People who have retained their jobs so far have not felt the effects of the recession. This is especially true for professionals and other people who were once considered ‘comfortably wealthy’. These people are a large segment of British society and can be described as being occupants in a mythical area called Middle England. As the Government tries to balance the books, they will undoubtedly take more money away from those who have it than from those who don’t. Middle England, beware! You are the backbone of tax-paying, law-abiding majority and the easiest source for revenue.
Even those who are not interested in politics have watched with increasing concern the rising tide of tax increases and benefit cuts from the Coalition since the time they were renamed the “squeezed middle” by the Labour Party.
In addition to the elimination of Child Benefit for families with one earner who is 40 percent tax, there will be moves to lower the threshold that Tax Credits recipients can benefit from. Families with children entering university for the first-time will face a real problem in 2012. They will be affected by the proposed tripling of university tuition fees.
Middle England is now aware of the importance of a quality education to ensure its offspring have the best start in life. The reality of how detrimental a large amount of debt can be to their children’s future quality-of-life is also evident. This shocker has hit parents who worked hard to save money to help their children through university.
Student debt was considered a necessary evil until recently. This was made possible by the low interest rates and modest loans. Graduates will now be facing a tax nightmare in the future because the fees proposed are nearly three times as high. Even those who consider the PS9000 per year fees to be inevitable are more concerned by the close to commercial interest rates that will be charged on student loans. Particularly aggrieved parents are those who see their children as being in a difficult financial position at a time when they may be trying to start their own homes.
The final details are yet to be released, but there are hints that the Government is also considering ways to penalise the early repayment of these loans. This will be a huge financial penalty for graduates who are unable to repay their loans on time due to the unavoidable interest charges. Although the political implications of this are still being understood, the clock is ticking towards implementation. To avoid a dark financial future for their children, many parents are looking to save money on tuition.
When teens are considering their college options, they should be aware of the amount of debt they could have. Either they need to be fortunate enough to have their tuition covered by a combination benefit or bursary, or both. Students from England who are stuck in the middle of the income spectrum may decide that it isn’t worth their time to go to university. A student can accumulate PS45,000 in debt within three years with a minimum of PS6000 student living expenses and PS9000 tuition fees per year. This could lead to a student paying out more than PS50,000 in interest payments over the course of their studies.
Imagine a young couple who meets at university and then works hard to find a job after a few years. Their combined debts could easily reach close to PS100,000. This is terrible and will not increase their willingness to borrow enough money to purchase a home. Many parents will have given up a lot in order to allow their children to attend university. It will cause deep resentment to see their children struggle to get onto the property ladder.
Many parents who work hard will question whether it is worth encouraging their children to consider university. Is a university education a luxury for the wealthy and a benefit that is not available to the poor? Children of the’squeezed middle” will have to struggle their way up corporate ladders with the Open University, which offers one of the few debt-free routes to a degree.
The majority of Middle England children who recently started A-levels will need to evaluate their future education. Is it worth considering university unless they are bright and have straight A’s? No matter how much they enjoy student life, is the cost of an Arts degree at “Anywhere University” worth it?
As yet, parents are still trying to digest the implications of the new fee charging system. Many parents could decide to delay retirement in order to continue working for several years while still paying for their children’s education relatively debt-free. Students will be looking for better jobs to help them pay the bills and many people will dust off their CVs to show that they are in need of more income.
Parents may need to keep their jobs, and have a second income in order to send their children off to university. There will be contingencies and Income Protection Insurance (PS1000 per month) is an option. This insurance pays PS1000 per person if one parent becomes disabled or unemployed. This insurance would provide a monthly income guarantee that will be essential to many Middle England parents to help them pay for their child’s university education.
Dennis Haggerty is the Marketing Manager at i:protect. He said, “University fees are creating a huge and unexpected hole in many families’ budgets. Many families simply cannot imagine their children leaving university with so much debt. This will result in a greater demand for our product by a segment of the market who could not afford to take money out of their savings if they were unemployed. The search for other funding sources will be accelerated by the fact that each of our sons or daughters at University can now afford PS15,000 per year in addition to their household expenses. If the policyholder is unable to work for one year, a policy with premiums as low as PS10 per week would pay PS15,000 annually in benefits.
The Middle English tradition of supporting its children through university is going to be severely strained. For the sake of their children’s future, however, as long as they are working, most parents will pay the maximum amount they can. To convince their children to pursue a university education, more parents will need to be willing to cover the entire cost of tuition fees. Fearing the financial consequences, many students who are interested in attending university may not make it because they don’t want to pay.
Parents who are considering paying tuition fees upfront may be able to reduce the risk of losing their earnings. It is worth looking into this option. These parents will be attending university open houses for their children and their daughters, which will allow them to evaluate their options for higher education. Even if one parent is out of work, it would be nice to know that at least a minimum income would be earned. Unemployment Protection and Income Protection Insurance offer a viable plan b in uncertain employment markets.
Dennis Haggerty FCII M IDM Marketing Manager iprotectinsurance.co.uk specialises in the supply of low cost on line Unemployment Insurance, Lifestyle Protection, Income Protection and Mortgage Payment Protection Insurance.