Weak and unstable

by reestheskin on 10/07/2017

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One key finding is that because interest rates on student debt are very high — up to 3 per cent above RPI — the average student accrues £5,800 of interest while studying, meaning they borrow £45,000 but have a debt of £50,800 on the day of graduation. By contrast, the average debt burden on students in the US is far lower at $36,000 (£27,900), even though the cost of tuition varies far more at US institutions.

Arguments about university funding are everywhere (and here and here and from the IFS, too). The UK government is indulging in fantasy / PFI like economics again, and much of this story looks like another mis-selling scandal. The universities again, come out of this badly (FT). Whereas many have behaved badly, they are going to end up being treated worse.

My eldest daughter warned me that reading comments will make me sad or angry. But sometime anger is more valuable than sadness. The comment below, in the FT, from Matt_us is germane (The case for reform of UK university finances)

Hang on a minute. Students now graduate with about £50k of student debt (tuition and maintenance loans and interest). Student loans cannot be repaid by the majority of students. That is because the interest rate is higher than the repayment schedule. Despite repaying loans, the student debt continues rising. It is a pyramid scheme. 

In detail: Graduates have to earn over £56k to even repay £1 of their loans, otherwise the loans get bigger, rather than smaller. Graduate starting salaries are between £20k and £30k. And only the best graduates will earn over £45k after five years in the job.  During that time all loans will increase by 6% per year.