Average Graduate will NEVER pay off their student loan come 2012…
2012… the end of the world… the Olympics… an everlasting debt…
A bold claim, but one based on extensive calculations.
This spreadsheet tries to explain the math behind the claim, but essentially;
The average student on a three year course at a university which charges £9000 tuition fees will never pay off their loan.
With the average wage for the UK sitting at around £25,000, adding on the graduate earnings premium for some of the very highest earners (40%) gives you an average earning of £35,000.
Given that an average wage for first-degree achieving graduates 6 months after graduation sits at £19,677 and the average retirement age sitting at around 65, after 22 years the average graduates annual wage will have increased from £19,677 to £35,000.
The rest of the maths should be kept away, for now. But assuming a £42,000 debt (£9000 a year on the course, and around £5000 in loans for maintenance and accomodation a year), it will take the average student on only a three year course well over the 30 year limit to pay off their student loan.
I have used a 3% interest rate as a base, and at £41,000 earnings, “graduates will repay at the maximum, rate of RPI plus 3%”, for which I have used a 2% RPI as an average.
In actual fact, you have to earn nearer to £60,000 annually across your career to fully pay off your loan within 30 years but will have, in total, paid £84,960.
Feel free to check (and potentially correct) the maths.
However, the fact that the average student who’s parents earn just too much to entitle grants will never be able to pay off their loan, simply have a debt on their back that is ever increasing.
And will consistently take 9% of their wages over £21,000, and to my knowledge, more over £41,000 (although, for this average student, this is only for the last three months of the 30 year limit).
Obviously, this is all dependant on the rate of repayment set in the September of each year (3% was used for this calculation).
*sigh* There are so many variables, but I hope this still maintains the strength it should.
As the second sheet of the spreadsheet shows, the total paid off is £39,443.64. So, for a student not taking maximum loan (or for that matter, on a course that does not charge the full £9000) the debt may be removed sooner.
But, then again, those students on a four or five year course…
Please tweet this around and sent it around to different people, feel free to use the numbers or message me if they need correcting or editing or you find some more accurate figures.
Hopefully, this might reach a few more people in a much clearer way and prove it’s point.
That point being that university education is now going to be hanging over nearly every student for 30 years.
And the government can;t even get all of the money back.
Scare tactics? Trying to make students avoid university?
Kill off smaller courses?
Let’s get talking.
1. Changed to £42,000 for maintenance loan of £4,950 for both accomodation and maintenance
2. Problem with the data is that even those earning well over the average graduate earnings premium still begin with average salary (might change it to make average graduate starting wage the 140% of graduate earnings premium wage and increase alongside other numbers)
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Tags: graduates, grants, student loan, tuition fees