24 minutes and 1 second of the financial advisor and consumer champion Martin Lewis talking about the tuition fees system, how it works and what people get wrong about it:
* Mark Pack is Party President and is the editor of Liberal Democrat Newswire.
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78 Comments
Clearly you are not sorry – let’s talk about what the LibDems got wrong about the tuition fees system. Those who have been saddled with the increased debts being by definition of above normal intelligence are more than capable of understanding how the system works – and I daresay past graduates (such as Mark Pack) are more than capable of understanding that the system is better for their interests than one in which is paid for by taxes applied to all high earners and/or all graduates past and present – hence their preference for the current system.
@TBNGU Labour introduced tuition fees. They set up the report that led to the new fee system. Personally I think the new system is an aberration but its no reason for anyone to vote Labour.
Yes , no doubt they are. But given the interminable repetition of myths about the new system it’s clear a lot of would-be students are not getting the information they need to do that. Martin Lewis is doing a great job.
“But given the interminable repetition of myths about the new system ….” the fairer aspects of the system are likely to be jettisoned as soon as Lib Dems are out of the way, no matter whether it is Labour or Conservatives pulling the strings.
Truth is that the new system is expensive and does in the end give free tuition to those who do not benefit financially. Perpetuation of the myths helps prepare the ground for making the funding and tuition fee system a lot worse.
The scope for removing its fairer aspects is actually a reason to be against this new system though.
@TBNGU “by definition of above normal intelligence ” take it from an old trade union rep – a degree does not equal intelligence ! The leadership should not have made the promise, and having made it not gone back on their word like the Labour Party. Nevertheless the new system is better for poorer students.
Mark, the new tuition fees system may be the fairest system possible, but that does not alter the fact that it is putting off people going to university. Consequently there is a massive financial black hole in the UK’s university system that needs to be urgently repaired.
Seeking out ever new justifications from non-experts (why on earth are you listening to Martin Lewis, and not the people within the University system or whose job it is to look at funding, student numbers, etc?) is not dealing with the very real threats to the UK’s world leading (but unlikely to remain so) HE sector.
It’s time to admit that the current fees/funding setup, whatever the motivation for establishing it, is not achieving what it should and has to be scrapped as soon as possible lest you permanently damage the UK’s future as a provider of quality HE in a global marketplace.
TBNGU: Plenty of people I’ve spoken to involved with university admissions say there are lots of people who might go to university and make excellent students who don’t fully understand how the system works. On that basis it seems to me sensible to publicise information which explains it. (And of course that’s in part the point Martin Lewis is making himself too.) But if you’ve got some evidence to back up your comment that no such people exist, let’s hear it…
Of course, the new system is better for poorer students who are not going to end up big earners. And the same could have been achieved by just tweaking it slightly so that it was called what it truly is: a selective graduate tax. Which would, of course, have left the Lib Dems pledge not being abandoned.
Part of the reason it may be putting off people going to university is because of the scaremongering by, among others, the Labour Party. Maybe if they’d acted a little more responsibly, and talked constructively and accurately, this wouldn’t have happened.
One problem I see is if wage inflation occurred over (say) the next ten years as it did in the 70’s. In such a case, it’s not impossible that £21,000, which is the threshold for starting tuition loan payments, might be the level of a new minimum wage. In such a scenario, a post grad on the new minimum wage of £21,000, would find themselves paying 9% of everything over ‘the new’ minimum wage, and 20% of everything over their personal allowance of £10,000.
To remedy this the £21,000 threshold, should have some method of indexing. Either to RPI, or (say), Minimum Wage x 2.
If you don’t allow the £21,000 threshold to index in some way, you may find a new sub prime problem ten years hence.
John: The £21,000 threshold is index linked, so if there’s that level of inflation that £21,000 equals a minimum wage, then the tuition fees threshold will still be substantially more. Ironically given which post you are commenting on, one person who has been pointing out that the threshold is index-linked and people need to bear that in mind when making decisions is …. Martin Lewis!
Heads up on that Mark. My mistake. Thanks for that.
“Of course, the new system is better for poorer students who are not going to end up big earners.”
So much for social mobility. For poor students who were hoping at attain a modestly decent income and a better standard of living than their parents, the new system is a disaster. Rich students will be happy either way. When the only way for poor students to avoid burdening themselves with a colossal debt is to settle for a lifetime of low incomes, this hardly strikes me as a helpful system for the poor. Yet this feature of the system is, we keep being told, its greatest virtue.
