Money, money, money
To all Keele freshers – a very warm welcome. You’re going to have a fantastic time over the next three years
Without wanting to be too much of a wet blanket, though, do you know how much it’s all going to cost you and how you’re going to pay it back?
You probably know that you can borrow up to £9,000 to cover tuition fees for the 2016-17 academic year and £8,200 to cover living costs. Assuming everything stays as is (a big assumption, as tuition fees seem certain to be going up), at the end of your three years you may have borrowed as much as £51,600
But that’s only the start. Interest begins to rack up as soon as you borrow the money – which can be as early as Freshers’ Week. What’s that you say? Interest rates are at rock bottom, aren’t they? That’s all you ever hear on the news anyway!
Sadly for students, we’re the exception to the rule. Under rules introduced in 2012, interest on your loans accrues at the Retail Price Index (RPI) plus three percentage points. The measurement of RPI is taken, somewhat arbitrarily, in March every year. Sod’s law, but in March RPI was 1.6%, a 75% rise from the year before, when it was 0.9%. That means the interest rate on your loan is a whopping 4.6%. That rate will remain in place until RPI is measured again in March 2017
On that basis, the total you could owe by the end of your course would be £56,766. And this keeps climbing until it’s paid off
The good news (?)
The silver lining is that only a (small?) percentage of you will have to pay the full whack back. To begin with you only start paying anything back once you start earning £21,000 a year, a threshold that’s frozen until 2021. At that point you pay back 9% of gross earnings. Interestingly, the interest rate you’re charged now varies according to how much you’re earning
If it’s £21,000 or less you’re now ‘only’ charged RPI. After that there’s a sliding scale up to RPI plus three percentage points (4.6%) for those on £41,000 or more
The Institute of Fiscal Studies has calculated that more than two thirds of graduates will never earn enough to repay the full amount, with any unpaid amount being written off after 30 years. The only way you’d be able to pay the lot off is if you had a starting salary of around £40,000 which rises by 2% a year and without you taking any career breaks
So maybe it’s best just to forget all about debt and get stuck in to university life! Good luck