[Closed] New student loan rules / graduate tax

I've got no great aversion to a graduate tax TBH, it seems the fairest way of doing it.

Seems ok to me. Only half of all graduates will in fact pay back their loans so my taxes will still be subsidising lower paid graduates which I don't think I have an issue with. Should I be outraged at this?

There's other rules that they've introduced around only being eligible if you've got a pass at maths and english. This is going to hit some students who excel at one but not the other.

There’s other rules that they’ve introduced around only being eligible if you’ve got a pass at maths and english. This is going to hit some students who excel at one but not the other.

Isn't that up for consultation - talking about min GCSE pass level to be eligable for a loan.- still were quite low grades mind, so not filtering out too many people.

Should I be outraged at this?

No idea?

Doesn't really bother me much - I already think reducing Univeristy numbers (and the cost) is a good idea. But on the other hand, being a young graduate is certainly getting expensive.....

Martin what’s his face from MSE has done the sums.

I think I read it equates to a 9% tax for most of your working life if you don’t ever earn enough to pay it off.

Doesn’t seem that fair when the minimum requirement for a lot of fairly middling paid jobs that we need people to do (teaching, nursing spring to mind) need a degree.

StuF
Full Member

There’s other rules that they’ve introduced around only being eligible if you’ve got a pass at maths and english.

I've heard this two ways- haven't seen the official proposals but some places are reporting that you need a GCSE pass at maths and english, OR at least 2 A level passes, which would hit a little different. The other thing is, it's not clear how it applies for articulating college students, or mature students.

It's being used as a shorthand for "not proper courses" which is absolute horseshit. There's not that many subjects that don't already require this english and maths foundation and they're definitely not all mickey mouse subjects which is what they want you to think

It’s being used as a shorthand for “not proper courses” which is absolute horseshit. There’s not that many subjects that don’t already require this english and maths foundation and they’re definitely not all mickey mouse subjects which is what they want you to think

No, but it might push more people down the vocational training route which is probably more appropriate. The idea that everyone should go to University never made much sense to me, esp now we've cut off our supply of Eastern European trades people.

I'm all for a graduate tax if we want huge numbers of people to go to university. This however is an awful idea as it means those earning the most and able to pay their debt off quickly will pay less than someone earning less but paying the debt over the full period.

So you can currently get a degree without Maths or English GCSE? Blimey

So you can currently get a degree without Maths or English GCSE? Blimey

My sister has neither Maths nor English GCSE (well, O-level in her case). She has got a PhD though.

Not everyone goes GCSE-A-level-(or Scottish equivaolents) -University.

Seems like a bad idea to me. I paid about 12k for 4 years. The massive increases since then will mean people choose not to go. Probably the poorest so it reduces social mobility. Fine if you are wealthy as you don't take the loan.

I don't really see the need for a specific graduate tax. In principle we tax things to raise money and influence behaviour. I would have thought a well educated population would be good and feel this will drive the opposite. It's a move away from general taxation and the pot being split based on the best needs of the country.

Not sure why you would target graduates specifically. The whole system should be looked at in terms of who is going to uni to study what rather than just saddling them with a burden. This on top of house price/rent costs etc. I can see us starting to suffer a brain drain. 15years ago if the situation was as it is now I'd probably have left the UK.

Interest rate tied to CPI

RPI was what I heard. You know, the higher one that somehow gets used when they're increasing what you pay, not the lower CPI which is used for benefit calculations.

I would have thought a well educated population would be good and feel this will drive the opposite.

Well from a purely fiscal point of view it's a law of diminishing returns. Up to a certain point having more graduates will pay for itself through increased GDP. Then, at some point, that will drop off and eventually you just spend more money on degrees which reduces available funds for other things like hospitals etc. Someone must have done the actual modelling.....

RPI was what I heard.

Yes you're probably right, couldn't recall exactly what I heard on the radio this morning.

Although, as with the existing scheme, they are at liberty to randomly jack up the interest rate after students have taken out the loans (which is completely immoral).

If graduates salaries are higher aren't they already paying more in tax than if they'd not gone to university? (on average)

If graduates salaries are higher

That "if" is doing the heavy lifting there. I'm not sure what the solution is here though.

