Weird feeling. After 10.5 years and roughly £21,000 of debt- I finally paid off the last instalment of my student loan today.

Next month, for the first time- I’ll receive my full post tax salary, for the first time since I graduated.

Sharing as an example of how the system works in practice. In truth I only seriously started paying off the capital in the last few years, when I started to earn a good salary, paying roughly £400 a month off. I suspect many will never significantly eat into the capital.
That’s especially the case for those those under the new regime, who have over £50k of debt. I was lucky in a) lower fees (3k not 9k) and maintenance grant (not loan) still existed.

Indeed IFS forecasts that 83% of students from PST 2012 reforms won’t fully pay back their loan.
Of course those who don’t pay off their fees, the cost will eventually have to be absorbed by the Treasury. Having 17% pay back all and the rest some will still be cheaper for HMT than no loans at all. But we should recognise the a) odd conceit that we have a system of loans...
...which the vast maj will never pay back and that instead b) that graduates are paying in effect a topped up rate of income tax for many, many years.
There are two other things to say about the system 1) the fact of this topped up income tax is another burden for graduates trying to accumulate capital for buying a house/save for a pension etc 2) there is an inequity issue. Wealthier students often receive support...
...from family to reduce (or eliminate) their loans. With George Osborne’s abolition of the maintenance grant (and replacement with another loan) that inequity has become greater. Poorer students start working life as poorer graduates...
...taking home less of their salary than their more privileged counterparts.

Of course, HE has to be paid for and graduates pay according to their ability to do so (as their salary goes up). But as I say, important to see the system for what it is and how it works in practice.
Graduates graduating today will often have over £50k of debt. An enormous figure especially when one considers their experiences of late and labour market they’re graduating into.
Even when things get better and *some* get good salaries it will take them many, many years- paying a big chunk of their post tax salaries to get into any position of paying it off.

The rest will likely have it hovering over them, in one form or another, until their 50s.
I have no complaints. I have a good job and benefitted hugely from my degree. That said, for the present cohort and that of the last few years there remain questions about a) intergenerational equity b) equity within their generation (for reason identified above)...
...c) sustainability of the student loan book long term. Truth is many politicians have in effect simply deferred the long term cost to the public purse to the decades hence, when many fail to repay. And who will have to deal with that? Ah yes- the grown up students.
To expand on this point for those asking- effectively we have created a system where the same two graduates, earning the same salary, in the same job might have quite substantially different take home pay. And that will most likely be as a result of their family background. https://t.co/nArHkMdQl0
And I should mention something about interest. I paid a lower rate of interest than current students. For those starting in 2020 in England and Wales their rate of interest is 5.6%. So a third year student who owes £30,000 will have £1,680 added to their debt this year.
Therefore, many students will find the capital they owe, even when in work, going up, not down.
You might ask whether that on top of the de facto graduate tax the Plan 2 students are paying, the very large capital sums they must repay, whether an interest rate of 5.6% makes any prospect of repayment, for all those outside the very top jobs, remotely credible.
As a result of the interest, many graduates work for years while their stock of debt goes *up*

So let’s take a graduate on Plan 2 with a debt of £50k and a v respectable starting salary of £28,500.

Despite a good, rising salary their debt *never goes down*. Rises to £113k.
The system I was on (Plan 1) I think can (just) accurately be called a student loan system. The fees were much lower, the maintenance grant still exist to leaven some inequalities and the interest was lower.

For Plan 2 (since 2012) those things are no longer the case.
I’m not saying whether the contributory principle is right or wrong, that’s for others to argue about: what I’m saying is that in particular, post-2012, we in fact have a de facto graduate tax. There’s no realistic prospect of many graduates paying back the stock of debt...
...and so it is, in effect, an extra income tax levy which will exist on graduates for 30 years. The debt will simply escape them and payments continue. I suspect older generations are ignorant of how the system operates in reality simply because they’ve never experienced it.
The fact that it is a de facto graduate tax generates all sorts of policy questions and it’d be better for the graduates and for policy makers to recognise it and treat it as such.

End.

More from Lewis Goodall

More from Finance

1/ My Mission: To Spread Financial Wellness (thread)

Here’s what "financial wellness" means to me

⬇️⬇️⬇️⬇️⬇️⬇️⬇️⬇️⬇️⬇️

2/ Mindset

Humans are programmed to think short-term

Evolutionary, thinking short-term makes sense. It helps with survival.

