Repayments could make life much tougher for many graduates as they begin their careers
Published 12/07/2016 | 02:30
Meeting repayments on the new student loan proposal would probably not push most graduates into destitution.
But it could make life much tougher for many, particularly those with other debt, at the very start of their careers. And for those who hope to buy their own home, it is likely to push back that day, as the repayments eat into their potential deposit savings.
The proposal to offer loans to students to pay higher fees suggests that repayment would be deferred until graduates started earning €26,000. This threshold would exclude those on the national minimum wage of €9.15 an hour, which equates with annual pay of €18,620 for a 39-hour week. It would also exclude those on the so-called living wage, which is higher, at €11.50 an hour, amounting to €23,402 a year.
The report notes that the repayments required are "generally modest". For example, a woman on a middle income would make an average monthly repayment of €104 on a €16,000 loan at 2pc over 15 years. During her 20s, the payment would be lower, at €61.
Surveys of graduates show many now enter their first jobs in the €24,000 to €26,000 salary range, compared with more than €26,000 in 2008. But other reports show those in some disciplines join the workforce at wages well above this. For example, business students command starting salaries of almost €29,000, while engineering and IT graduates expect €33,905.
So if mammy and daddy do not cough up the fees upfront, many graduates may find they may have little loose change if they are not on the fast track to promotion or in line for public sector increments.
The Living Wage Technical Group decided to keep the living wage at €11.50 an hour this week. But it noted that an increase in rents was offset by cuts to the USC, cheaper transport, energy and food. It said an increase in the wage may be needed next year if the cost of renting "continues the trend of recent years".
However, Ibec does not think the loan burden would lead to demands for higher wages. Head of Education Policy Tony Donohoe noted that current students must come up with an annual €3,000 registration fee, and they do not get a tailored loan scheme to do so.
The new system would admittedly be more expensive, based on a €5,000 annual loan, but specific credit would be available.
But Michael Taft of Unite is not optimistic about the impact on graduates from lower-income households.
"It's just one more burden in what is becoming a necessity in terms of tomorrow's economy - education. For those in below-average income situations, payment could range between €40 per month to over €100 per month, with repayment periods in the decades."
He said the fact students could still pay the costs upfront meant students from higher-income households may not face any debt as they begin working life - "not very equitable".