Mark :
I’ve watched Martin Lewis’s piece a second time. He mentions (at about 4.32), the £21,000 threshohd. But there is no mention of it being index linked in any way. I’m not saying that you are wrong, but if the threshold of £21,000 is indexed, it is a crutial piece of information and should be made clearer.
Thanks
John: Martin Lewis talks about the linking (a bit) in http://www.telegraph.co.uk/finance/personalfinance/consumertips/8967331/Martin-Lewis-check-the-maths-before-paying-tuition-fees-upfront.html which is also quite a good compliment to the video I think.
@Stuart Mitchell
When you say “When the only way for poor students to avoid burdening themselves with a colossal debt is to settle for a lifetime of low incomes” you clearly misunderstand the new system. That’s why the video is very helpful.
If students end up as big earners then they are, by definition, not poor. So what Tony Dwason said is correct.
Mark :
Thanks for the link to the Telegraph piece by Martin Lewis in Dec 2011.
You are correct in that he does say :
” It is also worth noting that the payment threshold will rise each year, in line with earnings (we don’t know how as yet)”
If both he, and you, are correct about the indexing of the threshold to earnings, we must surely know by now, what that index linking is based on? Do you have that information or a link to it?
I presume all Labour MP’s have been sent a copy, along with all Local Labour Party HQ’s, with a request they watch and learn the facts/truth as their antics are damaging the current generation of 6th formers with LABOUR’S LIES….
“And the same could have been achieved by just tweaking it slightly so that it was called what it truly is: a selective graduate tax. Which would, of course, have left the Lib Dems pledge not being abandoned.”
Why is it more like a “selective graduate tax” than the old system? Isn’t the essential difference that fees have gone up so much that most people are expected to continue making repayments throughout their careers, rather than stopping at some point?
In fact if fees had been raised even more, wouldn’t the repayment system have been even more like a graduate tax? And funnily enough didn’t Vince Cable argue against that option?.
Semantics aside, Lib Dem policy was to abolish fees altogether and fund higher education through general taxation – not through a ‘graduate tax’. The ‘bottom line’ is that this government has moved in precisely the opposite direction, with the result that overall graduates will be paying far more. I think efforts to disguise that fact from the electorate only add insult to injury.
So many of you who had your fees paid still do not understand what the feeling is when an envelope drops on the mat telling you that you owe thousands and each year that amount increases with interest. It is a feeling that chills the whole body. It does not matter that you do not pay it until you earn £21000. When the student debt is owned by private companies I think we all know that they will be allowed to change the terms and call the money in. Paranoia? I don’t think so.
“When the student debt is owned by private companies I think we all know that they will be allowed to change the terms and call the money in. Paranoia? I don’t think so.”
If I understand correctly, there is explicit provision in the loan agreements allowing future governments to alter the terms of repayment. It’s all very well saying these aren’t really loans because of the thresholds and so on. But if there is no guarantee that those thresholds will be maintained in the future (even in numerical terms), then they really are loans in a very practical sense.
@Anne
“I think we all know that they will be allowed to change the terms and call the money in.”
Actually, I think we all know exactly the opposite.
“Actually, I think we all know exactly the opposite.”
Simon, are you saying that the terms of repayment are fixed, and can not be changed by future governments?
That’s quite different from the information I’ve seen elsewhere, and – if you think about it – would make nonsense of the statement in the article that Mark has just linked to, which says “the payment threshold will rise each year, in line with earnings (we don’t know how as yet).”
@Chris
Read fully what Anne wrote. She referred specifically to student debt being owned by private companies, and suggesting that “they will be allowed to change the terms and call the money in.” They means the private companies.
You clearly don’t agree with her either – your reference is to changes by future governments.
Clearly future governments could do anything they could get through Parliament.
Simon
Well, apparently we agree that private companies _could_ be allowed to change the terms of repayment by a future government. So we certainly don’t know “exactly the opposite” of what Anne said.
There’s an interesting discussion of this point here, including the observation that the New Zealand government recently raised the repayment rate for holders of existing student loans:
http://andrewmcgettigan.org/student-loans-campaign/
I don’t know about you, but I should be extremely uncomfortable about taking a loan of £30,000+ under these conditions.
