Saturday, 24 September 2011

Explaining the system – fees 2012

It’s hard to escape the media comment on the 2012 changes to university fees for English students. The detail can be difficult to understand and quite frankly off putting. This post has been written to help demystify these costs as they relate to the courses within the Visual Communications division of the University of Wolverhampton and to help you make sense of the detail. 

If you’re a full-time student from the UK or EU and are interested in studying on your first higher education course, you can get a government loan to cover tuition costs. You don’t pay up front before you study, the student loan company will cover these costs and you will only start to pay back your loan once you’ve graduated, and are earning over £21,000 a year. Repayments for the current student loan system 'kick-in' when graduates are earning £15,000 per year. The repayments of the new scheme are deducted through the tax system when you earn £21,000 - meaning that as a new graduates you will actually pay back £540 less each year than students students under the old scheme. 

The new student loan system embraces for the first time, eligible, part-time students who are studying for their first degree or other designated HE course.

The university has put together a helpful web page that provides information on ‘study now pay later’:  

Maintenance grants are still available for anyone with a family income under £40,000. Take a look at the informative guide to other financial support on the University website:  

Reduce costs with Student Scholarships and the Continuing Achievement award 
At the time of writing this post, the University will be awarding 420 National Student Scholarships for 2012 entrants. Scholarships are worth a minimum £3000 in your first year of study. A £1000 tuition fee waiver + £1000 cash + Reduced Accommodation Fees (worth up to £1500) or a further £1000 fee waiver.

What’s more, you don’t need to apply, as the University will contact eligible applicants to confirm that they wish to be considered for a Scholarship. If you are accepted for the scholarship, you can also apply for the Universities ‘Continuing Achievement Reward’ in your second and third years

You will be considered for a National Student Scholarship if the Student Loans Company can confirm by July 2012 that you have a residual income of £25,000 or less. You will also be considered if you have firmly accepted a conditional or unconditional offer of a place at the University of Wolverhampton by July 2012, or if you have achieved a minimum 280 UCAS Tariff points or equivalent

So what is a ‘Continuing Achievement Award’? All new students at the University of Wolverhampton (UK+EU) paying a tuition cost of £8500 will be eligible to have their tuition fee reduced as a reward for continuing achievement and progression through each year of study. 

Each year if you are successful in your studies, work hard, submit all of your assessments, pass and progress, the University will credit your tuition fee by £1000 for that year when you re-enrol, thus reducing costs by £3000 over the three years of a first degree. 

You don’t need to apply for the award, if you meet the eligibility criteria each year the University will automatically reduce your tuition fee by notifying the Student Loans Company. 

Undoubtedly the new system is complicated. We have found an informative explanation from Martin Lewis, of Money Saving, who heads up ‘The Independent Student Finance Taskforce’ working with Universities, Colleges and the NUS.

Visit the University website for more details: 

Look below the jump to read Martin’s article ‘Balancing the Books’ from the Sunday Times University Guide 2012 published September 11 2011

Balancing the books 
Money-saving expert Martin Lewis gives his advice on how to survive the new fees and 10 good reasons why it's worth investing in a degree 
Hello guinea pigs. Not an insult, just fact. You will be aware that this is the first year of a very different system for English students paying for university and I wouldn't blame you if it was scaring the pants off you.

So far, the focus has all been the spit-flying, street-shaking, political fight about the near trebling of maximum tuition fees to £9,000. Yet that spin and counter-roll has shrouded the real impact on the pockets of students and their parents.

The changes certainly aren't all sweetness and roses, but their effect isn't as harsh as it's been portrayed. University is still affordable. You may not think that when the loudest thing being shouted is about graduating with £50,000 of debts (correct for those on £9,000 fees taking maximum loans over three years) but actually that isn't the crucial number.

What really counts is how much you need repay. For some, it's much less, others much more. This whole thing has been dismally communicated and myths abound. So here are some key facts everyone should know:

1. You Don't need cash to pay for university. Neither you nor your parents need stump up the cash. Tuition fees for full-time, first-time undergraduates are automatically paid direct to the university by the Student Loans Company. Earn less than £21,000 and you've nowt to pay. You only start repaying the loans in the April after graduation provided you're earning more than £21,000. You repay 9% of everything you earn above that, for example, earn £31,000 and you repay £900 a year. If your earnings drop later, so do your repayments.

