Lowering tuition fees -The facts!

In light of the recent proposal by Ed Miliband to reduce student tuition fees to £6000, I wanted to clarify exactly what this would mean for the student population of the future.

Here are some facts from Student Finance England which may or may not change some of your views on the matter.

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Students don’t pay any money to the universities upfront. However, once they leave university and are earning over £21,000 they will start to make repayments based on –

What they earn and not what they owe

I have included a table which shows how much students will repay. All figures are subject to final approval of the 2015/16 student finance policy

SFE repayments

Interest will also be charged on the loan and you can find out more information about this here

After 30 years any shortfall in repayments will be written off.

Example

Dave has completed a 3 year degree and starts a graduate job earning £21,000. Every 5 years his salary increases by £5,000. According to this year’s Student Finance England financial agreement, Dave would make the following repayments. (This doesn’t take into account any periods of unemployment)

SFE EXAMPLE

Scenario 1 – Based on Tuition fees at £9000 per year

Tuition fee loan =  £27,000

Maintenance loan =  £12,000

Total loan = £39,000

Shortfall after repayments = £9,570 plus interest

 

Scenario 2 – Based on Tuition fees at £6000 per year

Tuition fee loan =  £18,000

Maintenance loan =  £12,000

Total loan = £30,000

Shortfall after repayments = £570  plus interest

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As you can see from the example I have provided, lowering the tuition fees in Dave’s case would make no difference to the amount he would repay after the 30 year period, only the shortfall, which would be wiped.

Obviously not everyone’s situation will be the same but in my opinion, this change will only benefit high earning graduates who would pay off their loan in less than 30 years. Therefore based on the information I have gathered, perhaps it would be more beneficial to propose  lowering monthly repayments or the overall term of the loan.

I hope you have found this useful and I would love to hear your comments on this matter.

Love

Nic x

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