- No students pay tuition fees. Unlike under Labour's first scheme - where if you didn't pay your fees in the first week of September, you didn't get to do the course, today the only students paying fees are those who want to.
- Graduates pay fees, but only some of them. The only graduates that pay fees are those that first repay their cost of living loans. For a typical student in England this year that would be £8,430 for the year, or about £25k over 3 years. In Scotland this is 4 years, so £34k. In London the loan is higher, £33k for a 3 year course and £44k for 4 years.
- To repay that £25k over the 30 year period you need to repay £833 per year on average. To repay £44k for a 4 year London loan you must repay £1460 per year.
- This is ignoring any interest.
- To repay £833 a year you have to earn £9255 a year more than the threshold, which is still £18k under Labour's scheme, £21k under the coalition, and the tories have increased it to £25k.
- That means to repay the cheapest maintenance loan you have to earn an average of £34k a year for 30 years -- that's before any interest payments. £34k is well above average earnings.
- If you only earn that £34k, you do not pay a penny in tuition, so free tuition doesn't help people on average wages.
- If you did 4 years in London, you have to earn an average of £41k before you repay any tuition fees (again ignoring any interest).
- So who does benefit from free tuition fees? Lawyers? Bankers? Headteachers?
- Yes, they do, but when do they actually start to benefit? Lets assume you start at a big city firm earning a £40k salary, and this increases at 10% a year for the first 10 years upto £94k, then holds steady.
- In the first year you repay £1350. Next year £1710. It's not until 8 years after graduation that you start repaying tuition -- when you're in your 30s and earning £78k a year. If you did a 4 year London course you don't start repaying tuition until 12 years after graduation - aged 34.
- As for the 6% interest rate, who does that affect?
- Lets assume someone graduates from a 3 year course in london (£33k in total cost of living loans) on say £24k a year, and this increases by 5% a year for 10 years, then holds at 3% per year. Le
- ts also assume that inflation is 2% per year, and the £25k repayment threshold also increases at 2% per year. Lets also assume we don't charge any tuition.
- That means after 10 years you're earning £37k (£31k in today's money), and 30 years you're earning £67k (or £38k in today's money)
- At 2% interest (inflation level) you'll have repaid your cost of living loans (again no tuition fees) after 28 years.
- At 6% interest you'll have the debt wiped out at 30 years.
- Inflation linked interest, coupled with zero tuition fees, gives someone earning significantly above average a £4,000 (in 2018 pounds) tax break when they reach about 50 years old.
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