Miss-sold a loan from the government

kathrynha

Cyberman60 wrote: »

Why not take responsibility and pay back the loan rather than looking for a way out and blaming other people, as everybody seems to want to do nowadays.

It's not about looking for ways out of it, it's about following the terms and conditions we signed up to.
When/if we are earning enough we will happily pay it back as we agreed when we signed up for it.
And I know many not paying it back are doing jobs that require degrees, but don't pay highly, generally in some sort of public service.

What we are objecting to is firstly the fact the loans have been sold. Erudio have paid pennies in the pound for these loans. If we pay it back the tax payer won't see a penny of what we pay.
And secondly the changes of T&Cs Erudio are trying to force on us. These loans are not supposed to be on our credit ratings, the deferment level and what costitutes earnings and what evidence is required is all set out in the original T&Cs. The SLC have said T&Cs won't change, but they are, and that obviously is wrong.

ericctheking

Cyberman60 wrote: »

Why not take responsibility and pay back the loan rather than looking for a way out and blaming other people, as everybody seems to want to do nowadays.

Again this is backwards thinking.
If student loans where like any other loan I think Martin's :money: advice about going to University would be a lot different. To make a rational decision you need to know where you stand. Many people would never have taken out the loan if the conditions were that of a regular loan.

Pixie5740

Is your argument that you think the government shouldn't have sold the loans to Erudio rather than the loans shouldn't have been given to students in the first place?

I agree that Erudio should abide by the same terms and conditions of the original loan.

I think the reason that the government sold the loans is that they were just too expensive to service these loans with all the admin involved and so many people never paying them back as the threshold was set too high. Rather than the tax payer getting the loan money back selling the loans is more about damage limitation.

Brock_and_Roll

ericctheking wrote: »

Many people were miss-sold a student loan pre-1998.
There are many reasons why these loans were miss-sold.

1) They were sold as different to other loans because they were with the government. It wasn't explained that in the t&c s that the loans could be sold on.

2) They were promoted to minors studying at sixth-form colleges. The argument that this could happen is that they were lent without a view to a financial gain as the government held them. Now the loans are held by profit-seeking private enterprises who have a view to a financial gain from buying the loans.

3) They were sold as not having an affect on people's ability to get a mortgage as not reported to CRAs if the borrower isn't in default. They are now affecting people who have never defaulted ability to open even a bank account.

1) It was in the terms and conditions. Not included in the promotional material, but you would not expect to see all the terms in the headline literature any more than you would expect to see all the other legal bits and bobs that are in every loan agreement.

2) Correct, the Government did use the not-profit loophole to provide loans to U18s. It is a moot legal point as to whether the future assignment of those loans amounts to a mis-selling of the original loan, but in any case the numbers of U18s who took out loans prior to 1998 must surely be tiny.

3) How many people who took out student loans over 16 years ago are in a position where the loan is not repaid and they are unable to open a bank account due to negative credit references? What on earth have these people been doing all these years?

I was actually at university at the point when "grants" switched to "loans" - not happy at all at the time. Nevertheless the interest rate was so cheap we all borrowed as much as we could - I recall queuing up with my fellow uni labour club members to buy British Telecom shares!

The OP seems dedicated to try and turn this into the next big mis-selling scandal, but it is not going to happen. If this were likely we would already be getting the annoying text messages!

Herzlos

ericctheking wrote: »

Again this is backwards thinking.
If student loans where like any other loan I think Martin's :money: advice about going to University would be a lot different. To make a rational decision you need to know where you stand. Many people would never have taken out the loan if the conditions were that of a regular loan.

It isn't a regular loan though; even with the payment holidays (which will be factored in - having a payment holiday on a student loan will become the norm, and my bank asks about student loans anyway) it's still by far the cheapest loan you'll ever get, and can be deferred until you can pay.

I really doubt anyone will turn them down purely because they show as a payment holiday, as most students aren't thinking that far ahead.

ericctheking

I know the income loans work differently but also people will be worried about having to deal with Wonga-like companies such as Erudio when the loans are sold off.
Check out the Erudio student loans thread for the details.
Things might seem okay now with the SLC dealing with the loans but wait until an Erudio try to re-interpret the terms and conditions that people signed up to.
People are very blase about the loans being sold off (there is less scope for problems with income loans I agree but even Martin felt with the old sell-off there was nothing to worry about at first)
Also overseas ex students still have to defer every year. Imagine Erudio dealing with your deferral!

ericctheking

From Martin's own blog :money:

"As someone who was relatively sanguine about the sale of the student loan book believing it was only a back-end operation that wouldn’t really change much for those with outstanding loans – I’ve now changed my mind.

Having seen this mess, it would take a lot of persuasion to get me to believe that it’s worth the risk to sell any more of the student loan book."

So there you have it! If you have a student loan or intend on getting one BEWARE!

Hanky_Panky

Eric - you clearly have an axe to grind about this but you have so far failed to explain what your motive is here. Your points are also being countered but yet you keep repeating them as if that makes them more valid - it doesn't.
Personally I am really happy if having to take out these 'eye-watering' loans prevents someone from wasting 3 years at University doing Media Studies or a similar non subject that is of no use to them at all when they get into the job market. It certainly made my Daughter think twice and rightly so.

Pluthero

Cyberman60 wrote: »

Why not take responsibility and pay back the loan rather than looking for a way out and blaming other people, as everybody seems to want to do nowadays.