So a investment banker will get to pay their loan off and minimal interest a nurse will get to go the full 40years, thus paying far more.

Got to protect the rich and screw the poor.

The result of this looks to mean low paid graduates will pay more, higher earners will pay less. Add in the changes to NI, and we clearly shifting the tax/payment burden onto the lower paid and away from the better off.

I reckon that if you work for the government/country you should not be paying back anything. So if after you graduate you become a state health worker, or teacher, or police office, or you join the army, etc you pay nothing. I'd probably extend that to all key workers as well.
This would be a small incentive to take low paid but essential work, and wouldn't cost that much.

So a investment banker will get to pay their loan off and minimal interest a nurse will get to go the full 40years, thus paying far more.

The higher paid are always better off, they get offered better interest rates etc as they are lower risk. There is really nothing new here.

Add in the changes to NI, and we clearly shifting the tax/payment burden onto the lower paid and away from the better off.

Except that the higher paid are more likely to be higher rate tax payers and thus pay more income tax....

I reckon that if you work for the government/country you should not be paying back anything.

Let's not get to a place where politicians exclude themselves from taxes.

easily
Free Member
I reckon that if you work for the government/country you should not be paying back anything. So if after you graduate you become a state health worker, or teacher, or police office, or you join the army, etc you pay nothing. I’d probably extend that to all key workers as well.
This would be a small incentive to take low paid but essential work, and wouldn’t cost that much.

Except then you are having a government making an unfair employment model between public and private sectors with this being a benefit in kind, which potentially again is taxable!

Except that the higher paid are more likely to be higher rate tax payers and thus pay more income tax….

The burden is being shifted away from them and towards the lower paid. That is why NI rates are increasing, and higher band income tax rates are not. This change in “loan” repayments greatly reduces how much the higher paid will have to pay during their lives, while increasing how much the lower paid will have to pay during theirs.

Except then you are having a government making an unfair employment model between public and private sectors with this being a benefit in kind, which potentially again is taxable!

Not if you legislate for it properly.

If graduates salaries are higher

.

No, but it might push more people down the vocational training route which is probably more appropriate. The idea that everyone should go to University never made much sense to me, esp now we’ve cut off our supply of Eastern European trades people.

These two are connected in my view.

I've just helped recruit 5 people. Our two administration posts were inundated with applications from degree- in-an-unrelated-subject holding applicants. Half of them couldn't spell or even read the application instructions (cover letter and CV). I'm not sure what all these fresh graduates expected to do as a job or what they expect to earn, but a junior £24k admin job didn't 6 need a biology degree.

And if plumbing or forestry pays more, then career advisors need to start telling kids this asap...

Imo, the university system in the UK borders on a Ponzi scheme in the way university leaders are so focused on money.

Aidy

Let’s not get to a place where politicians exclude themselves from taxes.

Good point well made.

I did say 'working for the government'rather than 'being the government' 🙂

I knew a woman who couldn't get a GCSE in maths so couldn't get into teacher training college to fulfil her aspiration of teaching in a comprehensive school. Shame, she did get a 1st in English from Oxford.

the university system in the UK borders on a Ponzi scheme

This is spades, we have far too many graduates we don't need, those that actually use their degrees and go on to higher paid roles get whacked twice, they pay for their loans and again in NI / tax, those that don't use their degrees don't end up paying for it, the rest of us do.

Also been the biggest reversal to social mobility in a century, back in the golden years of the 80s peoples financial back ground really wasn't a bar to going onto university education if you were bright enough, full maintenance grants and no thought of fees. These days it's got to put off even the brightest candidates, there's no guarantee of highly paid roles out there given the number of graduates and you're saddled with a crippling debt at a time when it's almost impossible for young people to live independently.

Edit: and expecting student nurses to pay for their degree based job mandated training is nuts, should be free and only payable on a sliding scale if you leave the NHS, with the whole debt written off after 15 years service.

Also been the biggest reversal to social mobility in a century, back in the golden years of the 80s peoples financial back ground really wasn’t a bar to going onto university education if you were bright enough, full maintenance grants and no thought of fees. These days it’s got to put off even the brightest candidates, there’s no guarantee of highly paid roles out there given the number of graduates and you’re saddled with a crippling debt at a time when it’s almost impossible for young people to live independently.

