Martin Lewis: The five changes needed to improve the current student finance system

1. Student loans are misnamed and misframed as a debt. This is misleading, off-putting and leads to people making perverse decisions such as part overpaying loans after graduation, even though it doesn’t result in lowering their continuing repayments. The system should be improved and renamed as a ‘graduate contribution system’ as in other countries.
   
   
2. Students don't have enough money to live off while at university. Too much political focus is on tuition fees. Most students complain to us about the practical cost of living, and high rents in student areas. Maintenance loans need to be increased.
   
   
3. The Government must be honest about the parental contribution. Even though students are independent adults – almost all under 25 years old – their maintenance loans are means-tested based on parental income. Some get less than half the full amount. It is implicit that parents are supposed to make up the gap (see my The real cost of uni blog for more).
   
   If this system is to continue, honesty is required. The parental contribution must be explicit – parents should be told clearly what their expected minimum contribution is. This would stop friction between students and parents, and let parents realise they may need to save for years to have the money ready
   
   
4. Student loan statements are damaging. Many are rightly frightened by huge interest added each month, even though the reality is few will repay all of it, and some won’t repay any of it. Statements should focus on explaining repayments and a predicted total cost.  .  The current ‘total debt’ figure should be strongly de-emphasised and put in its true light as ‘the current settlement value’, a figure which is rather meaningless for most.
   
   
5. There should be a guarantee of no negative retrospective changes. When students sign up to finance, the terms should be fixed at the outset, with no negative retrospective changes (as judged by an independent panel) allowed by Government. If not, then at least it should be transparent which terms of a loan are variable and which are fixed. For example, the date loans wipe could be fixed, but interest rates amendable.

Let me know what you think below (again, a reminder: this is about changing the current system rather than the wider debate of which system is best).

• Full submission available here: Martin Lewis & MSE’s submission to the Augar report
• Full guide to student loans: Martin’s student loan mythbuster
• My related past blogs include:
  -  Big student loan shake-up means millions (but not everyone) will pay £1,000s less
  -  If 83% are predicted not to repay student loans, who pays?
  - Why cutting tuition fees bizarrely risks hurting not helping most students
  - Warning: Parents with 2+ children who’ll go to uni, SAVE NOW, the system’s biased  
  - Are student loans broken? What I told Uni Minister Jo Johnson