I wouldn’t take much comfort from the index linking. Governments switch from one index to another when it suits. The bottom line is that if you study in this country you are on the hook and the fees are in global terms, uncompetitive now and bound to rise. I will save up so that my kids can study abroad. Let the government offer this style of loan for people to study abroad and watch the exodus.
Is Martin Lewis a “financial advisor”? I think that I am right in saying that he has never qualified as a financial advisor and does not have that professional status. He is a a journalist who covers financial issues and he is not regulated in the way that a financial advisor is. If the new tutition fees system is so brilliant, I don’t understand why the LibDem leadership opposed such a system when they were in opposition. It may not be the worst system but it is not the best system. A young person will still have to decide whether to run up thirty years of debt by taking a degree that may affect their ability to pay their expenses, repay mortgages and repay other loans in the future. The terms of repayment of the debt could be changed at any time by successive governments or private companies that get involved. Much better to have a system where lifelong education is funded through a progressive taxation system that does not incur a debt on the individual. The current cabinet had their expensive educations paid for them, why should current students not be allowed the same privilege?
It’s simple. Lib Dem policy was and is to abolish fees altogether. This system is simply the best we could get given the political circumstances. And don’t forget the fees review, although improved and implemented by this government , was originally put together by the Labour Party. Parliamentary support for this system and against free higher education is therefore overwhelming.
They had to make that decision under the old system, too. OK up to 25 years instead of 30 but they’re both ‘forever’ from the perspective of a young person. They key long-term advantage of the new system is substantially lower, CPI linked repayments. Which can only affect their ability to repay mortgages or save for a deposit or retirement in a positive way.
It can not be changed by private companies. As others have said it could be changed by future governments but there’s no history of that . Changes to the loan system in the past have never affected existing customers. And they could just as well choose to write off the debt!
Agreed, but it’s not just the cabinet blocking it. It’s practically the entire Tory and Labour parliamentary parties. You can’t do anything without the support of one or the other.
The fundamental mistake Lewis makes (not surprising since he isn’t a qualified financial advisor) is that he concentrates on the monthly repayments rather than the aggregate repayments.
Concentrating on the aggregate (the issue that potential graduates take into account when deciding whether it is worth going to university):
The new system penalises most those who earn 35k-40k. They pay the highest proportion of their incomes over their lifetime.
The new system rewards those on higher incomes, as they will pay less as a proportion of their incomes. Tuition fees are therefore REGRESSIVE and the complete opposite of a graduate tax, which would either be proportional or progressive.
Under the new system graduates will vastly subsidise everyone else in society given the extra tax on their increased earnings and the ridiculously high level of fees combines to make them pay back to the exchequer far, far more than the actual cost of their fees. Penalising people that work hard and those that aspire to a better future isn’t going to create a society with good economic and social outcomes.
The aggregate repayment is related to the cost of the course (unless the graduate doesn’t manage to find a graduate job, which is hardly why people choose to go to university), not the ability to pay. Tuition fees are fees and are nothing like a graduate tax.
The coalition explicitly rejected a graduate tax in favour of fees. It is more than disingenuous for the coalition to pretend they are the same as a graduate tax.
I really do get fed up of the spin and distortion by those seeking to justify a system that was brought in purely because of ideology – i.e. the marketisation of HE and the idea that the cost of a course should be related to its potential wage generation.
Simon: “…you clearly misunderstand the new system… If students end up as big earners then they are, by definition, not poor. So what Tony Dwason said is correct.”
It is you who misunderstand the system. Graduates will start off with much larger debts, that will accrue a higher rate of interest than at present, and take many more years to pay off. The only way to avoid being burdened with these huge debts is to have a low income. What sort of incentive is that for poor students to strive for middle incomes?
Lib Dems accuse the scheme’s critics of being liars and doom-mongers, yet we are only saying exactly the same things Lib Dem MPs were saying prior to May 2010 – even though those Lib Dem criticisms were based on an assumption that the Tories would only double tuition fees, rather than the tripling the Tories and Lib Dems eventually brought in.
Steve the focus is on monthly repayments because that’s one of the two big changes. Everything you said about aggregate repayments is also applicable to the old system except it was much more regressive because of the lower non-indexed threshold. I agree with you that it’s a reach to call it a graduate tax but bear in mind the point where you start to repay less in aggregate is also fairly well aligned with the point where you start to pay the 40% rate of tax.