Very much this. My eldest is at Cambridge, racking up debt, his girlfriend (it's finally official and we can stop tiptoeing round the subject!) is doing a degree apprenticeship earning £25k in her first year. Ironically, on the same course as someone with a music degree from Cambridge. Oh, how I laughed 😅

Edit: and expecting student nurses to pay for their degree based job mandated training is nuts, should be free and only payable on a sliding scale if you leave the NHS, with the whole debt written off after 15 years service.

This, and doctors, teachers, social workers and possibly a few more besides.

It's always struck me as an interesting policy move from governments that claim to want a high value economy based on consumer spending to punish those that choose to study for high value jobs and remove that % of population from consumer spending.

Add in the changes to NI, and we clearly shifting the tax/payment burden onto the lower paid and away from the better off.

Yup, totally agree.

Except that the higher paid are more likely to be higher rate tax payers and thus pay more income tax….

That's a gross oversimplification and you know it (just trying to recall if you're the poster that posts loads of good stuff on all the share/investment threads)

I A close friend of mine earns in the 40% tax bracket, and yet he only pays around 12 % tax. (<Edit>He's just looked at his payslip and it's 10.4% actually) He maxes his share options, gets a Cycle to Work voucher, and nursery vouchers, he maxes out his pension payments etc to ensure he doesn't actually pay any tax at 40% and pretty much never has. His employer even bung the 13.8% employer's NI contribution on top of anything he pays in his pension. In the unlikely event that he ends up earning 6 figures and hence hits the £40kPA pension max, or the £100-£120k 60% effective tax bracket, I'm pretty confident he will find a way around that.

He knows that when he dies he can leave the vast majority of his pension pot to his kids free of IHT.

And he's just some middle of the road IT manager with no particular interest in playing the system. The further up the earnings tree you go you can guarantee that people are doing even more to pay even less tax.

Higher paid pay more income tax, Ho Ho Ho. Made me laugh cry

The UK already has chronically poor productivity in comparison to our G7 peers and this does appear to be a funny way to create a ‘high skills economy’ the Government is wittering on about. Perhaps the dawning realisation that if you create lots of graduates at taxpayers’ expense and the only opportunities are McJobs, social care or fruit picking then you really are going to create a brain drain. However, I still fear that there will be a considerable exodus from the UK with other economies growing faster, UK living costs rising considerably faster than wages, then it’s only natural that the clever ones will head elsewhere. Having worked cross-industry and with Government on skills policy and implementation, the only thing that matters in Whitehall is what can be achieved within an electoral cycle, not what will benefit people and the country long-term.

And he’s just some middle of the road IT manager with no particular interest in playing the system.

I don't buy that at all, if he knows he's only paying 10.4% tax, he's definitely gaming it.

The reality is that the student debt is getting off the scale in terms of the outstanding debt, and the UK aren't exactly playing the long game when selling them off in packages at 50p in the £, i dare say they've tweaked it this way to make the next few tranches of student debt being sold are more attractive and may gain more than that 50p in the £ rate.

As for actual uni courses, there is a hell of a lot of work the UK need to do about further education and how we support the building of the next generation, the current set up isn't really doing what it should, and with Brexit, we need to be doing more for further eduction, apprenticeships, etc.

So you can currently get a degree without Maths or English GCSE? Blimey

Of course you can. My brother left school with no qualifications. He's got a degree though. Schools work for some people but not everybody. Universities work very well for some people even if school didn't - as its a different kind of learning and study. He was offered a place at university on the basis of 'talent'. When was the last time you had to show your GCSE certificates to anyone? I've got 11 of them I don't think anyone other then me has ever laid eyes on them. Mind you I don't think anyone has ever cared that I've got a degree either. I think its presumed that I have but I don't think I've ever been asked to prove it.

argee
Full Member

The reality is that the student debt is getting off the scale in terms of the outstanding debt,

Yup. The most incredible thing about the last big change in student loans- ie, the move to tuition fees of £9000- is that as well as the impact on students, it's definitely going to cost the taxpayer money, because the repayment rates are so much lower than the previous system.

