Thursday, 23 May 2013

University tuition fees - myth busting

There was an article today (Thursday 23rd May 2013) on the BBC website about the possibility of limiting university tuition fees to £6,000 per annum.

While I appreciate nobody wants to pay more than they have to for education, there is so much scaremongering flying around about tuition fees it is difficult to know what to believe.

There are a few key points which I think are worth highlighting:

  • Universities have had their funding slashed. Tuition fees are a way of replacing that lost income.
  • The majority of people will and indeed should pay their tuition fees by way of a loan.
  • The loans are different to most other types of finance in the way they are repaid
  • You start to repay the loan only once you have earned over a certain amount, currently (2013) this amount is £21,000 as of 2017 which is when the first tuition fee loans will become repayable.
  • Payments ARE NOT based on the amount of the debt, which for most students starting this year will be close to £50,000. Instead they are based on a percentage of salary over the £21,000 limit.
    • To give you an example; someone earning a starting salary of £30,000 (a good starting salary for a student) would repay approximately 9% on £9,000, £810 (£67.50 per month) which is taken direct from the salary through the PAYE system.
    • I doubt many people would argue that payments of this level are particularly onerous given a net disposable income of approximately £1,900 per month!!
  • So the amount you repay is based on how much you earn, not the amount you owe which in effect means the more "successful" (I appreciate success in relation to money is subjective) you are, the more money you earn and by association the uplift in earnings you have received by having gone to university the more you pay.
    • That should be great news to people who argue that going to university does not help you get on in your career. IF YOU DO NOT EARN MORE THAN £21,000 YOU DO NOT HAVE TO REPAY THE DEBT. 
  • There is one final piece of this jigsaw which makes the repayment system very attractive. If after 30 years you have not repaid the debt, the remaining liability is completely wiped clean.
    • In all circumstances, nobody over the age of approximately 53 will owe any money for their tuition fees.
    • 30 years is a long time but if you have only ever repaid 9% of earnings a significant  percentage of graduates are likely to pay much much less than the £50,000 loan.
    • If on the other hand you have a sterling career and earning £100,000's each year the debt will be repaid anyway...
I'm sure people could come up with plenty of counter arguments but as I see it, and remember this is only my opinion there is absolutely NO REASON why tuition fees should put people off going to University!!!

Read more about student fee myth busting on Money Saving Expert.

One final point and a more worrying one, is that tuitiion fees are only part of the problem. The NUS conducting a survey a few years a few years ago which suggested living costs for a year of University were approcimately £15,000... The bad news is that these costs have to be paid for as you go, no cheap loan facilities cover these costs (other that means tested grants for lower earning families).

As I always suggest, forward planning is the key. If you would like to talk to someone about University funding or for that matter Private School Fees funding I would suggest talking to EDEN School Fees Planning 


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