A couple of factual points I would like cleared up, if anyone can help?
What happens to students who do not complete their degree course.? Do they still pay for the time they spent at Uni.
Martin Lewis says that the new system means people will pay ‘all their working lives’. As most students graduate in their early 20s, the 30 year payment period leaves them in their early 50s. Well short of retirement. Or am I missing something?
Mark:
I think you and Martin Lewis are wrong about the indexing of the £21,000 threshold. It may have been originally intended to be indexed, but has secretly been dropped. I’ve checked the direct.gov website and can find no mention that the £21,000 will rise with either RPI, CPI or average earnings.
This is a serious flaw in the present tuition fees system, and in the event of a bout of wage inflation, will cause a massive subprime type headache for post graduates in coming years.
“bear in mind the point where you start to repay less in aggregate is also fairly well aligned with the point where you start to pay the 40% rate of tax.”
Whatever gives you that idea?
According to this graph on John Hemming’s blog, all but the bottom two income deciles will pay more in aggregate. Those on median incomes will be paying something like 70% more:
http://johnhemming.blogspot.co.uk/2012/09/labour-and-tuition-fees.html
David it is definitely written off after 30 years. If Martin Lewis said ‘all’ I guess he misspoke and meant ‘majority’ or something like that. Not sure about your other question for full-time students, but for part-timers (say through the OU) you start to repay four years after your first module begins (as long as you’re earning over £21K) whether or not you have graduated.
The new system is better for most people month to month, it applies also to part -time students and allows a bit more attention to be given to FE. Those are all plus points. But…
1. It seems inescapable at present that graduates will have to make a contribution to their education, even if the claims of their greater earnings potential seem overstated as student numbers increase. But the argument that society as a whole gains by having a better educated population also has force, and therefore central funds should chip in.
2. The idea that government should pay nothing at all for university courses in arts and humanities is disturbing.
3. The fact that this sum of money is labelled “debt” means that we are telling young people that starting life with a significant debt is OK.
4. The fact that the repayment scheme is designed to ensure that many people will have all or part of their debt written off over time is another element of financial education which I would have thought Vince Cable would not approve of.
5. If we were honest and called it a graduate tax this would avoid some of the problems. But we’re not, and we don’t and it doesn’t.
6. So instead of paying for university provision out of taxation/government borrowing we have a system in which the money for each year’s students’ fees is borrowed then and there by or on behalf of the government, and much of it is written off some time in the future. Is this really going to have a good impact on the deficit and the national debt?
“David it is definitely written off after 30 years.”
Again, are you saying that period couldn’t be extended by a future government? If so, it would be good to see the evidence for that.
@ Simon Shaw
To clarify, I meant that future governments ( I do not preclude this one ) will pass the legislation to allow the private company that owns the student debt (SLC) to make profits and call in the debt. Profit is the Coalition’s god and lining pockets of themselves and the 1% is the mantra. The average debt of students starting in 2012 will be £53000. Very few will even earn £21000. Half of this year’s graduates are not employed. Do you honestly think that this money is going to be written off?
Chris my comment is in response to Steve’s point that, under the new system, those earning over about £45,000 pay less in aggregate than somebody on £35,000. It’s an anomaly that makes it difficult to call the new system a graduate tax, but it is balanced to some extent by the fact that those higher earners will be paying higher rate income tax. That higher earners pay more in aggregate compared to the old system is not in question.
@David Sea
“What happens to students who do not complete their degree course.? Do they still pay for the time they spent at Uni.”
In short – yes. Details can be found on the direct.gov.uk site. Quote:
You must tell your university or college and Student Finance England if you leave your course early. You have to repay any loans or grants you were paid but not entitled to in one of the following ways: repay the amount in full, set up a monthly repayment plan. If you leave your course early you need to repay a percentage of the Tuition Fee Loan for that year. The percentages are: 25 per cent during term one, 50 per cent during term two, 100 per cent during term three. Find out more about how to repay your loan if you leave your course early by contacting the collections department of the Student Loans Company on 0845 073 8895.
HESA numbers suggest that one in five students will fail to complete their degree, whilst in the worst case (Highlands and Islands university), fewer than 50% will complete their degree. These days the best advice to students is, if you think you might drop out and you’re in your first year, drop out early – that way you incur a smaller debt and may still be eligible for a loan if you return to HE. If you’re in your second year or later, don’t do it, since if you drop out and then decide you want to return to HE at any time, you’ll have to fund at least one year of study yourself, which at £9000/year is more or less prohibitive to most people.
