If you started university between 1998 and 2012, the Government plans to sell your student loan to the City.
If you started in 2012 or beyond, chances are the same will happen to you. If you went before 1998 then your loan has already been sold, and you probably know there were substantial problems.
The House of Lords’ Economic Affairs Committee is due to meet Jo Johnson MP (Minister for Universities). I was written to and asked: “Is there anything you would want the committee to consider in advance of the meeting?”, and told to address my questions to the chairman.
Below is my response…
23 March 2017
Dear Lord Hollick,
I write regarding the Lords’ Economic Affairs Committee’s forthcoming meeting with the Universities Minister, Jo Johnson, on the sale of the student loan book. I wanted to explain a number of issues of concern which I believe are important to raise with the minister to give current, past and future students confidence in the Government’s procedures.
Lessons to be learnt from the sale of pre-1998 student loans to Erudio
Erudio bought these ‘mortgage-style’ loans in November 2013. At the time we questioned whether anything would change, and were told there would be no change to the loan terms and conditions.
While true, this turned out to be only a very narrow assurance. The terms didn’t change, but the operational practice of the loans did. My team and I at MoneySavingExpert.com had significant amounts of correspondence from outstanding holders of those loans about the level of distress and worry it caused. These problems included:
Applications for loan deferment for those earning under the income threshold were wrongly processed, meaning some were asked to pay who shouldn’t have been. The loans in the new tranche being sold, though, do not have a deferment threshold as they are income contingent and paid via the payroll, so this is less of an issue.
As these evidence, it is important that the minister gives a cast-iron guarantee that there will be no negative changes to terms and conditions, operational practices, credit information and point of contact.
Will the sale bias the Government to retrospectively increase loan costs?
In April the Government will freeze the repayment threshold for those who started university in and after 2012. This U-turn was announced in November 2015; before that it had promised students the repayment threshold would increase in line with average earnings.
The net effect of this is a retrospective hike in costs for all university leavers whose income is above the threshold, who have started university since 2012. This is something I have long campaigned against.
The Chancellor was questioned about this at the Treasury Committee on 12 December 2016. In the meeting, Wes Streeting MP asked about the “retroactive changes to student loan repayment conditions, in particular freezing the threshold at which graduates would begin to repay from next year…”. The Chancellor replied:
“I would have to be frank with you and say I do not see scope for reversing that decision. It is an important part of our overall fiscal consolidation and, of course, it is also about preparing the student loan book, ultimately, for sale as an asset sale [emphasis added].”
Previously we’d been told that there were no plans to sell post-2012 student loans. It would be good to get clarification from the minister to see if that policy has been reversed. Does the Government consider the rights of investors to have confidence in what their rate is to be more important than the rights of student to have confidence in what they will repay?
Furthermore, what guarantee do we have now the Government has effectively retrospectively hiked student charges that it won’t do it again – for this tranche and others – to make these loans more attractive to investors?
I hope this letter provides useful information for your meeting with the minister.
Founder and Executive Chairman, MoneySavingExpert.com
 MSE News coverage on Erudio can be found at http://www.moneysavingexpert.com/news/tag/Erudio. In addition, the MoneySavingExpert Forum thread “Erudio student loans help” has over 500,000 views and 6,000 replies from graduates discussing the range of problems they have experienced with the company: http://forums.moneysavingexpert.com/showthread.php?t=4923210.