Student Debt Welcome
Student Debt
Hi and a warm welcome to my site. I’m Zack Needham. I’m twenty years old and I’m a student, completing my final year of a Sociology Degree. Do I have a job to go to at the end of my studies? No. Do I have any immediate prospect of employment? Not at the moment. Am I in a whole lot of debt as a result of choosing to go on to further education? Yes. 
I don’t come from a privileged background but I had hoped that getting a degree would give me a better start in life than the majority of my peers. The reality is I have a load of student debt round my neck and no immediate prospect of clearing it. If I do get work, I will have to pay back my loan and the payments will be deducted from my salary at source. Will I ever be able to afford to buy my own home? In the present economic climate, I very much doubt it.
I wouldn’t say I‘m a particularly extravagant person. I’m no angel either, and I’ve had a good time as a student. Okay, the first year I did waste money on booze, but I calmed down a lot in the second year and now I’m working really hard. I’ve decided to research this debt crisis for students and get a few facts down here on paper so if you read on, at least you will know where you stand, particularly in light of the 2012 changes in student finance. What is more, you, and your parents/guardians can at least make an informed financial decision about whether or not you choose to go to university.
Under the current system, university tuition fees are £3375- a –year max for 2011/2012 students. In 2012 all institutions are allowed to charge up to £6000 and even up to £9000 providing they make extra provisions for bursaries for poorer students. Okay, so they’re telling you that it isn’t a case of pay up or you can’t go because special student loan companies automatically repay fees, which means you will only need to start repaying in the April after graduation at the earliest. Well, that’s fine I suppose. If you never earn anymore than £21,000 you never repay. The loan is repaid through the income tax system. That means that once you’re working your employer takes it off the payroll so you never see the money. It simply reduces the amount you receive in your pay packet. You only repay 9% of everything you earn annually above £21000 of pre-tax salary. If you started paying the loan, but then lose your job or take a pay cut, then your repayments drop accordingly. The £21000 threshold is designed to rise in line with average earnings. This will start in April 2017, so you’ll repay 9% of everything above that threshold.
It doesn’t sound too bad does it! You stop owing when you’ve cleared the student debt or 30 years (from the April after you graduate) pass, whichever comes first. If you never get a job earning over the threshold, you’ll never repay.
Above-inflation interest rates add to Student Debt
There are a few nasty little catches in the new system. As real interest is charged, for the first time, students won’t just pay for the cost of their education; sadly they’ll pay for financing it too. Also, it will take much longer to pay off loans. And don’t forget the part-time students who make up 40 % of all undergraduates. Fees for them are likely to rise in 2012 too with all universities being able to charge up to £4500 and some £6750 provided they offer bursaries. It’s worth noting that part-time students won’t be eligible for maintenances loans or grants, and they will begin to repay from April 2017, not at the end of their course. This could result in some needing to start paying back tuition fee loans before they graduate if they earn over £21,000.
Student Debt – Monthly Repayments
Full-time students under 60 at the start of their course can also take a loan to pay for their living costs, for example, food, books, accommodation and travel. They are known as maintenance loans and are usually paid in three termly instalments direct to your bank account. The amount you get is dictated by two elements—up to 65% of the maximum living costs loan will be available to everyone in 2012 regardless of their parental income. Then there is the Income Assessed bit. The amount you can borrow is means- tested, so that the higher your parents’ residual income, the less you can borrow.
It doesn’t matter whether you choose a course that costs £6000 or £9000, the same amount is paid each month. Of course, the more you borrow, the more you’ll be repaying. Don’t forget that. And should your parents tell you to stick to your budget, remember your whole income as a student will consist of your student loan, any grant or income you get from working, also any money given to you by your folks. If you total that up, then this is what you should budget not to spend more than.
Those coming from homes with lower incomes or with less traditional backgrounds are most likely to be offered incentives by the universities. They may give you a reduction each year on your tuition fees, or a bursary. This could be a grant to help with living costs. Also there are scholarships to be had if you show excellence in academic ability.
So finally, it is up to you whether you decided to go for further education or not. In my case, I’m still glad I did it, but the financial cost and student debt does have to be given a lot of consideration. Good luck!