@Stuart Mitchell
”The only way to avoid being burdened with these huge debts is to have a low income.”
You aren’t from the right wing fringes of the Conservative Party are you? Because that is exactly they would say about income tax rates – that they are a disincentive to bettering yourself. Is that really what you are arguing?
Including the Graduate Loan Repayment with Income Tax, under the new system a graduate would have a marginal tax rate of 29% on income between £21,000 and £42,000.
In contrast, a non-graduate with an income between £100,000 and £116,000 has a marginal income tax rate of 60%.
Which do you think is more of a disincentive?
“Chris my comment is in response to Steve’s point that, under the new system, those earning over about £45,000 pay less in aggregate than somebody on £35,000. It’s an anomaly that makes it difficult to call the new system a graduate tax, but it is balanced to some extent by the fact that those higher earners will be paying higher rate income tax. That higher earners pay more in aggregate compared to the old system is not in question.”
Sorry, I misunderstood what you were referring to. But I think there is a bit of confusion there, because higher earners will not, I think, pay less in aggregate than those on middle incomes, only less as a proportion of their income.
And as I said it’s not really just “higher earners” who will pay more in aggregate than under the old system, it’s everyone but the lowest-earning 20%.
Anne: I think your fears are well founded. Indeed, I think what has been created here with this tuition fees debacle is a mirror of the PFI scandal.
In the same way that the government of the day allowed private investors to design PFI contracts, for the building of hospitals and then gain extortionate rents from public funds. Similarly, this government has given the drawing board to private investors to design a PFI style tuition fees system, whereby they can claim ‘rental income’ from graduates future income prospects.
This is why the indexing of the £21,000 threshold, has been secretly dropped. These private investors want to make sure that the debt increases with inflation, but have ensured that the threshold that triggers payments, is static and inescapable in the event of wage inflation.
If the coalition does not review this, they are putting future graduates into a (potential), financial trap.
@Simon
Of course a £27,000 debt (with interest) is going to be a disencentive to some people bettering themselves. That is axiomatic. Your comparison with income tax rates is meaningless because income tax rates apply to all, whereas this does not. A 60p marginal tax rate is certainly a huge disencentive to having a taxable income between £100,000 and 116,000, whch is why tax accountants will ensure that virtually nobody falls within that bracket!
We are not talking about the rich here. According to Martin Lewis’ tables, those on an income of £35-40K will end up paying the most. If you don’t have wealthy parents, it is already difficult enough to buy a house on such an income. Do you really think people will shrug their shoulders at an extra 9% tax on that income and not be put off by it? This year’s university admissions figures do not support your view.
CARON LINDSAY. “Maybe if they’d acted a little more responsibly, and talked constructively and accurately, this wouldn’t have happened”. These words could perfectly be directed at all those LibDem MPs and their pledge, which, of course was not kept. Now had that solemn promise been kept, and the LibDems had told the Tory Party that Fees were a red line, not to be crossed, “this [students being put off HE] wouldn’t have happened”. People in very vulnerable glass houses…………
The threshold has not been dropped and was confirmed to me when I was talking about this to our central office only a couple of weeks ago. In fact if you care to look you will also notice that the old £15k threshold has also been uprated by CPI and will continue to do so each April until 2015 . Something labour didn’t do.
On the new system if the CPI link at the bank of England average of 2% then a student who graduates on £23k and ten years later is on £36k will find they are paying £981 that year as compared to £1890 if they had been under the old system. ( ignoring the additional £15k uplift we’ve also got for the students).
I would also like to point out that not all students will find they are on a reasonable starting salary of £23k ,many above the Watford gap will find themselves on considerably less.
In my work place we have two business graduates , the first who has been out 4 years and is on £17K and the second for a year who is on £15k…
sorry typo…the old £15k threshold has been uprated by RPI
The threshold is supposed to be linked to average earnings. But given the huge amount of reindexing already done by the government (the stealthiest of all stealth taxes), it’s reasonable to assume that come April 2017 the government will choose whichever index will maximise government revenue.
We’ve seen several assertions that indexation of the threshold has been dropped. Is this true?
