Tuition fees rise, students panic. They shouldn't.
Tuition fees have UK students panicking, but they can relax: The proposed increase will actually make it easier to get a mortgage, and students will have lower monthly payments.
You may have seen the student furore at changes to tuition fees yesterday. Hundreds of violent socialist and self-professed "anarchist" students besieged and occupied the Millbank tower. However, the vast majority of them really ought to calm down. As I pointed out in my analysis of the Browne Review, there are plenty of myths flying around.Skip to next paragraph
The Adam Smith Institute is the UK's leading innovator of free-market economic and social policies. Politically independent and non-profit, the Institute promotes its ideas through reports, briefings, events, media appearances, and its website and blog.
Subscribe Today to the Monitor
The truth of the reforms is that there will be a fall in graduates' annual repayments, with the threshold for repayments being raised to £21,000 from £15,000. Student debt is not a mortgage-style debt: whilst interest will be allowed to accrue, this merely affects the time it takes to repay the debt - annual repayments are completely income-dependent and set to fall. Most significantly, university education will remain free at the point of use (which could be problematic, as my full analysis shows).
New myths have come to my attention and desperately need dispelling. One comes from a misreading of this BBC report (representative of many other reports in the media) on the reforms' effects on mortgages: skimming the report would give the impression that increases in the headline figure of student debt will affect a students' chances of getting a mortgage. Not so. The article actually states that it is the current system that affects students' chances. The proposed rise in the threshold of repayment would make it easier to get a mortgage and, with no change in the 9% income-dependent figure, the only way I can see it affecting mortgages is through the 5 extra years of repayment before the debts are forgiven.
The article's calculation gives the figure of current annual debt repayments for a graduate on £30,000 per year at £150 per month. What it fails to mention is that with the Browne review and government's proposals, this will fall to £105 per month. I challenge any socialist or well-meaning student protester to demonstrate how falling annual and monthly repayments will make it harder to get a mortgage.
The Christian Science Monitor has assembled a diverse group of the best economy-related bloggers out there. Our guest bloggers are not employed or directed by the Monitor and the views expressed are the bloggers' own, as is responsibility for the content of their blogs. To contact us about a blogger, click here. To add or view a comment on a guest blog, please go to the blogger's own site by clicking on the link above.