So far, the impact of the recession has not really been felt by people who have kept their jobs. This is the case particularly for professionals and others who in the past would be described as 'comfortably off'. This group represent a large section of British society that finds itself described as occupants of a mythical place called Middle England. However, as the Government looks for ways to balance the books, inevitably they will take more money from those who have it, rather than those who don't. So Middle England look out! As the back bone of the tax paying, law abiding majority; you are the easiest source of revenue.
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Since rechristened the 'squeezed middle' by the Labour Party, even those disinterested in politics have been watching with increasing alarm the gathering storm of Coalition benefit cuts and tax rises.
The combination of the removal of Child Benefit for households with one earner on 40% tax will be compounded by moves to lower the threshold for those who benefit from Tax Credits. However the real crunch will come in 2012 for families with children who are entering university for the first time. They will be hit by the planned tripling of university tuition fees.
Middle England realises how important a good education is to ensure it's offspring achieve the best start in the world of work. This is now juxtaposed by the knowledge of just how damaging a large debt can be for their children's future quality of life. For parents who have worked diligently to build up their savings to support sons and daughters through university, this hike in tuition fees has come as a bombshell.
Up until recently student debt was viewed as a necessary evil. However the modest loans and low interest rates made this acceptable. Now the proposed fees are close to three times higher, this has created a future tax nightmare for graduates. Causing more alarm, even among those who see £9000 per annum fees as inevitable, are the close to commercial rates of interest to be charged on those student loans. Parents are particularly aggrieved that their sons and daughters will be faced with a heavy debt burden, at the very time in their lives when they might be trying to set up homes of their own.
Although the final details have yet to be published, there is more than a suggestion that the Government are also looking at ways to penalise early repayment of these loans. Therefore, with its unavoidable interest charge, for the graduate, this will become a massive financial penalty for achieving future success. The political ramifications of this have yet to be fully understood, however the clock is counting down toward implementation. Many parents are already looking for ways to meet these tuition fees themselves to avoid a bleak financial future for their children.
Teenagers contemplating their university options are mindful of the potential weight of debt they would carry around their necks. They either need to be lucky enough to come from families that have the means to pay, or poor enough to qualify for a combination of benefits and bursaries to escape the majority of fees. Those students from England stuck in the middle may decide it simply is not worth going on to university. With minimum student living expenses of about £6000 per annum, when added to £9000 tuition fees each year, will mean a student will accumulate £45,000 of debt in just 3 years. When taking future interest payments into account, this could mean paying off nearer £50,000 over time.
Imagine a young couple who met at university and subsequently worked to achieve reasonably paid employment after a few years. They could easily have debt liabilities of close to £100,000 between them. That is ghastly and will add nothing to the willingness of mortgage providers to lend them enough to buy a home of their own. Many parents will have sacrificed a lot to enable their children to go to university. To see them subsequently struggle to even get on the property ladder, will engender deep resentment.
Indeed many hard working parents will openly question whether they should do anything to encourage their children to think about university, given the potential size of the financial millstone this will create for them. Will a full time university education prove to be only a luxury enjoyed by the rich and a means tested benefit for the poor? The children of the 'squeezed middle' being left to battle their way up the corporate ladder with the Open University offering one of the few debt free routes to a degree.
For the majority of children from Middle England who have recently commenced studying A levels, there are new risks that they will now need to assess regarding their future education. Unless they are very bright, with straight A's to secure a place at a flagship institution, is there much point even thinking about university? However much fun student life might be, will the value they gain from an Arts degree at 'Anywhere University' be worth incurring so much debt?
The reaction of parents still digesting the ramifications of the new fee charging regime are as yet unknown. Many could be deciding to postpone retirement to work for several years yet to pay for their children to get through university relatively debt free. The need for more income will see many more dusting off their CV's as well as demands for students to find better work to pay their way.
For parents, keeping their jobs and a second income coming in to get two children through University may become much more important. Inevitably contingency plans will need to be considered and Unemployment Insurance or Income Protection Insurance paying £1000 per month, if one of the parents is unable to work due to accident sickness or unemployment, could offer an answer. This insurance would guarantee the monthly income that many Middle England parents will soon see as essential for them to afford to pay for their child's university education.
Dennis Haggerty, Marketing Manager of protection insurance specialist i:protect commented, "We see university fees creating a large and unexpected hole in the budgets of many families who simply cannot contemplate their children leaving university in so much debt. This in turn will create a demand for our product from a section of the market that hitherto could cope by taking money from their own savings if they were out of work. Now finding £15,000 per annum for each son or daughter at University, in addition to their usual household expenses, will drive the search for alternative sources of funding. For example, one of our policies with premiums of just £10 per week would pay £15,000 in benefits if the policyholder was unable to work for a year"
The lifetime habit of Middle England to support it's children through university will be placed under severe strain. However, for the benefit of their children's future, provided they are in work, most will 'bite the bullet' and pay as much as they can. More parents than ever may need to agree to pay the full cost of tuition fees for their offspring, just to convince them to take advantage of a university education. Otherwise many potential university students may refuse to go in fear of the financial consequences of their decision.
Helping to mitigate risk of lost earnings for parents contemplating paying these tuition fees 'up front' is worth consideration. Those same parents will soon be attending university open days for their sons and daughters to weigh up their options for future education. It would be nice to have the confidence that a minimum guaranteed income would be received, even if one of the parents were out of work for some time. Unemployment Protection or Income Protection Insurance does offer a viable 'plan b' in an uncertain job market.
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