After a series of complicate mathematical calculation, I think I can prove that a debt £27,000 is a greater than a debt of £9, 000. I have also consulted a philosophical guru and have been reliably informed that fairer and better are difficult concepts to prove because they are subjective value judgements, not empirical truths.
John & daft ha’p’orth
Many thanks for the info.
@Stuart Mitchell
”We are not talking about the rich here. According to Martin Lewis’ tables, those on an income of £35-40K will end up paying the most. If you don’t have wealthy parents, it is already difficult enough to buy a house on such an income. Do you really think people will shrug their shoulders at an extra 9% tax on that income and not be put off by it?”
You clearly live in a different world to normal people ( οἱ πολλοί or the plebs). Anyone earning £35-40K is very much in the top quartile of UK earnings (see http://www.ons.gov.uk/ons/publications/re-reference-tables.html?edition=tcm%3A77-235202 Table 1.7a).
What you are saying is that around 80% of the UK working population don’t earn enough to buy a house. So how do they do it?
@Simon
I said that earning £35-40K does not equate to being “rich”. I stand by that. Do you disagree?
How do you feel about the fact that somebody earning, say, £50K will (according to Lewis’ table) end up paying less than somebody earning £40K?
“What you are saying is that around 80% of the UK working population don’t earn enough to buy a house. So how do they do it?”
Well clearly, a lot of people are NOT doing it, unless you believe that the housing market is in a healthy state.
Those who ARE managing to do it are in many cases having to do one or more of the following :-
(a) Wait until in their mid-30s.
(b) Get deposit off parents or grandparents.
(c) Get parents to guarantee mortgage.
(d) Buy shared ownerships.
(e) Take out a mortgage at a far higher multiple than the standard 3x that prevailed when you were a young man.
So please, stop pretending that clobbering these people with an extra £27,000 debt that they’l be paying off into their 50s is fantastic news.
Mark
I have no problem with Martin Lewis pointing out how the system works – my evidence that there are students who more than understand that they will have bigger debts to repay than was previously the case is based on personal contract with many students (yes I am more than aware of the exceptions – but most students do not see themselves in that position). The point I make that the burden will be reduced, and will in my view be fairer, if it is shared with previous granduates and/or higher rate tax payers is just a statement of the blindlingly obvious – some LibDems and Tories may not agree as they come from a different moral/ethical position.
I do believe higher education needs to be paid for – the question is really who should bear the burden, the LibDems having shared a position which took the view that the burden should be shared on an even wider basis than that put forward by the Labour Party have now gone well beyond what nearly all members of the Labour Party would consider acceptable – personally, i would have been reasonably happy with keeping tuition fees where they were and introducing a graduate tax or increasing the 40p tax rate to 41p.
“I do believe higher education needs to be paid for – the question is really who should bear the burden,”
Is it a burden as such? Nobody ever describes pre-16 education as a “burden”. We think of it as an investment. How come it suddenly becomes a burden between the ages of 18 and 21?
Stuart Mitchell. Good point.
Education is not a cost to society, it is an investment in society.
It’s only because we don’t measure it properly that it is difficult to value and harder to afford.
@Stuart Mitchell
”I said that earning £35-40K does not equate to being “rich”. I stand by that. Do you disagree?”
I would use rich to refer to wealth not income, but on the basis that someone on £35-40K earns more than 75% to 80% of UK workers I would say they are well off (or whatever the income equivalent of rich is).
@Stuart Mitchell
“How do you feel about the fact that somebody earning, say, £50K will (according to Lewis’ table) end up paying less than somebody earning £40K?”
Someone on £50K has a marginal income tax rate of 40%. Someone on £40K has a marginal tax arte of 20%. With 9% Graduate Loan Repayment added that’s still only 29%.
So the answer to your question is that I feel very happy with that.
The better question, Stuart, is why on earth you wouldn’t be?
Paul:
You have completely missed the point. No-one is saying that ” The threshold has not been dropped”. In fact that statement is illogical. What has been dropped, is the “indexing” of the threshold. If you go to my earlier points you will see that any future inflation will increase the debt for graduates. But because the threshold is fixed at £21,000 (with no indexing), graduates will find themselves in a financial trap.
Do an arithmetic test. Assume that inflation doubles the average wage, the minimum wage etc., but the £21,000 threshold remains static. The present minimum wage (due to inflation), could hit £21,000 which would trigger 9% payments from what is ‘now’ their minimum wage. This would make no sense, and indeed creates a financial trap.
