Do you want a house or a degree?



LuMaxArt Graduation Concept
Originally uploaded by lumaxart

In an article in The Telegraph about the problems facing first-time buyers after the credit crunch, my attention was drawn to the claim that “for the first time, graduates might be better off not repaying student debt when they leave university, because the only chance they stand of home ownership is saving for a deposit from the age of 21”.

I wasn’t aware that graduates had an option of not repaying their student debt (unless their salaries are rather low), but I think it’s an overlooked consequence of tuition fees.

The problem is that if you have to pay off your student debt for years, and if your salary isn’t high enough that you can afford to pay off debt and save for a deposit at the same time, you’ll end up a home-owner potentially much later. (It’s not as simple as just saying that you’ll become a home-owner five years later. If you’re very young, you might be willing to live with your parents and save a lot, but the older you get, the more likely it is that you’ll have a partner and perhaps kids which will make saving for a deposit much harder.)

Of course house prices aren’t rising at the moment, but once the recession is over and they start going up again, timing matters – the flat you could have bought with a £5000 deposit in 2000 would have been completely out of your range in 2005.

I suspect there will be a lot of graduates that will actually never become home owners, because they won’t manage to pay of their student debt before they become parents, but at the same time, they probably won’t have great pensions, so we’ll be looking at some very impoverished pensioners fifty years from now, unless tuition fees and graduates taxes are abolished soon.