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Monday, 8 August 2011

Word of the Day

Relative poverty

Someone is in relative poverty when their incomes are rising at a lower rate than everyone else's. A more formal definition is, if someone is in relative poverty, their income is below a specified proportion of average household incomes (below the average incomes of the population).

Many students will "never pay back loans"

An article published this morning warns that many students will not be able to pay back their student loan regardless of whether you are being charged £6000 or £9000 for your university course. If you think you will be worse off having fees of £9000 rather than £6000 per year, then you may be wrong. This is because after 30 years your debt is written off and you still would not have finished repaying your full debt by this time.

Martin Lewis, from MoneySavingExpert, calculated that if a graduate starts earning £30,000, then the debt of fees of £6000 per year will remain unpaid. If a graduate starts earning £40,000 after graduation, the graduate will pay back their fees of £6000 per year in 24 years. This means that students that start earning £30,000 will never pay back their debt, no matter what their fees. And the likelihood of graduates paying back fees of £9000 is very low.

Whether you have to pay your £6000 fees or £9000 fees, the monthly repayments remain the same. You will have to pay 9% of everything over £21,000 and this increases as you begin to earn more. In some ways, I suppose it is a good thing that you are not debt burdened for the rest of your life (with your student loan fees that is!) and there is a chance that you never have to pay back all the money you owe. But unfortunately, you still have to pay more than the preceding years.

This article can provide thought for the law of unintended consequences. Ask yourself though, how can the government not have calculated how many debts will remain unpaid?

Beyond the crisis: lessons for the future of the eurozone

Great lecture at the LSE on 7th September. A ticket must be requested on 31st August if you want to attend. Please consider going if you want to learn more about the Eurozone crisis. Lecture is conducted by Herman Van Rompuy, Prime Minister in Belgium from 2008 to 2009. More information found on the LSE website.

Hope to see you there!