So in practice it's mostly a scam to take £160bn of the national debt and give it to kids to carry for 25 years, in order to hide that debt and make government figures look better. And of course when it gets written off in 25 years the current government doesn't care because they'll all be gone, and with any luck it'll fall on a labour government so they can say LABOUR INCREASES NATIONAL DEBT1ONe!

dovebiker
Full Member

The UK already has chronically poor productivity in comparison to our G7 peers

Though as ever it's worth remembering that productivity is incredibly difficult to measure- so instead we've come up with some metrics that are easy to measure, and we call them "productivity" even though they don't really measure it.

, he maxes out his pension payments

thats just a deferral really - as the the pension pot he's paying into will be taxed when it pays out.

I don’t buy that at all, if he knows he’s only paying 10.4% tax, he’s definitely gaming it.

Yeah you're right. What I meant was that I'm just doing the obvious easy things rather than employing a tax expert to really take the piss.

thats just a deferral really – as the the pension pot he’s paying into will be taxed when it pays out.

Not particularly. I can withdraw a couple of hundred k tax free at 55 IIRC. And if I package it correctly a chunk to the kids. And since there's no way I will be earning more than £30k in retirement the tax on that will be sod all.

It’s always struck me as an interesting policy move from governments that claim to want a high value economy based on consumer spending to punish those that choose to study for high value jobs and remove that % of population from consumer spending.

I guess it raises the salary point at which people can be a bit freer with their spending, buying stuff/services just because they want them, or buying premium ones just because they're nice. Instead the money services debt. Looking at the "plan 2" repayment on listentotaxman now, it eats away £1100 (£100/mth) off a £40k salary, £3k (250/mth) off £50k.

Arguably they (or indeed I) don't need or deserve those things in the first place. I could have done without the nice things I've been fortunate to have due to my earnings as a graduate (bikes, holidays, not living in a rented house share, etc.). The government could have spent the money on public services or tax cuts for those poorer than now-me, rather than subsidising my education. In practice however, poor youth me would have been scared shitless by these numbers and my parents would have not let me get into such debt, regardless of what the (changeable!) repayment terms were.

So in practice it’s mostly a scam to take £160bn of the national debt and give it to kids to carry for 25 years, in order to hide that debt and make government figures look better.

I remember thinking Osborne being a smug clever b****** when he introduced this.

Hmmm am in the process of being TUPE'd to a uni. Should I be worried?

One positive is it's a vocational subject and >90% are either company sponsored or higher apprentices. Very few student loans.

Students, at the min, have to retake GCSE if not at the min level already (At college anyway). So if going to uni without them have probably not managed to get the grade more than once*

How does this fit with adult learners doing level 3 courses at college? They are only funded up to 19 after which they need a load, granted the cost is less but still.

* I'm useless at exams and would certainly not be where I am now if every course I took was exam assessed.

I've got GCSEs in English and Math and I'm as thick as pig excrement. I remember something about Macbeth and a wood that moved, "tell me about the Rabbits George!", and algebra and matrices. All of which have been 100% useless in my post education life.

If you're going to argue that you don't need to buy things you don't need your UK consumer based economy needs a radical change as an awful lot of jobs disappear. In an 'ideal world' for this model young adults should be supporting restaurants, shops, building work etc by going out, buying fashionable clothes and moving onto the property ladder. Instead they can be poor and stay at home , and not contribute to the overall economy.

Personallly I'm underwhelmed with the desire for vocational degrees and rather hire people with a good grasp of basics. But I also have a job where sometimes I use algebra, matrices n' such

It baffles me that the UK finds it so hard to fund our graduates. It benefits to country on the whole.

Cost of course in Europe

If the government needs people to be educated to degree level, then do more to help pay. I'd we don't need people, create an employment and training system that works for younger people.

Re: cost of courses in Europe.

This confirms my (likely bias) that says the £9k+ fees, private halls, private landlords and multiple private companies all with snouts in the trough from students are bordering on some kind of scam/Ponzi scheme.