This is a scandal in the making if the £21,000 remains fixed with no future indexing to earnings or inflation.
John: I don’t follow where you’ve got the idea from that the uprating of the £21k threshold has been dropped? From your comments it looks like you’ve concluded that because you couldn’t find it on one government website you looked at (direct.gov.uk) it must have been secretly dropped.
That seems to me pretty thin grounds for such a conclusion, especially as other sites say the indexing is in place – e.g. see http://www.bis.gov.uk/news/topstories/2010/Dec/tuition-fees-student-finance – not to mention the ministerial statement itself on the scheme at http://www.google.co.uk/url?sa=t&rct=j&q=&esrc=s&source=web&cd=8&cad=rja&ved=0CGQQFjAH&url=http%3A%2F%2Fnews.bis.gov.uk%2Fimagelibrary%2Fdownloadmedia.ashx%3FMediaDetailsID%3D2691%26SizeId%3D-1&ei=b8hoUIjHKurb0QWOn4HYAw&usg=AFQjCNG2N_YeYSKuHLurdbg4jkxgvI6kXg&sig2=5O4Y1gr_8jDhXZyyB–Yyw
Of course it is an investment for society – but investments still have a cost/burden that someone has to pay for before the investment yields its return. The argument is really around who bears the cost of the investment . LibDems have clearly changed their stance on this and should have the basic honesty to admit that this is the case – or perhaps they never originally belived their own arguments and just put them forward to gain short term popularity – bit like when they argued that cuts should be delayed until economic growth was embedded in the economy.
Well, some of us have not changed our stance, TBNGU.
From moneysavingexpert.com
“The £21,000 threshold is scheduled to rise in line with average earnings. This will start in April 2017 (a year after the first graduates under the new system – 2012 starters – are eligible to repay). ”
As to the viability of the scheme – could I suggest that you read this article from the most recent THES?
http://www.timeshighereducation.co.uk/story.asp?sectioncode=26&storycode=421227&c=1
It is not comfortable reading, but this is a bit more important that party political posturing. Arguments about whether this scheme is ‘fair’ or not will be a bit hollow if the fears of very informed and impartial observers (and, as it happens, Whitehall) are realised and this does turn out to leave our university system with billions of pounds of debt.
Mark :
Those 2 links you gave are from 2010. These were proposals, but never actually put in the legislation. Please give a link that shows that the £21,000 will ‘in fact’ increase with earnings or inflation.
There is none that I can find. The £21,000 is static. And if wage inflation occurs, that threshold for payments, will be met much sooner than people think.
The £21,000 is static, and will be a financial trap for the unwary, in the event of wage inflation.
I’ve given a link here to the Student Loans Company. Please find the page or lines of text that tell students that the £21,000 threshold will increase with either inflation, average earnings, minimum wage, or indeed if it will increase at all, and show me the link to the information. Please.
http://www.slc.co.uk/services/loan-repayment.aspx
Chris
Thanks for that link. Here’s something I hadn’t appreciated:
“However, the rise in tuition fees will push up inflation in the fourth quarter of this year, as fees are among the basket of goods and services used in calculating the consumer price index of inflation. Therefore, fees will add £2.2 billion to the cost of pensions and benefits by 2016, which are linked to the CPI, McGettigan argues. If these predictions are accurate, the rise in fees could potentially wipe out the savings to BIS from cutting the teaching grant, by increasing spending in the Department for Work and Pensions.”
John: The ministerial statement (Word document I linked to) isn’t a proposal, it’s an official statement of how the scheme will operate. That’s as definitive a statement as you can get – and much more so than the content of a website which may contain a mistake or out of date information. The reason the information is from 2010 is for the cunning reason that the policy was announced then and hasn’t been changed: that’s why there are plenty of references to it on the BIS website. They’ve not updated them since as there’s nothing to update them with (and conversely haven’t removed them or changed them as they’re still valid).
The legislation gives the power to make these changes without requiring future Bills, which is why also there hasn’t been any further legislation.
Chris Riley :
Martin Lewis is wrong. The £21,000 is static. I can find no ‘official’ information or website that says it will increase.
If you can find an official website (that doesn’t have Mr Lewis’s fingerprints on it), that says differently, please link it.
