€16,000 student loan could take 15 years to repay at €100 a month, says report
Published 08/03/2016 | 02:30
Until a decision is taken to introduce a Government-backed loan scheme - and it may not happen - there is no way of knowing what the repayments will be.
The Cassells report sets out a number of examples showing how it might work, but the final figures would depend on the level at which "fees" are set, what the interest rate would be and at what earnings level a graduate would start repaying a loan.
For the purposes of the report, calculations are based on fees at €3,000 a year (the current rate), €4,000 a year and €5,000, which would give rise to debts of €12,000, €16,000 or €20,000, respectively, based on a four-year degree. Interest rates for such a scheme would be low, and in these examples are at either zero or 2pc, while the income threshold at which graduates would start paying is €26,000 a year.
An income-contingent loan scheme takes account of a period, or periods, where a graduate is not in receipt of an income - in this case, of at least €26,000 a year - such as periods of unemployment or maternity leave.
One example of a loan of €16,000, with an interest rate of 2pc, would see a female graduate, on average earnings, paying average monthly payments of €104 over 15 years.
In the example used, €104 a month is described as 3.8pc of net income over the lifetime of the loan and the total repayment on €16,000 would be €18,459.
If the loan was €20,000, average monthly repayments would rise to €112 and the period of repayment would increase from 15 to 18 years.
Payments are generally lower when people are in their 20s, as it takes time to rise up a salary scale, and the woman in this example would expect to pay €61 a month in the early years after graduation.
Obviously, the higher the salary the quicker the repayment period and, in this example, a woman in the top 20pc of the earnings league would clear a loan of €16,000 in 12 years, with a total repayment of €18,195. The calculations also show people in the top 70pc of earners repay the loan in full.