Monday, 23 May 2016

Student Moans

Not sure if it's her heels, a wedgie, or her debt causing her pain
Student Loans: Got one? Yep, me too. Think about it much? No, me neither. But I was watching Jeremy Corbyn slate David Cameron about abolishing maintenance grants for low income students which was burdening them with more debt and it crossed my mind how many of my friends (myself included) were excluded from the low income bursaries because of our parents incomes but our parents incomes were not big enough to remove our need to take both tuition and maintenance loans.

This got me thinking about how much student debt I had. I think last year I paid a grand total of £6 of my student loan because my contributions taken from my salary were only 50p more than the interest for that month. So how much do you need to earn to have a shot at paying it off? I’m going to round figures to the nearest £50 for clarity. I studied with loan plan 1 so that’s tuition fees of £3,500 and then each year I took the maintenance loan too of another £3,500. I did 3 years study and one year abroad where I was charged half tuition. Therefore I graduated with £26,250 of debt. Not much if you say it quickly. They take 9% of your wage pre-tax after the threshold of £17,500 and it is written off after 25 years which, if you work backwards, means to pay the whole loan off before the 25 year deadline I need to earn a minimum of £29,150 a year. But wait, that’s without inflation on the loan. Damn. Ok with the current rate at 0.9% recalculated I now need to earn at least £30,450 a year. Eeep it’s going up. And this is in a job market where “the average starting salary for jobs posted to is £18,000 - £20,000”. Not cool.
I love how confused this woman looks

But, I have to count myself lucky. If I had done the same degree on loan plan 2 (starting study post 2012) I would have to pay £9,000 a year on tuition meaning I would leave uni after the same degree with a loan of £45,500!! A whopping £19,250 more. So, using the same calculations, assuming 0.9% inflation, an extended repayment plan of 30 years, and an increased repayment threshold of £21,000; I’d need to earn £40,100 at least. Every. Single. Year. But wait according to the student loans repayment website “ RPI (0.9%) where income is £21,000 or less, rising on a sliding scale up to RPI+3% (3.9%) where income is £41,000 or more”. It doesn’t tell me the sliding scale though but they do make your loan more expensive if you earn more. That seems… unusual for Cameron.

Anyway, say I took one of those average jobs and earned £19,000 in my first year. On plan 1 I need to get a 4% pay rise every single year for the next 25 years to make that average and be on a salary of £48,700 a year by the time I’m 48. But if I’m on plan 2 I need a 5% pay rise every year to finish on a salary of £78,200 after 30 years and that’s without my interest rate raising which it would and I wouldn’t be paying off any of the loan for the first 3 years because I wouldn’t be earning enough. Does that mean I’d have to earn more to contribute more because the interest would be more? Probably. So essentially new graduates need to be aiming for £80k+ by the time they’re 53. Either way, regardless of plan and career path; I better start working hard huh? The thing is not all degree career paths will have this kind of money in them so these loans won’t get repaid and this money will have to come from somewhere?! 

Well maybe not. Supposedly this is meant to be more like a graduate tax rather a loan to be repaid so thinking "what do I have to earn to pay it off" isn't in line with thinking it's an additional tax rather than a loan. But it's still called a loan isn't it? My Univerity saw the effect of the increase of student loan debt in student spending and attitudes. The union pub had to shut because of reduced revenue (yes you read that right, a student pub on a student campus was struggling for customers), and the union club saw ticket sales decline so much that their once star studded line up enviable of most festivals has been reduced to theme nights with playlists instead of live acts. In my final year of uni (2 years into the higher fees) there was such a different feel about the campus that societies were struggling to engage members as there was so little sense of community and belonging. 

So if repaying these loans is impossible for some/most, and they are designed to be that way then why not genuinely introduce a graduate tax with a cap so that students are less intimidated by their financial status and can enjoy their university experience without the fear of financial ruin if they went out or to the union pub? It seems sad to me that this is taking away the community of university which is arguably more important for development into adult society than the degree itself!