DrSzin
07-Aug-05, 14:43
I've just read a front-page article on student finance from July 26. Hope it's ok to quote it here in its entirety:
Holy Trinity Amenity Group - Some Good Advice for Potential Students And Their Parents (http://www.htag-guildford.org/)
The HTAG web site is run by Isabelle Thurley (nee Bruce) living in Guildford and originally from Wick and is aimed at her local community. Today she has posted a very interesting piece on student loans and well worth any parent thinking about if their children are likely to go to university and get involved in student loans which can be very expensive if not handled carefully. Basically the earlier you start saving the less student loan you might need youngsters to take on with all that debt can involve.
I agree with the statement that it's a good idea for parents to start saving for their offspring's higher education as early as possible. Indeed, I saw the writing on the wall long ago, and took out long-term investments for my kids just after they were born.
However, the original article also says:
Graduates and parents alike seem unaware of the huge interest rates on these loans which creep up each year. More information needs to be made available to undergraduates and parents about the long term burden of student loans, and better still, student loans should be means tested so that students don't take out loans for clothes, clubbing, Sony Playstations etc., without realising the long term costs of such indulgences.
The claim that Graduates and parents alike seem unaware of the huge interest rates on these loans which creep up each year is mystifying. Huge interest rates? I would say not.
The following appears on the website of the Student Loans company: (http://www.slc.co.uk/noframe/faqs/msgeneral.html)
The interest rate is linked to the rate of inflation and will be adjusted in line with the Retail Price Index, (RPI). The interest rate from 1st September 2004 to 31st August 2005 is 2.6% and from the 1st September 2005 will be 3.2%.
The interest rate may be increasing with inflation at this moment, but you're unlikely to get a rate as low as 3.2% from anyone else, and it will presumably drop when inflation drops. This is surely the best-value loan going!
Not quite sure what the author is getting at when she talks about means testing. Maybe she is suggesting that rich kids shouldn't get these cheap loans. Perhaps I'd agree with that, but rich parents can afford to pay off the loans of their offspring, so long term costs needn't arise. Anyway, I thought student loans were already means-tested, but I can't find anything on the website about means testing -- not that I looked very hard.
If they're not means-tested, then the obvious thing for rich kids to do would be to take out a student loan at an interest rate of 3.2%, stick it in an ISA or other safe tax-free investment, accumulate interest at signficantly more than 3.2%, and then pay it back when they start earning several years down the line. They could make a tidy profit this way.
Surely she doesn't mean that less well-off kids don't deserve cheap loans because they might not be able to pay them back?
Finally, I was saddened to hear of the death of Robin Cook yesterday. The one and only time I saw him in real life was when he spoke at a rally following a student-grants demo many years ago. He was the radical young left-wing MP for Edinburgh Central, and his public speaking was impressive way back then: his red hair and beard matched his politics rather well. He had integrity and some of his Westminster speeches were outstanding. He will be sorely missed...
Holy Trinity Amenity Group - Some Good Advice for Potential Students And Their Parents (http://www.htag-guildford.org/)
The HTAG web site is run by Isabelle Thurley (nee Bruce) living in Guildford and originally from Wick and is aimed at her local community. Today she has posted a very interesting piece on student loans and well worth any parent thinking about if their children are likely to go to university and get involved in student loans which can be very expensive if not handled carefully. Basically the earlier you start saving the less student loan you might need youngsters to take on with all that debt can involve.
I agree with the statement that it's a good idea for parents to start saving for their offspring's higher education as early as possible. Indeed, I saw the writing on the wall long ago, and took out long-term investments for my kids just after they were born.
However, the original article also says:
Graduates and parents alike seem unaware of the huge interest rates on these loans which creep up each year. More information needs to be made available to undergraduates and parents about the long term burden of student loans, and better still, student loans should be means tested so that students don't take out loans for clothes, clubbing, Sony Playstations etc., without realising the long term costs of such indulgences.
The claim that Graduates and parents alike seem unaware of the huge interest rates on these loans which creep up each year is mystifying. Huge interest rates? I would say not.
The following appears on the website of the Student Loans company: (http://www.slc.co.uk/noframe/faqs/msgeneral.html)
The interest rate is linked to the rate of inflation and will be adjusted in line with the Retail Price Index, (RPI). The interest rate from 1st September 2004 to 31st August 2005 is 2.6% and from the 1st September 2005 will be 3.2%.
The interest rate may be increasing with inflation at this moment, but you're unlikely to get a rate as low as 3.2% from anyone else, and it will presumably drop when inflation drops. This is surely the best-value loan going!
Not quite sure what the author is getting at when she talks about means testing. Maybe she is suggesting that rich kids shouldn't get these cheap loans. Perhaps I'd agree with that, but rich parents can afford to pay off the loans of their offspring, so long term costs needn't arise. Anyway, I thought student loans were already means-tested, but I can't find anything on the website about means testing -- not that I looked very hard.
If they're not means-tested, then the obvious thing for rich kids to do would be to take out a student loan at an interest rate of 3.2%, stick it in an ISA or other safe tax-free investment, accumulate interest at signficantly more than 3.2%, and then pay it back when they start earning several years down the line. They could make a tidy profit this way.
Surely she doesn't mean that less well-off kids don't deserve cheap loans because they might not be able to pay them back?
Finally, I was saddened to hear of the death of Robin Cook yesterday. The one and only time I saw him in real life was when he spoke at a rally following a student-grants demo many years ago. He was the radical young left-wing MP for Edinburgh Central, and his public speaking was impressive way back then: his red hair and beard matched his politics rather well. He had integrity and some of his Westminster speeches were outstanding. He will be sorely missed...