Student Loan Fraud.

Originally Posted by 1andrew1

Yup

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Yes, unfortunately a graduate tax or an increase in VAT won't win elections. But student loans and hikes in employer NI contributions may. Is that the fault of the system, a fault of the political parties or a fault of the voters?

As is so often the case in this country there are class issues at play. Once upon a time you could only go to university if daddy could pay for it, which meant daddy was either landed gentry or a wealthy merchant. The student grant system was designed to allow poorer students access to degrees on the same terms as the wealthy ones, with the State paying them an allowance instead of their parents. All that quite predictably got unaffordable as the number of people going to university sky-rocketed in the 1980s. But the idea that funding higher education was a class issue poisoned the debate. I was at uni in the early 90s, just as grants were first being frozen and top-up loans offered (luckily, for the first 2-3 years the top-up loan was so small you could, just about, go without it if you wanted to), but well after the days when you got a full grant in term time and no-questions-asked unemployment benefit throughout the summer. Student Union rhetoric in the early to mid 90s was all about how education is a right, not a privilege. No useful debate about how the privilege was to be paid for, obviously.

The loan system has parked the debate rather than settled it. Many students won’t come anywhere near paying it off, especially in Englandshire where you have to get a loan to pay your fees as well. There are no tuition fees in the socialist republic of Scotland but as a consequence the universities are cash-strapped because the government, as the one paying all the fees, gets to say how much it’s prepared to pay, and it’s not nearly enough. The institutions here are therefore groaning at the seams with overseas students studying non-courses for which they pay a prince’s ransom, which at least some of them think is worth the cash just to get on the bottom rung of the immigration ladder.

Much as I hate to admit it I think the loan system is probably a good idea in principle because a university degree is elective and frankly not necessary for everyone. Sure it’s character building but why should everyone else pay for that? And, for that matter, a pay-back system that is linked to financial ability and stops making demands of you when you stop earning is also equitable. The problem of course is that that is not a loan, it is something else, more like, but not quite like, a tax, and politicians on both sides need to be honest about that. We need to stop, for example, screaming about how much debt students are in because the cash value of their debt is irrelevant in many ways, if they’re not going to pay it off anyway. And we need to tighten it up so overseas visitors can’t exploit it, although the size of student ‘debt’ I suspect is vastly, vastly caused by UK nationals and not Romanians.

[jfman]

It wasn’t student union rhetoric that made successive governments farm off hundreds of thousands of students to massage the unemployment figures. Much like 1990s incapacity benefit.

Originally Posted by jfman

any more than people who could earn into the 40% tax bracket allow their careers to stagnate to avoid the marginal tax increases within it.

A 15% increase, plus the other changes that come with it (that reduce pay) are not "marginal". Are you borrowing a calculator from Old boy.

[Pierre]

Originally Posted by Chris

Much as I hate to admit it I think the loan system is probably a good idea in principle because a university degree is elective and frankly not necessary for everyone. .

A loan is a loan, regardless. You should pay it back.

Why should a 16yr old, on an apprentice scheme, paying tax, fund a student peer to go to university?

Regardless of income, all student loans should be repaid, then maybe they might think on what degrees pa more!

I would enforce repayment of all loans, regardless of income.

Never quite understood the not having to pay it back bit.
If you dont have to repay it, ever, then its not a loan, its a gift (or grant).
The definition of a loan (borrowing) is you have to give back what you borrowed at some point.

Originally Posted by Pierre

A loan is a loan, regardless. You should pay it back.

Why should a 16yr old, on an apprentice scheme, paying tax, fund a student peer to go to university?

Regardless of income, all student loans should be repaid, then maybe they might think on what degrees pa more!

I would enforce repayment of all loans, regardless of income.

The problem is, it is so expensive you are going to end up bankrupting people perhaps many years later, if the loan is construed as of the regular type that must be repaid in full. In fact there is no way anybody aged 18 with no assets or proof of income would ever be granted a loan of that size on those terms. Generous loan forgiveness terms are the only way it can work - you claw back what you can from who you can and write off the rest. That is how it’s designed but we’re being dishonest about it, leading to headlines about the size of ‘student loan debt’ as if it’s got out of control when it’s actually how the system as designed.

[Pierre]

Originally Posted by Chris

The problem is, it is so expensive you are going to end up bankrupting people perhaps many years later, if the loan is construed as of the regular type that must be repaid in full. In fact there is no way anybody aged 18 with no assets or proof of income would ever be granted a loan of that size on those terms. Generous loan forgiveness terms are the only way it can work - you claw back what you can from who you can and write off the rest. That is how it’s designed but we’re being dishonest about it, leading to headlines about the size of ‘student loan debt’ as if it’s got out of control when it’s actually how the system as designed.

The answer , is that you either live with the system, or change the system

The system is not fair or sustainable, therefore we need to change it.

