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What do you think?
Sir, I am a baby boomer with four children (the youngest is four years old). Like many I have a financial and moral foot in the state’s treatment of the different generations.
I accept my family will be paying deferred interest at 2 per cent on any social care I might receive. Merryn Somerset Webb (FT Money, May 20) tells us the 2 per cent rate of interest charges is linked to the gilt market. Presumably the central government envisages making neither a profit nor a loss on its social care charges.
Student loans are, like social care, not part of the taxation system. Social care costs and student loans have other similarities including nil payments for certain categories. In contrast to the 2 per cent interest on social care costs, student loans are charged at 4.6 per cent interest (the retail prices index plus 3 per cent). Unless my maths have deteriorated from their abysmal GCE level then the government would also appear not to be making a loss on student loans. The reverse. The possibility exists of a substantial profit of 2.6 per cent a year (4.6 per cent minus the 2 per cent cost of borrowing)
I do not know the rationale for the government making a profit from the educated young. Large and increasing debt deters applicants to university, predominantly from poorer families. How does this interest differential policy help social mobility?
We hear of the poverty premium. Are student loans another instance?
Nailsea, Somerset, UK