Myself and many thousands of others who took out these loans have been VERY responsible. We have abided by the original loan terms for many years, sending evidence to the SLC when under the REPAYMENT threshold and having our loans deferred promptly. I could have ignored my responsabilities and went rogue years back and not sent any thing to the SLC and now any debt I owed would be statute barred. I would be free. AND NOT be treated like a criminal by the bottom feeding DCA Erudio.

Also these loans were promoted in a certain way, I.E they would not impact on a students future finanial health. Also the govt made provision for a percentage of people NOT repaying EVER. Here is a post by Mrmcguffin which explains this better than I could:

[FONT=&quot]'The provision for deferment is integral to this loan scheme. Over time it left a progressively larger proportion of remaining borrowers who will defer repayments until the loans are cancelled, as they are perfectly entitled to do. This is not only a right, it was fully anticipated and intended as the inevitable consequence of the repayment threshold.

When the scheme was introduced it was estimated that 13% of borrowers would have their loans cancelled after 25 years. A default rate of 10% was also assumed. This can be read from the figures here:

[/FONT][FONT=&quot]http://hansard.millbanksystems.com/w...9890724_CWA_31[/FONT][FONT=&quot]

By 2013, out of the loans retained by the government after the 1999 sale, loans in deferment were 13% of the total issued. There was a default rate of 10.7%.

From the SLC figures for the year 2012-13 there were 115,000 borrowers in deferment, and 82,000 in default. The loans in deferment also represented 56% of the face value of £895m. It was costing the SLC £4m a year to administer these loans, and it knew it would be checking perennial deferment applications until 2026. This was of course the inevitable outcome of the design of the scheme as promoted and promised to Parliament and students alike.

BIS sold the opportunity to shake down this group of 115,000 blameless graduates in deferment in any way the new purchaser could get away with. While Government ministers say the terms of the loans have not been changed, this is not true, as deferment is now made conditional on acceptance of the Erudio 'Deferment Application Form' and consent to the terms within it. That is not prescribed in the 1998 Regulations and is therefore a change to the terms.

I hope everyone experiencing this outrageous situation with Erudio will make their MP aware that the loans sold to this company were repeatedly misrepresented as 'underperforming' and 'distressed' to two select committees. This was the basis of the justification for the sale given to the Public Accounts Committee in December 2013 by the Permanent Secretary of BIS Martin Donnelly and the Chief Executive of the SLC Mick Laverty, and to the BIS Committee of January 2014 by the then Minister for Universities and Science David Willetts and Executive Director Shareholder Executive Michael Harrison.

It is simply not true that the loans sold to Erudio could correctly be characterised as 'underperforming'. This was the reason given for their sale. It is a false premise. BIS and the SLC classified loans in deferment as 'in a repayment channel' and behaving perfectly correctly. From the figures of BIS itself, only 4 out of 10 of the loans sold to Erudio were in default and could be described as 'underperforming'. The majority of 60% were 'in a repayment channel' and performing correctly and as designed. BIS is responsible for all this misery and wasted time and I hope everyone concerned by this will make their MP aware of that.'
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[FONT=&quot]What Erictheking is arguing is that because of Erudio's present actions. I.E treating us lawful deferers like criminals when we are simply abiding by the original loan terms is that a case for miss selling can be made.


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Pluthero

Also see this post again from Mrmcguffin:

[FONT=&quot]It might seem difficult to understand now why a 'loan' was made on such generous terms, with deferment reliant on the 'honesty of graduates'.

These loans were not introduced as 'mortgage style' loans but as 'top-up' loans. They were designed to supplement a maintenance grant frozen at 1990 levels and replace benefits for students.

The scheme was proposed in a 1988 Government white paper Top-up loans for students. The new loans were designed to achieve savings 'compared with continuing the existing system of support for students’ living costs.'

It was originally planned that this 'top-up' loan scheme would more than pay for itself. Its costs were calculated with allowance made for deferment and cancellation. Deferment was integral to the model and would not affect the costs of the scheme. There were clearly anticipated levels of deferment, repayment, cancellation and default. It was a planned scheme, this wasn’t just money shovelled out with the hope it would all be paid back. It was intended that a substantial number of loans would never be repaid.

It was structurally certain that a proportion of loans would be cancelled after being deferred for 25 years. The inevitable result of the income threshold is that a number of borrowers will remain below it. That is fundamental to the nature of the loans.

It was estimated that 13% of loans issued would be cancelled after 25 years. This happens to match the proportion of loans in deferment when sold to Erudio.

As well as incorporating deferment and cancellation the scheme was also planned to produce savings over the previous systems of student support. It was predicted that savings made by freezing maintenance grants and stopping benefits for students would substantially exceed the costs of the new loans. For example, the Government estimated that in the terms, prices and interest rates of 1990, an 80% take up rate of the 'top-up' loans would produce net savings to the 'PSBR' of £147m by 2013, when compared to continuation of student support through grant and benefits.

These loans were not issued as a commercial product. They were introduced as part of higher education public policy and as a specific mechanism to reduce costs to public finances. In their own intended terms, the loans cancelled after deferment for 25 years were to be more than paid for by the operation of the whole scheme and by savings in what would otherwise have been a cost. The objectives and benefits of the scheme would be achieved with an assumed level of cancellation equal to the level of deferment in 2013.

Calling these 'mortgage style' loans helps obscure their original purpose and structure and implies they should all be repaid in full. They were designed, structured and sold on the basis that a proportion would not be repaid. A 13% cancellation rate was fully anticipated. Even a 10% default rate was allowed for. It was pojected and promised that public money would be saved and Government spending and borrowing reduced at these anticipated rates. [/FONT]