student loans dont add up

james armstrong james36armstrong at
Wed Nov 3 19:18:35 GMT 2010

It took me ten minutes to
work out , that raising student fees and repaying them at interest as proposed is
not compatible with a sound economy nor is is rational.


Repay student loan + save up
deposit  +  repay mortgage ?


It doesn’t work out! Or to
put it another way young high earners won’t be able to afford to buy a house or
to start homemaking and family rearing.


The new  uni loan repayment kicks in when you earn

At the new student fee level you might
run up a debt of  £40,000.


You’ve found a property  priced at £150,000 

>From your first job, you will
have to save up a deposit – of ten per cent = £15,000 .  This could take you ten years at £1,500 p.a.


By then property prices will
have moved up  (but so may your salary /
wage/ income.) or it may not. The trend is for the houseprice: salary ratio to
increase  .


After ten years saving at
£1,500 pa you will have  a deposit of

You will then have to
convince the bank of your credit worthiness 
to be able to afford to repay £11,556 p.a. mortgage p.a. out of a salary
of £20,000  (that what I work out the
loan repayments for 25 years at 8% compound interest)


Here’s your case

Income £20,000 p.a. 

Repay student loan + inetest   £4,000 p.a. 

Net salary £16,000 less
expenses, less tax, less pension contributions ..

Repayments £11,556 p.a. 
Can't be done. 

Possible outcomes.


1 Bank refuses you mortgage.
You can’t buy a house.

2  Bank offers you mortgage (but this is now
certainly an unsound proposition ). There’s a trade name for this – “ sub prime

3  No 
mortgage? You can’t buy  a house
even if offered a mortgage.

salary isn’t big enough . You will have to rent.

4 You and all the other
priced-out generation now form the 
‘reserve  house-needy army ', which
landlords  rely on so they can now
exploit by  rent increases.and
house-builders rely on so they can push up house prices. 

5 House prices fall
because  of  the fall in demand 

6 Repossessions increase  as struggling owners go into  negative equity.

7  Following the 2008/9 crash Government is
forced to bale out banks  

 Following the 
2021 crash govt is forced….and after the spending review, student fees
are  increased...

 10 Because of the worry of such a life time- debt
level hanging over your head for thirty five years you have a nervous


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