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A post popped up on my Facebook post – and that of millions of others – this week containing a letter from a hacked off graduate, Simon Crowther, to his MP complaining about the hike in his student loan rate after graduation. The post contained a statement detailing interest payments totalling £1,800 over the course of just one year with Crowther claiming that the interest rate had been unfairly hiked up. It has since been pointed out by Money Saving Expert, Martin Lewis, that the rate change claim is false.
However, that doesn’t mean that some financial jiggery pokery hasn’t been going on. Lewis points out that what has changed for Crowther and his peers who started university in 2012 is the income level at which loans start to be repaid. They were told that they would start paying back their loans once they were earning over £21,000 and that the threshold would rise annually along with average earnings from 2017. However the limit has now been frozen by the government until 2021 which effectively means increased repayments as their salaries increase. This is undoubtedly to try and recoup some of the huge amount of unpaid loans – according to a Higher Education Policy Institute report, 45p of every £1 lent is currently unpaid. There is also talk of the threshold being lowered in the future.
Although flawed, Crowther’s letter does make an important point about the struggles faced by the younger generation. Graduates are coming out of university with an ever-increasing burden of debt which few manage ever to pay off and face enormous pressure as they juggle repaying student loan with meeting ever increasing living costs as well as saving for retirement. Often there just isn’t enough in the pot to cover it all.
As parents, the future financial obligations that our children will face is a huge worry. Anything that we can do now to take some of the weight off their shoulders later on is a great idea. By starting a saving plan early in their lives, you can spread the cost of their university education over several years and make your money work for you via compound interest. The younger your child is, the longer the investment time horizon and the bigger the multiplier effect on your savings which is why now is the time to start.
At Infinity we have a wealth of experience in helping expats to save for their child’s tertiary education. We offer a variety of flexible savings plans which can enable you to make regular deposits as well as additional lump sum payments as necessary. If you’d like to discuss your requirements with one of our financial planning consultant, please get in touch.
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