Student Finance 2012 changes – it’s time to tackle the ignorance

Student Finance 2012 changes – it's time to tackle the ignorance

Student Finance 2012 changes – it's time to tackle the ignorance

Update Note 13 June 2011: Now see the new Student Finance 2012 the facts guide (direct link

I had a good meeting yesterday with David Willetts (Minister for Universities and Skills) and Simon Hughes MP (Advocate for Access to Education). While I’m not the greatest fan of the 2012 changes, I do believe a chunk of the widespread fear is based on a lack of understanding, rather than the facts. Therefore, it’s crucial that we ensure people really do understand the good and the bad effects of the changes.

So, I’ve taken a decision to accept these changes are going to happen (though I will still lobby on the areas that aren’t fixed e.g. early repayment penalties) and leave the wrangling for others – while I get on with starting to explain how the new system works.

When we recently launched the All Party Parliamentary Group on Financial Education, amongst the other challenges I put to the 100+ MPs there, one was to ensure, "no students go to university under the new system, without understanding how the borrowing works" (watch the Financial ed. challenge to MPs video).

Yesterday’s meeting was to discuss options on exactly how to do that. Simon Hughes has been working on the wider picture of access for a while, and I’m pleased to say the Government are very receptive to the plans.

Major change needs major communication

The last time there was a sea-change in the way student finance worked was in 1998. Then two things happened – tuition fees were brought in and the loans changed from the old ‘mortgage style’ to the new ‘income contingent system’.

The media then concentrated on the contentious tuition fee issue as it was the better story – little was said about the change of loan repayments, which meant that rather than needing to repay the whole loan over 60 months once you hit a threshold, you simply repay 9% of everything you earn above £15,000 each year through the tax system – a much more gradual and less harsh system.

Yet now we’re back in the same boat. We have a host of changes and of course yet again, the focus is all on the rise of the cost of tuition fees and the other changes, some good and some bad, have primarily all been ignored (see my old Student loan argument is dangerous blog).

But, most people haven’t got a clue of either and there’s widespread myths and ignorance (e.g. see Will new student loans stop you getting a mortgage? blog) and while I’m at it let me clarify the answer to the most common question I get asked on this subject – it will ONLY affect those starting university in 2012 and beyond, if you are already a student by that time, you will continue on the current system (see the Student Finance guide for more).

We need to change the language

I’m in the middle of writing a new top 10 things everyone needs to know about the changes guide, so I’m not going to go overboard on explaining the new system here in a hastily written blog.

Yet, there is a big confusion between the size of the fees and loans and the actual cost of education. For example it is possible to get £9,000 tuition fees and yet have absolutely no cost because you never earn over the threshold to begin paying off your loan.

The whole system of student loans simply doesn’t fit into other lending or financial categories, it needs its own new language to deal with it to make sure it’s clearly understood.

What is needed is for students and their parents to understand the cost of the system and its impact – not just the level of fees – for that we need tools, effective communication and more. Only then can they truly decide whether it’s worth it.

At yesterday’s meeting I’m pleased to say there seemed to be a commitment to ensuring this will happen.

Related Past Blogs

>Universities must educate students over the new loans
>Student loans the seven deadly sins of early repayments
> Argument over student loans could kill the next generation of students