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Debt as an 'Asset'.....


sparks

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Real assets in this country (and across the world) were surpassed by imaginary ones decades ago...

 

So an interesting example is the new university fees system.

 

OK, so you don't pay up front, and you only start paying back when you earn over £21k..

 

Sounds fair, right?....Until of course you look into the 'small print'!

 

You can't pay upfront (£9k a year), but on graduation (despite promises of a 'penalty'), rich people will be able to pay off the whole amount (£27k) in a lump sum without it costing a penny more...

 

Those who can't will be forced into a system that they are then tied into even if they then later come into an inheritance that would enable them to do so...

 

So what does that mean?...well it means a new tax bracket for those who go to university - an extra 10% of your wages above £21k disappears!...And why is that REALLY good news for the government?

 

There have been several studies which have worked out how much a student will have to pay back. Given the assumption of 'average' inflation (3%) and the average wage of a graduate after 5 years (£35k) and average wage increases (3% p.a) there is no way to pay off the debt...in fact unless you start earning £40k, you never pay off any of the capital, and until you earn £65k you will still be paying back after 20 years...(all figures based on wages this year).

 

So what does that mean overall?....The average that graduates will be paying off over the period of the loan will be over £135k at today's rates...!

 

This of course assumes that any government won't change the terms of the repayments or the interest rates (surely not... :Surprise: )

 

So if our two kids were going to Uni next year, on average the family debt would increase by £270k....

 

But ours are a decade away, so the bills they would face we can only guess at...

 

 

Our advice then will be:

1. Get a degree abroad at a better rate

2. Graduate and then emigrate - and don't tell them where you're going

3. don't bother!

 

 

Regarding number 2, Here's a prediction...

 

The student fees (and debts) will become the responsibility of parents if they go into default...It happened to us (mrs sparks's icelandic education 'loan') 20 years ago...it crippled us for the best part of a decade (our mortgage would now be less than half it is now), but if we didn't pay they would have gone to her parents over there. They didn't have any spare money, so they would have lost their house!

 

So debt becomes an asset all over again!

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