Student loan repayments are being retrospectively hiked from April 2017 – so 100,000s of students and graduates who started uni since 2012 will pay more than they signed up for. In my view, this is against natural justice. So, I’ve been campaigning on it, and today had a meeting with Jo Johnson, Universities Minister, to come up with suggestions to mitigate the damage.
In a nutshell, from April 2017 the level at which student loans are repaid after university was due to rise, in line with average earnings, above £21,000. Last November the Government announced this was being frozen. That means people will pay more than they signed up for, both month-by-month, and in most cases £1,000s more in total in the 30 years before the debt wipes.
The worst thing about this is how can future students trust the system if they know the Government can change the deal once they’ve already signed up?
Before I explain where we are now, if you’re not up to speed, here are links to past blogs that tell the story and explain in more detail…
– Help fight the Government’s student loan U-turn: Read this for a full background of why this is such an issue.
– I’ve hired lawyers to investigate judicial reviewing Govt’s retrospective student loan hike
– The scrapping of student grants – what it means and how bad is it?
– An open letter to David Cameron on the student loan hike
– David Cameron snubs my student loan hike letter: Instead he arranged for me to meet Jo Johnson, which happened today.
My current strategy is twofold. I would like the whole policy reversed. After campaigning, consulting, getting hundreds of people to write to their MPs, I don’t think any protest will make a difference – only a legal challenge. Sadly, the legal advice I’ve had suggests a judicial review won’t work; the next option is to look at whether it is challengeable on contractual terms.
The other tactic – if this is going to happen – is trying to see what can be done to mitigate the damage. And that was the mainstay of my meeting today. After expressing my complete objection to this retrospective hike, I came up with a number of suggestions, which I’ve put below (mostly in note form).
I’ve put them in order of ease and likelihood. I was pleased that the minister was reasonably receptive to some of them, so you never know…
- Tell affected students. Every student who has taken out a loan since 2012 should be written to, to explain the threshold will be frozen and not increased as planned. It should include practical examples of what that means.
- Future student loan applications and all official marketing must clarify that terms and conditions might change. While it’s mentioned in the small print currently, the Student Loans Company should put tangibly and up front on loan applications what the key terms are – and what can be changed retrospectively. Or, at the very least, a warning that these terms aren’t fixed.
- People in financial crisis should have the option of deferment or a temporary payment reduction. Graduates must be able to apply for a deferment or temporary reduction in payments, so that the retrospective hike does not harm people who are in financial crisis. This includes people who are in debt crisis, are supporting other family members, and in any other extenuating circumstances.
This could be done either by deferring payments (and in most cases that would mean an overall cost reduction as most people won’t make it up before the 30 years when the debt wipes) or by setting up a fund which meets payments for them.
- The FCA ‘treating customers fairly’ principle should apply to student loans. There are six consumer outcomes that commercial lenders have to strive to achieve to ensure they ‘treat their customers fairly’. Among the six aims, lenders have to provide borrowers with clear information and keep them appropriately informed before, during and after the point of sale.
Lenders also have to make sure that consumers are provided with products that perform “as firms have led them to expect”. Plus, the associated service is of an acceptable standard and as they have been led to expect.
The Student Loans Company should be subject to these regulations, or at the very least a mirroring of these regulations within its own internal adjudication structures.
- Student loan terms and conditions should be locked into statute. This would mean that students can have certainty that what they sign up for is what they will get. I suspect this is unlikely.
If not, a transparent process must exist for retrospective changes to student finance. The Business, Innovation and Skills (BIS) Select Committee should have to approve retrospective changes to student loans. This would be similar to how the Treasury Select Committee has to scrutinise and approve appointments for the Office for Budget Responsibility.
Please let me know what you think and any other mitigation suggestions (I can always add addendums) below.