Financial wellness is all about training yourself to develop a long-term mindset

Not easy -- it takes practice


3/ Mindset

If you join the right tribes, you can’t help but improve

My favs:
@AffordAnything
@ChooseFiFI
FinTwit
@MicroCapClub
@themotleyfoolFool
@visualizevalue

Twitter / Podcasts / Blogs / YouTube -- when used correctly -- are amazing


4/ Mindset

Educate yourself - constantly!

Especially about:

1⃣Money
2⃣Relationships
3⃣Health

These 3 categories have an outsized influence on all areas of your life

Books


5/ Career

In the beginning, focus on growing your income

Do more than what is expected

Become a lynchpin

Find a career that you ENJOY (<- important!) that also has high-income potential

Start a side hustle (<- important!)

Build your talent
Last week Hizbollah's finance institution Al Qard el Hasan was hacked by Spiderz. A group of people took that Data and tried to make sense out of it. Below are the findings

https://t.co/eGLqvb28o5


Loans are provided to borrowers for gold deposits or other guarantees, to the association's members and to unsecured applicants.

AQAH had a carried forward loan balance of $450 million as of December 31, 2019. This balance has been increasing at a yearly rate of 13.4%.


AQAH laundered around $475 million in 2019 in the form of disbursed loans paid to more than 20,000 borrower accounts; mostly to borrowers with gold deposits.

Deposits accounts have been offered to 307,000 members of the association, 83,000 contributors as well as to 600 companies. AQAH closed 2019 with an overall depositors accounts balance of around $500 million.

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The first ever world map was sketched thousands of years ago by Indian saint
“Ramanujacharya” who simply translated the following verse from Mahabharat and gave the world its real face

In Mahabharat,it is described how 'Maharishi Ved Vyasa' gave away his divine vision to Sanjay


Dhritarashtra's charioteer so that he could describe him the events of the upcoming war.

But, even before questions of war could begin, Dhritarashtra asked him to describe how the world looks like from space.

This is how he described the face of the world:

सुदर्शनं प्रवक्ष्यामि द्वीपं तु कुरुनन्दन। परिमण्डलो महाराज द्वीपोऽसौ चक्रसंस्थितः॥
यथा हि पुरुषः पश्येदादर्शे मुखमात्मनः। एवं सुदर्शनद्वीपो दृश्यते चन्द्रमण्डले॥ द्विरंशे पिप्पलस्तत्र द्विरंशे च शशो महान्।

—वेद व्यास, भीष्म पर्व, महाभारत


Meaning:-

हे कुरुनन्दन ! सुदर्शन नामक यह द्वीप चक्र की भाँति गोलाकार स्थित है, जैसे पुरुष दर्पण में अपना मुख देखता है, उसी प्रकार यह द्वीप चन्द्रमण्डल में दिखायी देता है। इसके दो अंशो मे पीपल और दो अंशो मे विशाल शश (खरगोश) दिखायी देता है।


Meaning: "Just like a man sees his face in the mirror, so does the Earth appears in the Universe. In the first part you see leaves of the Peepal Tree, and in the next part you see a Rabbit."

Based on this shloka, Saint Ramanujacharya sketched out the map, but the world laughed
I just finished Eric Adler's The Battle of the Classics, and wanted to say something about Joel Christiansen's review linked below. I am not sure what motivates the review (I speculate a bit below), but it gives a very misleading impression of the book. 1/x


The meat of the criticism is that the history Adler gives is insufficiently critical. Adler describes a few figures who had a great influence on how the modern US university was formed. It's certainly critical: it focuses on the social Darwinism of these figures. 2/x

Other insinuations and suggestions in the review seem wildly off the mark, distorted, or inappropriate-- for example, that the book is clickbaity (it is scholarly) or conservative (hardly) or connected to the events at the Capitol (give me a break). 3/x

The core question: in what sense is classics inherently racist? Classics is old. On Adler's account, it begins in ancient Rome and is revived in the Renaissance. Slavery (Christiansen's primary concern) is also very old. Let's say classics is an education for slaveowners. 4/x

It's worth remembering that literacy itself is elite throughout most of this history. Literacy is, then, also the education of slaveowners. We can honor oral and musical traditions without denying that literacy is, generally, good. 5/x