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Violence is still the last refuge of the incompetent [Wednesday 24th November 2010 at 10:48 pm]

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[Feeling |curiouscurious]
[Playing |7th heaven [7thheaven.mod]]

Oh dear, there's been more riots in London. My views on the protests haven't changed, and the quote from my previous post still stands. This time round the police came out in force, leading to this gem of a comment that the BBC quoted:

From twitter: Why don't they stop sending a ridiculous amount of police out for small scale protests instead of cutting education spending?

Well, the last protest was "small scale" and look what happened there.

Anyway, while all this was going on Nick Clegg did make a good point: "Examine our proposals before taking to the streets. Listen and look before you march and shout." And indeed there are some significant points in the proposals:

Point 1: you do not pay any tuition fees up front.

Point 2: you do not have to start repaying fees until you earn more than £21k (and then it's 9% of what you earn above the threshold).

Point 3: your student loan is written off (without, I believe, affecting your credit rating) 30 years after graduating.

I do wonder just how much of the loan the average person will pay back. Hmm... let's assume an annual loan of £10k, this works out as £3k or so cost of living and £6k or so fees. Interest rates will be 0% for people on incomes of £21k, rising to 3 points above inflation for people on incomes of £41k. Let's assume a linear increase and 2% inflation, so at £31k you pay 2.5% interest.

So, after your three years of university you'll end up with a £30k loan (£10k × 3 years at 0% interest). This is actually slightly better than the current system, in that currently you do pay interest (pegged at inflation) from day 1, although your loan before interest under the old system would only be £18k or so.

Let's say you go into work bang on the £21k threshold, and each year at work you get a 3% rise. That's probably a highly unrealistic scenario, but it'll do for some rough numbers. I vaguely remember there being nice equations to do with applying interest, but I can't remember what they were so I'm going to do this the old fashioned way with mad Excel skillz.

YearLoanSalaryInterest rateInterestRepaymentResult
130000.0021000.000.00% 0.00 0.0030000.00
230000.0021630.000.16% 47.25 56.7029990.55
329990.5522278.900.32% 95.89 115.1029971.34
429971.3422947.270.49% 145.91 175.2529941.99
529941.9923635.690.66% 197.29 237.2129902.07
629902.0724344.760.84% 250.04 301.0329851.08
729851.0825075.101.02% 304.12 366.7629788.44
829788.4425827.351.21% 359.50 434.4629713.47
929713.4726602.171.40% 416.15 504.2029625.43
1029625.4327400.241.60% 474.02 576.0229523.43
1129523.4328222.241.81% 533.06 650.0029406.49
1229406.4929068.912.02% 593.20 726.2029273.49
1329273.4929940.982.24% 654.33 804.6929123.13
1429123.1330839.212.46% 716.37 885.5328953.97
1528953.9731764.382.69% 779.18 968.7928764.36
1628764.3632717.322.93% 842.601054.5628552.40
1728552.4033698.843.17% 906.461142.9028315.96
1828315.9634709.803.43% 970.521233.8828052.60

That's... not what I expected. The politicians weren't lying when they said that most people won't repay the full amount. Or were they? Just how much do you pay over the 30 year period?

I'll leave working that out as an exercise for the reader, though I'll give you a hint: they're still lying.

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[User Picture]From: crschmidt
Thursday 25th November 2010 at 1:06 pm (UTC)
(For those too lazy to open a spreadsheet, I believe the sum is 33217.55.)

"repaying" a loan is *not* the same as "paying the amount you borrowed" in my mind. Depending on how it's phrased, I don't see a lie there. When you borrow money, you pay for that privilege. (It sounds like you guys had a system where that wasn't the case before; all I can say at that point is 'welcome to the real world' :p)

I'm lucky enough that I dropped out of school before I actually finished, so my loans weren't that high, but nothing here seems unfair to me.
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[User Picture]From: boggyb
Thursday 25th November 2010 at 7:04 pm (UTC)
The existing system was much the same, except the interest was linked directly to inflation (technically, the lower of inflation and the base interest rate). This meant that your loan in theory never increased in real terms.

A lot of the current fuss is political: the Lib Dems have as part of their manifesto abolishing tuition fees, and a lot of students will have voted for them purely because of that. They might have survived unscathed if they'd merely gone "Oh, we can't do that as there's no money", but for them to then triple the size of the fees is taking it too far.

Fortuantly I graduated while the fees were still ~£1k/year (and postgrad courses use a completely different system for fees), so I can largely ignore this. The only worry is if they apply the new interest rate to existing loans - they've not said anything about that yet.
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