Student loans? = Student taxes

Interesting post here

Student tuition fees are in fact a graduate tax. The tax is a 9% band that kicks in at £21k. That means marginal rate of tax at £21k goes up from 20% to 29% (not including NI). I think anyone would be upset at a near 50% rise in taxation.

It is only until a student earns roughly £43k will they be making any progress in repaying the capital since the government is charging interest on their “loan” at a tapered rate which tops out at 3% plus RPI (currently 4.5% giving a current total of 7.5% ) at £41k. (incidentally Lord Browne proposed interest would be charged at the cost of government borrowing which is currently 4.38% on 30 yr bonds so  if it is a linear taper those earning from £21k to £31kish will be paying interest below the market govt rate and those £31k and above will be paying interest above the market govt rate.)

So what we have is a special tax for 21 to 51 yr olds for those unlucky enough to be young in 2010 (on top of expensive housing, no jobs etc). Like it or not going to university is a cultural rite of passage for nearly 50% of 18-21 yr olds and the coalition is throwing a massive spanner in the works. I suppose we have in effect had this system since tuition fees were introduced but raising the bar by so much so quickly is the painful thing and that is why they are so understandably upset (on top of LibDem U-turns).

Let’s imagine the government’s next move is to force those over 50 who require expensive treatment for chronic conditions on the NHS  to take out a loan which is repaid through taxation. I wonder how that would go down in the law abiding shires? No doubt such a move will be delayed until the current unlucky generation makes it through to having their student “debt” written off only to take out an NHS “debt”!


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