It’s against all forms of natural justice and good governance. The Government, without asking Parliament, has changed the terms of student loans, long after many students signed up to them – indeed some had already graduated when they did it. More than 130,000 people signed a petition forcing a parliamentary debate on this hike that will cost many £1,000s.
Next Monday (18 July) a debate to fight this national disgrace takes place. Everyone who cares about this – students, graduates and parents – should get in touch with their MP to ask them to attend and show opposition to the retrospective changes. Below I’ve template letters to help you do so.
How this retrospective cost increase works
This applies to first-time undergraduates in England who have started university since September 2012, who repay student loans after they leave at a rate of 9% of everything earned above £21,000 a year (full explainer in my Student Loan Mythbuster guide).
In 2010, when it launched the new system, the Government promised that from April 2017 this £21,000 threshold would rise annually with average earnings.
However, last October it reversed that, freezing the threshold until at least 2021. So instead of the threshold going up each year, it’ll be stuck at £21,000. According to the Government’s own estimates this will leave more than two million graduates paying £306 more a year by 2020/21 if they earn over £21,000 at that point.
Here’s a simple example to explain why you will now pay more…
If you earn £24,000 and the threshold had increased to £24,000, you’d have repaid nothing. But with it at £21,000, you repay £270 a year.
This doesn’t just hit the amount paid each month. Many, if not most, students won’t repay in full within the 30 years before their loan’s wiped. So this change means they’ll actually end up repaying possibly £1,000s more in total over the lifetime of the loan.
Yet that only hits lower and middle earners. Higher earners who’ll earn enough to repay within the 30 years pay more in the short term too, but end up repaying less in total – as they’ll clear the debt quicker less interest will accrue.
Thus this is a regressive change – in other words, it benefits high-earning graduates at the expense of lower- or mid-earning ones. What’s worse, its retrospective nature goes against all the rules of good governance. No commercial company would be allowed to do this – the regulator wouldn’t allow it.
After spin that this wasn’t a retrospective hike, this week it was admitted. During questioning by Lord Sharkey in the House of Lords’ Economic Affairs Committee, Philippa Lloyd, the director general responsible for higher education, conceded it, as this video shows:
What you can do to help
The debate is an opportunity to put pressure on. We need as many MPs as possible to be at the debate and register their disapproval. To make that happen MPs need to see that this is something their constituents care about. The debate in itself won’t be binding, but if we can show this is a widespread unpopular move that won’t go away, there is a chance of overturning it.
- How to contact your MP. You can email them, or in some cases tweet them – find who your MP is and how to contact them.
- A template to send to them. Copy and paste the template below, or better, personalise it with your views and experience and explain why it matters to you. I’ve written it as a draft for students who started in 2012. If you aren’t, and are a parent, or a future student, or just someone interested in fairness, you’ll need to adapt it.
TEMPLATE EMAIL
Copy and paste or download the Microsoft Word version.
As your constituent and a recent student, I’m writing to ask you to urgently tell the Government to abandon its dangerous plans to retrospectively change the student loan system, and to join the campaign against this proposal.There is a debate in the Commons next Monday 18 July, which I would like you to attend.
When the new student loan system came in, in 2012, everyone was told that from April 2017 the £21,000 repayment threshold would start to rise annually with average earnings. This information was then communicated to students like me and formed a core part of the calculations given about how much university would really cost.
The decision to backtrack on this is hugely damaging. It means I will likely have to pay thousands more over the life of my loan than I’d legitimately planned on. Effectively, the T&Cs for these loans have been written after they’ve been taken out.
This is outrageous, unfair, and should not be allowed to happen.
However, even more important than the additional cost is the message this sends. The regulator would not allow any commercial lender to make a change to its terms this way. It is therefore surely wrong for the Government to do so – retrospective changes are bad governance.
Of course, there was a consultation before the change. Yet only 5% of consultation responses were in favour of this change – 84% were against. So I am confused why, despite such cross-society opposition, the Government pushed ahead with the retrospective change anyway?
This is a bigger issue than just money. A retrospective change will destroy any trust I, and future generations, have in the student finance system, and perhaps even more widely, in the political system as a whole. After all, how can anyone in good conscience now explain student finance to young people when the system can be unilaterally changed, even after they’ve signed their loan contracts?
With a new Government coming in, there is a chance for it to look again at this injustice. Please go to the debate and show your opposition to the retrospective changes.
Yours sincerely,
ENTER YOUR NAME & ADDRESS HERE (SO THEY KNOW YOU’RE A CONSTITUENT) AND IF POSSIBLE SOME DETAILS ABOUT YOU.
Meanwhile, if you’re planning on tweeting your MP about this issue, we’ve a hashtag to use, a sample tweet is below…
SAMPLE TWEET
As my MP, please fight the #StudentLoanUTurn – there’s a Commons debate next Mon 18 July, I want you to attend please.
It would be great to know if your MP gets back to you – so please forward any reply you get to studentfinance@moneysavingexpert.com.
- Share your thoughts with the Petitions Committee too. You can share you thoughts and concerns about this U-turn with the Petitions Committee via the MSE Forum. The committee will then send a summary of all the comments received to the MPs taking part in the debate. The more pressure we can put on the Government, the better.
Will this work?
I need to be plain – this is just the latest attempt to stop this outrage and it’s not going to be easy. MoneySavingExpert.com and I have campaigned on this since the Government first mooted it…
- We put in an MSE submission to its consultation (like 84% of submissions, I argued it wasn’t fair – though we were all ignored).
- I’ve personally hired lawyers to investigate a legal challenge (sadly the advice doesn’t look promising there).
- I’ve even written to David Cameron and on the back of that met the Universities Minister to discuss it, yet there’s been little impact.
However, we will soon have a new Prime Minister, which likely also means new ministers at the Treasury and responsible for higher education. That means this is a fresh start, and the hope is that this opens a door for changes in policies like this. The debate is the best way to make that happen.
What did the petition actually say?
This debate came about after a petition by Alex True, a 22-year-old engineering student at Durham University, collected more than 100,000 signatures in just three days. Parliamentary petitions which reach 100,000 signatures are highly likely to be debated – though technically they need to receive the backing of the Petitions Committee, which is made up of 11 backbench MPs from different parties.
The petition, which quotes our campaign on this, states:
“In 2010, the Government promised that from April 2017 the student loans repayment threshold of £21,000 would be upped each year with average earnings. The Government has now backtracked on this promise, freezing the threshold at £21,000. Graduates will now pay more on their student loans.
“According to MoneySavingExpert, two million graduates will end up paying £306 more each year by 2020-21 if they earn over £21,000. By introducing retrospective changes it threatens any trust had in the student finance system.
“A commercial company would not be permitted to alter the terms of a loan agreement, so why should our Government? The Chancellor did not even mention these changes in his Autumn Statement, underlining the underhand nature of these changes.”