I think we need to stop pretending that that 200 billion or whatever it is, isn’t part of the national debt. But the fact that that number exists is simple proof that there is no way of financing higher education that involves taking significantly more money off students.

[jfman]

Originally Posted by Paul

A 15% increase, plus the other changes that come with it (that reduce pay) are not "marginal". Are you borrowing a calculator from Old boy.

It only applies to the amount above the threshold which (in tax terms) is described as marginal tax. National insurance also lowers for income above the threshold (except in Scotland, where the two changes happen at different income levels).

It's one of the most frequently misrepresented aspects of tax because the implication as often presented is that it increases the rate of tax on all of a person's income not just the part above the threshold. The rate of NI dropping 10% is never mentioned.

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Originally Posted by Chris

I think we need to stop pretending that that 200 billion or whatever it is, isn’t part of the national debt. But the fact that that number exists is simple proof that there is no way of financing higher education that involves taking significantly more money off students.

Given that the idea of actually paying the national debt is a pretence in itself I'm not sure why this £200bn (some of which will be repaid) is viewed more robustly than the other £2.8 trillion that will only be paid with more government borrowing to kick the can down the road.

It's also artificially inflated by the exorbitant commercial interest rates applied to loans in England. If you were designing a system to make it a graduate tax instead of a loan it'd look exactly like ours. The problem for charging those on lower incomes is we already pay out a chunk in benefits to those on poverty wages through Universal Credit. It seems fundamentally flawed to push more people above the threshold below it simply to move money around the government spreadsheet.

Originally Posted by jfman

It only applies to the amount above the threshold which (in tax terms) is described as marginal tax.

I'm perfectly aware how it works, since I have to pay it.

Originally Posted by jfman

National insurance also lowers for income above the threshold.

Yes, by 6%, less than half the tax rise. In addition, NI isnt paid on all income, tax is. So the "saving" is even less.

Marginal .. yeah right.
The definition of Marginal = minor and not important.
Just becasue they call it some dumb name, doesnt make it correct.

[jfman]

The principle stands regardless of the objection to my use of "marginal" - it's certainty not minor or unimportant when they take it off me. I don't see huge swathes of people sitting on 25k a year to dodge student loan repayments any more than I see people sitting stagnating just below the higher tax threshold to avoid it. You see some slightly above it tinkering with pension contributions but that's about it.

The child benefit rules create a problem within a narrow window as does the removal of the personal allowance at 100k.

For the vast majority more money is a better bet in the long term. Even if the state takes a larger chunk of it above certain thresholds.

[downquark1]

Originally Posted by Mr K

It's nowhere near as generous as the system a few decades ago; grants and nothing to pay back. Most of today's politicians benefited from that .
Another example of the generational divide and the crap deal/future young people have.

That is entirely true. It is also true that more people are going to university so that system would be unaffordable.

That said we should probably reduce the number of people going to university so if you want to go back to that system it is fine by me.

Originally Posted by Pierre

The answer , is that you either live with the system, or change the system

The system is not fair or sustainable, therefore we need to change it.

The answer would be much more state funding of universities. We're not going to go down the American route, but there isn't much public support for funding them like the Europeans do.

As Chris says the current system is just a bit of trickery, a stealth graduate tax, so those who start having a higher income pay more than those who didn't attend university.

No good can come from bankrupting people because they went to university as a kid and it didn't pan out to a much higher income.

[1andrew1]

Originally Posted by Pierre

The answer , is that you either live with the system, or change the system

The system is not fair or sustainable, therefore we need to change it.

Employers pay an apprentice levy across all their workforce to fund apprenticeships. Should this levy be cancelled and apprentices be made to take out student loans to make this fairer?

You don't link to evidence showing the current system is unsustainable, so that point has not been proved.

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Originally Posted by Chris

The institutions here are therefore groaning at the seams with overseas students studying non-courses for which they pay a prince’s ransom, which at least some of them think is worth the cash just to get on the bottom rung of the immigration ladder.

The red brick universities have the research funding and property investments to keep them going. Newer ex-polytechnics don't and have been suffering all over the UK. UK students' fees just don't cover the average course cost of c£12k whilst overseas fees of c£16k generate a profit to make the university viable. Although UK and formerly EU students did enable courses to achieve economies of scale. However, with overseas student numbers down due to immigration being tightened up, UK student fees not rising until recently and costs shooting up post Covid, many universities are facing a squeeze.

[tweetiepooh]

Remember the days when only a couple of percent of population went to uni, a bigger block to polys and colleges but many straight into jobs. But that made our figures look lousy worldwide where loads of people went to university so you make all the polys and colleges universities, change all the qualifications to degrees and suddenly you can't afford it anymore so goodbye free first degree and grant, hello fees and loans.
But we can't go back because all the universities have expanded to accommodate the extra numbers and can't return to the old ways.