“Once I’ve got a student loan, can the government change the terms?”

“Once I’ve got a student loan, can the government change the terms?”

“Once I’ve got a student loan, can the government change the terms?”

Invariably after giving a talk on how student finance 2012 will work, a hand pops up and asks: "can a government change the terms on my loan after I’ve taken it out?". Well, the New Zealand government has done just that, and that may increase those worries.

As head of the snappily titled Independent Taskforce on Student Finance Information I’ve spent a year alongside the National Union of Students (NUS) and universities trying to explain that, even with massive tuition fee increases, university is still affordable. 

Blast out the myths and misunderstandings and it boils down to a ‘no win, no fee’ system. The more graduates earn, the more they repay –  earn under £21,000 and you repay nowt.

If you’re not sure of how it works, do read the full Student Finance 2012 myth busting guide.

But of course that relies on the rules staying as they are now.  The NUS has recently asked me to back its campaign on exactly this issue, and I’m in two minds about it, so I thought it’d be useful to set out where I am…

Parliament cannot bind itself

It’s important to understand parliament is ‘omnicompetent’, which means if it passes a bill, that becomes UK law and overturns anything that’s happened previously. 

I always use the ridiculously silly to explain that if parliament voted that the USA belonged again to the UK (and said it overturned all past treaties) then that would be UK law, even though of course in practice it couldn’t be enforced.

Therefore even parliament can’t bind parliament. A bill now that this system must be in place in the future can simply be overturned by a vote of a future parliament.  

It’s not about whether it could, but whether it would

The real question isn’t whether it can change things, that’s a given, but whether it would. Since student loans were first introduced in 1991, we have never seen any negative retrospective changes. In other words the system which you sign up to when you become a student, is the system you stay on. 

So even though we saw massive changes in 1998 and this year in 2012, they have only impacted new starters, not existing or past students. Its also worth noting, the student loan is set up as a contract with the Student Loans Company, and therefore changing its terms is likely to be very difficult in any case (any lawyers got a view on this?).

There is a general principle that parliament is allergic to retrospective legislation, though it’s not impossible, as New Zealand proves. There graduates repayments have been increased from 10% to 12%.

In NUS President Liam Burn’s blog he argues that as the government initially underestimated the level at which universities would set fees, it is lending more than it thought and that’s costly. 

On the back of that I certainly wouldn’t be surprised if students starting in three or five years time have different terms to those starting now. Yet a government of any colour making negative changes for those who’ve already started would be shocking and abominable – and if it did I will be alongside many others screaming from the rooftops.

Three things to think about

  • The only option is to ensure any change is by legislation. There is no way to bind a future parliament. So the best we can do, and indeed what NUS is calling for, is to ensure that this must be done via legislation (ie, parliamentary vote) rather than delegated legislation (ie, a minister allowed to make decision with authority of parliament, without  a vote).

    If this were in place it would certainly slow down changes and make it more difficult, and that wouldn’t be a bad thing.

  • We want positive changes to be allowed. The problem with saying that we need to ensure all changes must be via parliamentary vote is that it excludes positive changes too. This year we’ve seen the repayment threshold for post-1998 students increased with inflation for the first time, that’s the right move.

    So it needs to be understood that if we make it more difficult to change, that impacts positive as well as negative changes, which could be a bad thing

  • A message of uncertainty is dangerous. We already face a battle to stop the psychological damage from new higher tuition fees wrongly putting some off going to university (it may rightly put others off), which is especially prevalent from people in more risk averse families from non-traditional university backgrounds.

    At this point having fought back some of the myths and misunderstandings around this system, to shout from the battle-tops a complex message which will be heard as "the whole thing’s based on jelly" could be extremely counterproductive and put even more people off.

OK, so there’s my stream of consciousness on this issue, I’d love to know your thoughts.