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A student tax rise would be yet more intergenerational theft A student tax rise would be yet more intergenerational theft
(4 months later)
Today's revelation that a government report has proposed raising interest rates on old student loans is scandalous. It shows that while previous generations got their education for free, younger generations are now being told to pay up and shut up. Were such a proposal acted upon, it would lengthen the period in which graduates have to make repayments, possibly extending it to cover the rest of their careers and introducing the concept of a career-long "graduate tax" to the UK. It would be nothing less than intergenerational theft.Today's revelation that a government report has proposed raising interest rates on old student loans is scandalous. It shows that while previous generations got their education for free, younger generations are now being told to pay up and shut up. Were such a proposal acted upon, it would lengthen the period in which graduates have to make repayments, possibly extending it to cover the rest of their careers and introducing the concept of a career-long "graduate tax" to the UK. It would be nothing less than intergenerational theft.
No one in their right mind would agree to buy a luxury £50,000 car without knowing what their interest payments or the period of payment are likely to be. Yet this is exactly what is being asked of students. They are told to sign an open-ended loan agreement where the interest rates and term of repayment can change, at any moment in time, at the whim of government, without the need to legislation. Don't young people deserve better protection?No one in their right mind would agree to buy a luxury £50,000 car without knowing what their interest payments or the period of payment are likely to be. Yet this is exactly what is being asked of students. They are told to sign an open-ended loan agreement where the interest rates and term of repayment can change, at any moment in time, at the whim of government, without the need to legislation. Don't young people deserve better protection?
Outstanding student loans weigh heavily on the government's purse. The Student Loans Company had £28bn of loans outstanding at the end of March 2012. Experts have suggested that a rise in tuition fees could drive the pile of total debt up to £40bn. Successive governments' attempts to monetise the student loan book have failed, in spite of advice given by financial advisers like Rothschild. The report obtained by the Guardian reveals how selling off student loans is now the government's ultimate goal: increasing interest repayment levels and reducing the threshold at which repayments kick in, are surely meant to make the purchase of the student loan book more appealing.Outstanding student loans weigh heavily on the government's purse. The Student Loans Company had £28bn of loans outstanding at the end of March 2012. Experts have suggested that a rise in tuition fees could drive the pile of total debt up to £40bn. Successive governments' attempts to monetise the student loan book have failed, in spite of advice given by financial advisers like Rothschild. The report obtained by the Guardian reveals how selling off student loans is now the government's ultimate goal: increasing interest repayment levels and reducing the threshold at which repayments kick in, are surely meant to make the purchase of the student loan book more appealing.
What can be done to give better protection to students? Crucially, student loans are not covered by the Consumer Credit Act, but it's worth remembering that that exclusion was only made possible because loans were low-interest in the 1990s. Nowadays graduates earning more than £21,000 per annum are paying 6.6% interest, ie commercial rates – which would suggest that the government may be breaking the exemption terms.What can be done to give better protection to students? Crucially, student loans are not covered by the Consumer Credit Act, but it's worth remembering that that exclusion was only made possible because loans were low-interest in the 1990s. Nowadays graduates earning more than £21,000 per annum are paying 6.6% interest, ie commercial rates – which would suggest that the government may be breaking the exemption terms.
Were student loans brought back under the Consumer Credit Act, the government would have to provide students with adequate and much more detailed financial statements, comprehensively outlining changes in rates of interest – something insiders suggest the government wouldn't have the capacity to cope with.Were student loans brought back under the Consumer Credit Act, the government would have to provide students with adequate and much more detailed financial statements, comprehensively outlining changes in rates of interest – something insiders suggest the government wouldn't have the capacity to cope with.
The current interest rates of 6.6% on recent student loans are the highest rates students are charged in western Europe. The losers will be past and current students – with tuition fee repayments likely to be as much as 9% of income. Stubbornly high housing costs will only exacerbate the situation and finances will get even worse for the young.The current interest rates of 6.6% on recent student loans are the highest rates students are charged in western Europe. The losers will be past and current students – with tuition fee repayments likely to be as much as 9% of income. Stubbornly high housing costs will only exacerbate the situation and finances will get even worse for the young.
The belief that each new generation should be better off than generation before has been shattered. Government policy is systematically taking from the young. Current students will become increasingly indebted with decreasing protection unless urgent action is taken.The belief that each new generation should be better off than generation before has been shattered. Government policy is systematically taking from the young. Current students will become increasingly indebted with decreasing protection unless urgent action is taken.
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