2010 November 05 Friday
Better Paid UK College Graduates Face Higher Debt Interest

Count on governments to implement perverse counter-productive incentives in the name of niceness and compassion. In Britain People who graduate from college into higher paying jobs will pay higher interest rates on their college debts. This is exactly the opposite of what the incentives should be.

Successful graduates will be penalised most by the introduction of variable interest rates on the loans they take out to pay the fees. A university leaver with debts of 30,000 and an annual salary of 45,000 will have to pay back about 2,160 a year for about 30 years. Someone earning 25,000 will have to pay 360 a year for the same debts because a lower interest rate will be applied. "Middle earning graduates will pay a lot more for their degrees over their lifetimes, and that will worry people," said Ian Mulheirn of the Social Market Foundation think tank. "They will face significant debt for the first time."

Imagine the opposite incentives were put into place. Imagine that the higher your income after college the lower your college debt interest rates. What would that do? Lower interest rates for higher earners would incentivize students to aim at higher paying jobs that produce more wealth.

Think about it. Students should be steered toward jobs where they will less likely to suck at the public teat and where they'll be more likely to earn more and pay more in taxes. The higher earners generate the wealth and tax revenue that fund education. We already benefit from their higher tax payments. Therefore we should encourage more people to make training and career choices that will make them higher earners.

Update: Want to make a country richer? Eliminate government funding for academic departments whose graduates make the least amount of money. Take the bottom 20 departments and make them totally tuition funded. The greater good would be served by steering people into learning skills that enhance their productivity.

Students who want to study art history or ethnic grievance studies who can't afford to pay the full freight for bricks-and-mortar colleges will still be able to learn economically useless information in online courses. Why waste taxpayer money people people attain lower middle class living standards?

Share |      By Randall Parker at 2010 November 05 09:09 PM  Education Incentives

Winston Smith said at November 5, 2010 10:40 PM:

"... higher paying jobs that produce more wealth."


Put the free market is always right kool aid down before you hurt yourself. It's a proven fact that for every banker killed on 9/11 the financial crisis was delayed by 9 days.

no said at November 5, 2010 10:42 PM:

This guy David Cameron is not a Conservative in the traditional sense, he does not represent his party, he actually is similar to Obama in that he won leadership of the Conservative party after coming out of no where and giving a good speach.. He had no experience coming into the job, used to work in PR, and had only been a member of Parliament a very short time compared to other MP's who became leaders..

No doubt he will push a lot of stupid policies before he is kicked out.

Wolf-Dog said at November 6, 2010 6:15 AM:

Most people would get higher paying jobs if they could, and this is precisely why it is much more competitive to gain admission to a college major that will ensure such a high paying job. For example, admission to medical schools or top colleges is much more competitive because of the status these programs ensure.

In fact, most people who end up majoring in literature or history (without the intention of applying to law school on the basis of the verbal ability they developed), do so because they could not enter or pursue more competitive programs due to their inability to do so, and this group cannot be able to pay the interest on their college loan anyway, since their salaries will be so low. Since the upper class pay most of the taxes anyway, this new system of variable interest rates is not so new, it is just a tax subsidy for the poorer groups who cannot compete. Higher interest rates for lower wage earners would simply eliminate a lot of college students who will end up getting no education at all.

Daniel said at November 6, 2010 2:05 PM:

>>Higher interest rates for lower wage earners would simply eliminate a lot of college students who will end up getting no education at all.

An education of dubious value; better to do without and learn a trade instead.

Randall Parker said at November 6, 2010 2:18 PM:


I knew plenty of people in college who could have handled the work for a computer science or engineering degree but who opted for an easier major out of laziness.

Engineer-Poet said at November 7, 2010 9:19 PM:

... and jacking up the effective tax rate on the earnings from more rigorous degree programs is a great way to make more people opt out.

Post a comment
Name (not anon or anonymous):
Email Address:
Remember info?

Web parapundit.com
Go Read More Posts On ParaPundit
Site Traffic Info
The contents of this site are copyright