Thanks
Mark:
I have just phoned the Student Loans Company 0845 300 50 90
I asked ” My understanding is that the £21,000 threshold will increase over time with average earnings or some other link to inflation. Are there proposals to increase that £21,000 threshold?”
Answer from SLC enquiry line ~ NOT THAT I’M AWARE OF.
John: Far from what you say to Chris, the official ministerial statement to Parliament is “official information”. It’s also repeated mentioned on the BIS Department’s website, which is “an official website”.
Mark : You are wrong. Otherwise please give a link to a 2012 outline of the student tuition fees policy.
As I have just pointed out, the SLC who are running the system are – “not aware of any proposals to increase the £21,000 threshold.” Are they wrong? Are they giving out information in error?
Link Please?
@Mark Pack
From the way in which Vince Cable writes that ‘we propose that the uprating [of the threshold] should be made every year’ it seems reasonable to describe the document as a whole as a proposal given that Cable uses the term himself. Let us not forget that Cable proposed a lot of things – early repayment penalties, for example – which were subsequently dropped. Words are cheap and once their purpose has been served, proposals are easily and quietly abandoned or manipulated even by the current government – good faith did so much to keep the threshold representative in the past. The problem with all this statement-of-intent stuff is that it isn’t a great basis on which to make a thirty-year financial commitment; is it not indeed the case that students are being asked to sign up to a deal in which much of the fine print has been replaced by a statement that in effect reads, ‘Trust us, we’re politicians’?
Mark:
Two links to Martin Lewis explaining the tuition fees system.
http://www.youtube.com/watch?v=WpgFYNcz54M&feature=relmfu
At (4.43) he says the £21,000 WILL increase with average earnings.
http://www.youtube.com/watch?v=55fKa-ErQ8E
At (4.32) he mentions the £21,000 threshold, but does NOT mention any increase with average earnings.
Why? Has Martin Lewis simply forgotten to mention it, or has it been dropped from the policy?
At the very least it needs official clarification from BIS Development, because The Student Loan Company are singing from a different hymn sheet.
Mark:
Given that you have not posted any links to current information, on the £21,000 threshold indexing with inflation, or average earnings, I must assume that Vince and the coalition have yet again deceived students from their original promises / proposals?
I foresee a scandal in the making over these deceitful changes to the tuition fees policy, which will inevitable blow up in Vince Cables face.
Don’t say you weren’t warned.
Not at all John, I have. The ministerial statement *is* the current position; the information on the BIS site *is* the current information. The situation hasn’t changed since 2010 which is why it’s not been replaced or updated. You seem to place great weight on the information not having been changed since as if that means there’s instead been a secret plan to change it; in fact, it’s the exact opposite – it hasn’t changed because there’s no need to change it as things haven’t changed.
@Simon
No, I do not share your happiness that the Lib Dem’s new fees scheme appears to water down some of the progressive elements of the tax system.
@Mark, @John
On the subject of whether the threshold will increase… Given that numerous university and government websites are telling prospective students that the threshold will increase with earnings, one would hope that that will be the case, or won’t we have the biggest mis-selling scandal in history on our hands?
Mark:
“The ministerial statement *is* (NOT) the current position;”
And if it is, Vince, or someone at BIS needs to pick up the phone and tell the SLC that they are giving out wrong information, both at enquiry level and on their website.
It frankly doesn’t matter if its cock-up or conspiracy, but for sure, BIS and the SLC are certainly at odds over this £21,000 threshold indexing.
Until it’s made clear on the SLC website its a scandal brewing.
Stuart Mitchell :
You are correct in that many university websites say that the £21,000 will increase. But you will probably also notice that many of them create a link to Martin Lewis’s website as their source of information.
Whatever the truth of this matter, the fact is that the company running this tuition fees system SLC, do NOT acknowledge that this indexing of the threshold is in the pipeline in future years.
If it’s not a miss selling scandal as you correctly put it, someone in authority needs to jump on this and correct it, before it DOES become a miss selling scandal.
Umm How can we expect the pulic to understand when it appears people with an interest in politics cannot?
There seems to be two questions that remain unaswered, that I, and I guess any student would like a definitive answer to.
1. Is the 21 k threshold linked to average earnings and how often will it be adjusted?
2. Can the terms and conditions of the loans taken out by studernts this year be changed by future governments? Ie can they be forced to pay back more or earlier?
If any of these are true then the students need to be made aware of it.
I certainly would not take out a loan without knowing, Would you?