If universities are really all about education, why are they charging so much for halls (which in turn means the private halls and landlords charge so much)? Why does every course cost the same (the maximum(yes I know, cross subsidy)? Why are international students paying £15-25k for pre recorded lectures? Why did two universities refuse to work with my organisation in the grounds that we 'only' brought in around £600-1000 a day per staff member, and thier target was £3-10k...!

None of this takes away from the great teaching and the caring staff. But they're working in a system that's not about education and nation building any more, it's about money.

n/a

Why does every course cost the same (the maximum)

"Nobody wants to look like their course is the budget option."

Quoted to me by a Professor at one of our leading Uni's.

He made an example of when they doubled the cost of their MBA course. They then got double the number of applications while making no other changes.

But they’re working in a system that’s not about education and nation building any more, it’s about money.

And I wonder why there's so much interest from members of our current government in privatising the NHS?

I don’t buy that at all, if he knows he’s only paying 10.4% tax, he’s definitely gaming it.

It's not too hard to manage though. At £50k it means paying £5k tax. Simply salary sacrifice £12.5k of your salary into pension/c2w so your effective pay is £35k. On £37.5k your taxes 20% on £25k, or approx £5k.

It's worth noting you'll pay 20% tax on a lot of your pension when withdrawing it, so it's not quite as efficient as it looks.

It's also worth noting that by cutting the interest rate to the rate of inflation, the example of "city banker Vs nurse" will have the banker (who pays their loan off) paying more in real terms, as the loan now has an effective interest rate of 0%. The nurse may pay more in absolute numbers, but in real terms it's less

It’s also worth noting that by cutting the interest rate to the rate of inflation, the example of “city banker Vs nurse” will have the banker (who pays their loan off) paying more in real terms, as the loan now has an effective interest rate of 0%. The nurse may pay more in absolute numbers, but in real terms it’s less

I'm pretty good with numbers, tax and the like, but you're going to have to run that one past me again

Add in the changes to NI, and we clearly shifting the tax/payment burden onto the lower paid and away from the better off.

Yup, totally agree.

Except that the higher paid are more likely to be higher rate tax payers and thus pay more income tax….

That’s a gross oversimplification and you know it (just trying to recall if you’re the poster that posts loads of good stuff on all the share/investment threads)

Yep - that's me. The majority of income tax is still paid by the higher earners though...

Here are some stats from the ONS for the average overall tax rate by income tax band:

[url= https://live.staticflickr.com/65535/51902912666_c52f677246.jp g" target="_blank">https://live.staticflickr.com/65535/51902912666_c52f677246.jp g"/> [/img][/url][url= https://flic.kr/p/2n5tZEA ]Average tax rate[/url] by [url= https://www.flickr.com/photos/brf/ ]Ben Freeman[/url], on Flickr

And some stats on the distribution of who pays what:

Distribution of income and Income Tax liabilities

The top 50% of Income Tax payers received 74.6% of total income in 2018 to 2019, or £834bn out of a total £1,120 billion. This resulted in a 49.2 percentage point income inequality between the top and bottom 50% of Income Tax payers (where 0 percentage points is completely equal)

However, the top 50% of Income Tax payers were liable for 90.5% of total Income Tax in 2018 to 2019, or £168 billion out of a total £187 billion, indicating the progressive nature of the Income Tax system

The top 1% of Income Tax payers make up the majority of additional rate Income Tax payers and received 12.5% of total income in 2018 to 2019

In addition, the top 1% of Income Tax payers were liable for 28.9% of total Income Tax in 2018 to 2019. This is projected to decrease to a 28.0% share of total Income Tax by 2021 to 2022

https://www.gov.uk/government/statistics/income-tax-liabilities-statistics-tax-year-2018-to-2019-to-tax-year-2021-to-2022/summary-statistics

As for your friend:

I A close friend of mine earns in the 40% tax bracket, and yet he only pays around 12 % tax. (<Edit>He’s just looked at his payslip and it’s 10.4% actually) He maxes his share options, gets a Cycle to Work voucher, and nursery vouchers, he maxes out his pension payments etc to ensure he doesn’t actually pay any tax at 40% and pretty much never has. His employer even bung the 13.8% employer’s NI contribution on top of anything he pays in his pension. In the unlikely event that he ends up earning 6 figures and hence hits the £40kPA pension max, or the £100-£120k 60% effective tax bracket, I’m pretty confident he will find a way around that.

