for its citizens (well free provided you score well on the entrance exam) why is it so all-fried impossible for countries that are, what, ten times richer? Twenty?


#13

Perhaps military and paramilitary budgets that soak up revenue like sponges?


#14

Propaganda. BBC only shows the avg “in-state” rate of $9,650, didn’t care to mention the avg “out-of-state” rate of $24,930.


#15

That is the correct comparison, though. The equivalent of “out of state” fees for the UK would be fees for international students, which range from ~£10,000 to ~£35,000 per year.


#16

It’s an overly strict logical construction. Realistically, all UK students get that rate, whereas a South Dakotan won’t get the same consideration at UVa.

I don’t know how it works for English/Welsh/NI students at Scots unis, but it can’t be more than the English rate.


#17

Not sure where you’re from, but a few thoughts:

  1. It isn’t really (just) about affordability, it’s (also) about the priorities of the people in charge of policy.
  2. Changing expectations about what college entails (amenities, services, etc.) increase prices faster than inflation (high levels of public assistance can also have this effect).
  3. Slower economic growth in more developed countries means less willingness or ability to take on public debt in expectation of future growth to pay it off.
  4. As the supply of degree holders increases (among other factors), the wage premium for college may fall, making it a less obvious good investment for public assistance.

#18

The answer is that it is probably cheaper to provide the tuition than not to provide it. Americans carry on complaining they couldn’t afford single payer healthcare while paying far more for healthcare than any nation that does provide it.


#19

Yes, I can!


#20

Here’s another take published earlier this year. It’s even less optimistic with less pro-market assumptions. Basically the student loans become financial instruments to cripple future generations with compounding negative effects down the line.

The Packhorse Generation: The long debt tail of student loans