Students are now forced to take crippling loans for tuition fees – What has changed?
Until the 1980s, UK student tuition fees were paid from taxation. The burden on students gradually increased. UK students now have to pay some or all of their own fees. Few students appear to know why they are being saddled with a lifetime of debt.
English students now have to pay £9000 per year for tuition fees. (£3000 in Scotland). Compound interest is added at a rate of “3% + RPI” while the student is studying. The tuition fee debt when repayment first comes due after graduation will be about £31,000 for a typical three year course.
“It does not matter to me because I will never earn enough to trigger repayment”.
Are you sure? Sure enough to bet your future on it?
a) Interest equal to RPI is added to your debt after you complete your studies. (3.3% in 2018). Interest is added even if you do not earn enough to trigger repayment. At 3.3%, your £31,000 debt will double in 21 years to £62,000. Are you really sure that student debt will never affect your credit worthiness when you borrow money for a car or a house? Student loan increases from RPI for an income of £25000 to RPI+3% (currently 6.3%) for those earning more than £45,000 per year. The 3% is added on a sliding scale. e.g. 4.8% interest is added to student debt for a salary of £35,000.
b) Will the debt repayment threshold rise with your wages? Will future UK Governments, including Labour, raise the debt repayment threshold when they are short of money for higher priorities? If not, you will end up paying off the debt even if your wages only rise with inflation.
c) Unpaid student debt will be paid by someone. That someone will be other students or by the UK tax payer through general taxation. Either way, you will pay more tax or suffer from reduced public spending.
Why are you saddled with such a high student debt?
a) UK membership of the EU requires that the UK Government deficit is limited to 3% of GDP. (Maastricht Treaty).
If the student debts were paid from taxation, student debts would add to both Government debt and deficit. The EU would then impose fines on the UK for breaking EU borrowing rules.
By moving student debts from Government to individual students, the debt no longer breaks EU rules. A smart move by the UK Government!
The only problem is that student and PFI debts do not just disappear. Somebody has to repay the debt. Any unpaid student debt has to be paid by the UK tax payer – by YOU!
(Student debts are identical in principle to “PFI” [Private Finance Initiative] spending. PFI allows spending without breaking EU imposed Government spending limits. In other words, PFI enables EU rules to be circumvented. Money is effectively borrowed from private companies to build hospitals and schools. Money borrowed for PFI does not add to UK Government debt. EU rules are not broken. The only downside is that PFI debt has to be repaid by the actual hospital or school. Money spent repaying PFI debts cannot be used to treat patients and or educate students).
b) UK membership of the EU requires that all EU students in the UK are treated equally.
The UK is not permitted to charge lower tuition fees for UK students than for students coming from any other EU country. Tony Blair’s Labour government had to decide whether to subsidise every EU student wanting to come to the UK or break EU rules.
The UK, and particularly England cannot afford to pay for every EU student. An English language education and a graduate job in the UK are still sought after benefits. Tony Blair, David Cameron and Nick Clegg’s only option as a good Europeans was to increase the fees for everyone.
(Scotland charges lower tuition fees. Scotland is subsidising EU students studying in Scotland. Can Scotland carry on being so generous with UK tax payers money? Many EU students simply go home after studying. How many EU students will bother telling the Student Loan Company how much they are earning to allow debt repayment to be calculated?
c) Who pays for unpaid EU Student debt?
Your debt will probably be sold to a private company. It is unlikely that every student’s debt will be repaid even to the most efficient debt collector. Any outstanding debt will have to be paid by the UK tax payer – by YOU – either by higher taxes or reduced public spending!