2. After 30 years, any remaining debt is wiped out. You stop owing when you've cleared the debt or 30 years pass. If you never earn over the threshold, you'll never repay. It's repaid like income tax so no debt collectors. Employers automatically deduct repayments before paying you, simply reducing your pay packet as they do with tax. Annual repayments will be £540 less under the new system. Today, graduates repay 9% of everything above £15,000, but as a result of the new higher threshold, you'll have £540 a year more in your pocket than current graduates. Repayments are the same whether fees are £6,000 or £9,000. The amount repaid depends only on how much you earn, not how much you borrowed or owe.

3. Above-inflation interest is charged. While studying, the loan's interest rate is inflation (Retail Price Index - RPI) plus 3%. From the April after graduation, if you earn less than £21,000 the interest rate matches inflation, and above that rises gradually until at £41,000 it maxes out at inflation plus 3%. That is an increase on the current system.

4. You will owe for longer and may pay a lot more. So while you will pay less each year, because the original debt is bigger and the interest rate higher it will take much longer to repay the loan than under the existing system - and higher earners are likely to pay much more back.

5. Part-time students get tuition fee loans too. Fees are also rising for part-timers to £4,500-£6,750. Yet for the first time they're eligible for tuition fee loans, exactly like full-timers (though not grants). Student loans also cover living costs. Students can get maintenance (living) loans on exactly the same terms for food, books, accommodation, travel and so on. The maximum is £4,375 a year if living with parents, £5,500 away from home and £7,675 in London. Lower-income family students get living grants. If your household income (parental or your own) after tax is less than £25,000, you get the full £3,250 maintenance grant that never needs repaying. Grants get smaller, then vanish above £42,600 income. However, the amount of loan you get shrinks if you get a grant.

6. There's no real change to your ability to get a mortgage. This is a worry for many parents. The student loan is seen more as a hit to disposable income than an outstanding debt (it's not on credit files). However, as the higher £21,000 threshold means you have more cash in your pocket than current graduates, saving for and getting a mortgage in the early years should be easier. This is roughly countered by longer indebtedness, meaning less disposable income later.

7. £9,000 courses won't always cost more than £6,000. Lower repayments, higher interest and bigger fees combined mean many who live away from home are unlikely to repay in full over the 30 years. Even some with starting salaries of £30,000 won't repay a £6,000 fee and maintenance loan, in which case there's no additional cost to doing a £9,000 course. There may be penalties for repaying early. The government has confirmed you will be allowed to repay early - but it is still considering levying penalties that will add to the cost if you do.

8. If offered a fee waiver or a bursary, go for the bursary. Those from lower income homes will be offered up to £3,000 a year by universities, some as a fee reduction, others as a cash bursary. If there's a choice, most should go for cash, since with many never repaying fees in full, unless you earn a big salary after graduating, you won't see the full gain from a fee waiver, whereas a bursary is cash in hand.

9. It's more like a tax than a loan. It's repaid via the payroll, repayments increase with earnings, it doesn't hit credit files and after 30 years it's wiped. It's more similar to an extra tax that you will pay if you succeed in earning more, rather than a traditional debt that must be repaid, hanging over people for life. Those who gain financially from going to university repay a lot: those who don't will pay little. No win, no fee.

10. You needn't take the fee loan - but probably should. If parents (or students) have got the cash, they can pay the fees upfront. Yet for most, this is a bad move. In the extreme, imagine someone paid the full three-year £27,000 fees upfront but after graduation their child never earnt £21,000 - every penny of the repayment would have been wasted. Even if they earned more than £21,000, they still may not need to repay anywhere near as much as was shelled out.

For many, it may be better to save the cash for later to put towards lowering a future mortgage or car loan, which are much worse and costlier forms of debt.

Martin Lewis

Martin Lewis, broadcaster and journalist, is the creator of He is the head of the independent task force on student finance information 

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