STUDENT LIFE / APR. 16, 2014
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Graduate Debt or Tax?

With the media announcing that most graduates will be paying back their debt well into their 50’s is it time to stop thinking of it as a debt and more of a tax.  After all it automatically comes out of your pay packet and it isn’t something you have to actively pay. If you think about repayments in these terms the amount stops being scary. In a recent visit to a school Nick Clegg told school children to ignore the myths of university being unaffordable saying that, “You can still afford to go to university” Sound advice and something that most graduates would agree with. Although the first year that fees went up saw a 17% decline in applications, university applications picked up again the following years. 

The sad truth is that we graduates will probably be paying our student debts back for most of our working lives. In fact one study by the Sutton trust says that only a quarter of graduates will pay back their debt in full. The rest will have to have it written off meaning that they won’t have paid back their student loan by the time that they retire. With this in mind, is it worth worrying about your student loan? If you never pay it back in full and a small amount always comes out of your pay each month until you retire, then it is more of a tax for education than a loan that you owe. 

Under the old system debts were written off after 25 years, this has now been extended to 30 years. The average student will now owe £44,000 this is an average of £20,000 more than students who studied under the old fees. The addition of real, above inflation interest rates on graduate loans mean that 45% of graduates will pay back more than they borrowed. In real terms students under the new regime pay 3% on their loans and this begins while you are at university. 

Students in other parts of the UK do not pay fees a system that works in Scotland and Wales. Removing the fees might be a far off dream but having the fees shouldn’t worry you. You have graduated now and you don’t have to pay anything back until you earn over £21,000 a year which means until you land your dream graduate job, you can relax. 

Conor Ryan, director of research at the Sutton Trust said, “We believe that the government needs to look again at fees, loans and teaching grants to get a fairer balance.” The system may not be working for the government, but it can work for us as graduates.  Instead of worrying about the debt, accept that the government made a mistake with the maths and just enjoy your life as a graduate. Accept the amounts that are taken are smaller than you pay in other taxes and stop worrying!

Liam Byrne, the shadow minister for universities, science and skills, said “The system has lost all fiscal credibility and is losing public confidence.".  This is definitely a valid point.  Graduates not paying back their loans (due to not being able to) undermines the entire point of the loans. If the loans are never to be repaid then why worry about them. 

Don’t think of it as a graduate debt, debts have to be repaid and there are severe consequences to not paying them. Instead just think of it as a graduate tax you will be a lot happier.

Are you a past or recent graduate? What is your take on the current student loan system? Your thoughts and comments below please…

 

 

  1.        http://www.bbc.co.uk/news/uk-politics-26338661
  2.        http://www.bbc.co.uk/news/education-26954901
  3.        http://www.bbc.co.uk/news/education-26954901
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