That doesn't sound at all correct, but without seeing his pay slips etc hard to comment. I used to earn £100k and pay £40k pa into my pension and paid a lot more than 10% tax each year (EDIT just worked it out, on £60k you pay £16,507.24 tax, so about 16%, however only 25% of the first £1m of the pension is tax free, so you have deferred tax rather than avoided it). NB I've stopped paying into a pension so now pay about 30% tax rate.

NB You don't have to earn £100k to hit the £40kPA pension max, you only have to earn £40k and pay it all in.

Seems ok to me. Only half of all graduates will in fact pay back their loans so my taxes will still be subsidising lower paid graduates which I don’t think I have an issue with. Should I be outraged at this?

I don't think most people are totally opposed to the concept - its the implementation. Child A has affluent parents, they fund them through university debt free, and so they pay no extra "tax". Child B is less well off takes a loan, but gets a well paid job and pays the loan back quickly as a result - so they pay the money back with a little bit of interest. Child C goes also takes a loan but works in a less well paid career so takes a long time to pay it back all the time accruing interest so that for their whole career they are paying back the money. Child D also takes a loan but keeps just under the magic threshold so never pays back a penny.

I reckon that if you work for the government/country you should not be paying back anything. So if after you graduate you become a state health worker, or teacher, or police office, or you join the army, etc you pay nothing. I’d probably extend that to all key workers as well.
This would be a small incentive to take low paid but essential work, and wouldn’t cost that much.

Interestingly my private sector employer has been discussing ways to retain graduates longer (it takes us about 12-18 months to actually make them competent and then they often leave because other places know we train them well!). Senior management is having some serious discussions about "if you stay for 5 years we will pay off your student loans" type arrangements. I don't think we are there yet (we've got bogged down in what-ifs), but some employers will start and then I think all sectors will have to do something similar for jobs where a degree is actually a requirement.

So you can currently get a degree without Maths or English GCSE? Blimey

Just a few weeks ago everyone was marvelling at Jake from Repair shop for having managed to get a degree and make a success of life despite being unable to read/write. I assume that means he doesn't have a GCSE in English. I worry that this proposal means someone who's had a really bad start in life, a shit experience at school and at 14/15 been dumped by society will find it even harder at 25 to change their destiny.

Our two administration posts were inundated with applications from degree- in-an-unrelated-subject holding applicants. Half of them couldn’t spell or even read the application instructions (cover letter and CV). I’m not sure what all these fresh graduates expected to do as a job or what they expect to earn, but a junior £24k admin job didn’t 6 need a biology degree.

I imagine if they have a biology degree they thought when they left school that they would pursue a career in science, they've now graduated and discovered there are bugger all jobs in biology and those that do exist pay less than £24k and treat you worse than an admin job. That's before you count the ones who, having studied it for 4 years intensively would quite happily never look through a microscope again - but have discovered skills or interests which are transferable to other settings. (Then there will be ones who are signing on and were told to apply to X jobs this week, or who moved back home after their degree who's parents are suggesting to apply to anything in the vague hope they can get rid of the again!).

I imagine if they have a biology degree they thought when they left school that they would pursue a career in science, they’ve now graduated and discovered there are bugger all jobs in biology and those that do exist pay less than £24k and treat you worse than an admin job.

I had a friend who trained to be a physio, 4 year degree and when she graduated there were not enough NHS places for her to complete her training and become fully qualified. She'd basically been screwed over - ended up a not fully qualified physio.

There really should be better information available when picking a degree on what career options reaaly exist.

Obviously you can still choose to study Biology and then work in MacDonalds through choice, but at least you'd have chosen that path at the start.

I’m pretty good with numbers, tax and the like, but you’re going to have to run that one past me again

The loan increases with inflation, so it effectively doesn't change in value each year. (It's more, but the amount of money it is still buys the same amount of stuff).

As the banker pays their loan off, and presumably the nurse does not, the banker pays more in real terms.

(I'm not sure I agree with it, but I get the reasoning)