Recent changes in tuition fees and student loan regulations in the UK have left existing and potential future students with serious financial worries. The cost of attending university has soared at a time when the cost of living is also increasing, leaving many people to wonder whether it’s worth continuing in further education.
Here we weigh up the pros and cons of student debt following recent changes.
Student loans repayments will reduce graduates’ ability to save, a new study has shown.
According to information provided by the Royal Bank of Scotland, the new student loans rules will decrease graduates’ savings by approximately 7% by the time they reach the age of 26.
As 26 is thought to be the average age at which young people begin to contemplate buying their own houses, concerns abound that increases in tuition fees will seriously hinder a prospective first-time buyer’s ability to enter the property market.
The cost of tuition has been raised from £3,375 to £9,000 per year, and other new rules have led some to proclaim that student loan repayments constitute a tax on graduates.
Indeed, under the new legislation, repayments do not simply rise in line with inflation. If graduates earn £41,000 or more, then they must repay their loans at the rate of inflation plus 3%, whereas those earning less than £21,000 a year will pay at a rate that increases exactly in line with inflation.
The average salary for graduates in the UK is believed to be £20,000, which means that if they manage to obtain the standard 90% first-time mortgage, then they will be spending approximately 40% of their salary on their mortgage.
When taking student debt into account, the debt rises to 44% on average, although in London the debt rises to a whopping 60%!
This means that despite the arrival of what some quarters have pejoratively described as a ‘graduate tax’, things won’t change a great deal in terms of repayments for the average graduate.
According to UK-Essay, a leading British essay writing service, students should not lose sleep over the new student loan regulations. Students will still only be paying back what they can afford and most students will not pay more over their lifetimes as the vast majority of graduates earn less than £41,000 a year.
Under the new legislation, the minimum repayment threshold has been increased from £15,795 to £21,000, at which point 9% over the threshold over £21,000 is automatically deducted from their wages.
For example, if you earn £25,000, your monthly repayments will be £30. Of course, going to university can lead to exciting career opportunities for many students as well as valuable life experience, but all this does come at a price.