'A threat to the government on students' £21,000 loan repayment' blog discussion

Former_MSE_Paloma Posts: 531 Forumite
I've been Money Tipped! Newshound!
This is the discussion to link on the back of Martin's blog. Please read the blog first, as this discussion follows it.

Please click 'post reply' to discuss below.


  • JimmyTheWig
    JimmyTheWig Posts: 12,199 Forumite
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    Hear hear!
  • agarnett
    agarnett Posts: 1,301 Forumite
    Your colours are now surely nailed to the mast, Martin, Sir.

    Excellent leadership of a type very sadly missing in parliament unfortunately.
  • Have been warning about student loans for some time now.
    Don't forget if the conservatives win the next election the loans will be sold off to nasty debt collecting agencies who will get the extra money from the threshold U-turn and not the government.
    This is not about money for the taxpayer it is corruption pure and simple. It is about making money for foreign owned debt collecting agencies!
  • matt.t_2
    matt.t_2 Posts: 1 Newbie
    edited 9 January 2015 at 9:01PM
    Don't the following also constitute changes to student loan terms and conditions?

    • Student loan repayment holidays announced by John Denham in 2007 (graduates will be entitled to take 5 year repayment holidays from 2012). See Martin's blog below. This never happened despite appearing in the SLC guide to terms and conditions (e.g. 2009/10: studentloanrepayment.co.uk/pls/portal/docs/PAGE/RPIPG001/RPIPS001/RPIPS006/SLC%20TERMS%20AND%20CONDS%200910.PDF - add www. at start) and never making it into the regulations.

    Martin's blog on this at the time: blog.moneysavingexpert.com/2007/07/10/student-loan-five-year-payment-holiday-take-it-take-it-take-it

    • The student support guarantee for those getting EMA also announced by John Denham in 2007. This never happened.

    webarchive.nationalarchives.gov.uk/+/ [add www. here] direct.gov.uk/en/EducationAndLearning/UniversityAndHigherEducation/StudentFinance/Applyingforthefirsttime/DG_171570

    Martin says "It hasn’t happened before...". Well the above shows it has. The point is there is a reason why the regulations can be amended as part of the agreement students sign (unlike the mortgage-style loans for pre-1998 students). And the regulations will always be amended with some positive change and some negative change. The 'change' Martin bases his blog on would not even be an amendment to the regulations as the regulations do not state that the £21000 is to be uprated.

    The uprating of the £21000 repayment threshold is not part of the terms and conditions so it would not be a retrospective change. The repayment of ICR student loans are governed by The Education (Student Loans) (Repayment) Regulations 2009 as amended, which effectively form the terms and conditions of repayment of ICR loans as you sign an agreement to repay your loan in accordance with these regulations as they are amended. These regulations (as amended in 2012) state that the threshold for repayment for post-2012 loans is £21000. Any decision on increasing this threshold has only ever been an intention and can only be implemented if affordability can be guaranteed, which clearly at present it cannot. When the first ICR repayment threshold of £10000 was uprated to £15000 in 2005, the Labour government stated an intention of uprating it annually by RPI from 2010 but due to circumstances such as the financial crisis chose not to amend it (in effect freezing it at £15000). Only from 2012 did this threshold start to be increased (despite the Browne review recommending it be increased to £21000 as it had been frozen for so long that level was only applied to post-2012 loans). The repayment holidays and 'EMA guarantee' were also dropped. Government policy decisions need to be monitored and reviewed as implemented policy develops.

    Postgraduate loan policy is also currently in development and it has been suggested that these could be repaid concurrently at 9% above the same £21000 threshold which would be frozen for 5 years. I think this would be a good policy decision if you consider the facts that the budget needs to support the uncapping of student numbers and it was clearly never intended that the RAB charge on student loans would balloon so high due to how economic variables developed. The regulations (terms and conditions) have always allowed the government to amend them for all borrowers so that they can be reviewed to maintain a sustainable system. This allows the government to review and amend variables such as the repayment rate (currently 9%) and the repayment threshold. Certainly in the infancy of a new system you would expect these types of decisions until the system has been fully embedded when the terms are generally fixed at the point of any loan sale - repayment of post-2012 loans don't even start until 2016.

    Under Labour's initial ICR system the threshold level of £10000 was frozen between 2000 and 2005 to allow the system to be monitored and was later reviewed and amended for all graduates to £15000 (not just those starting courses after the threshold was increased). Real pay is nowhere near as high as the government anticipated so if the £21000 threshold was uprated not only would the system be unaffordable but graduates would be making lower repayments than intended, so getting a better deal. It is right that the system needs to be tweaked to ensure that we have an affordable university finance system for all and that the new repayment system operates as it was intended to operate when policy was first developed in 2010.
  • agarnett
    agarnett Posts: 1,301 Forumite
    edited 9 January 2015 at 11:32PM
    Oh dear, so now we have a newbie poster seeking to split hairs and to discredit Martin in a post that reads like it has been crafted within a government spin department.

    If you are going to post in such tones, matt.t, may we please know who exactly instructed you to do so before you left the office for the weekend ?

    If what you say is the official government view, then I suggest that all Repayment Loan 2 students immediately write complaining of mis-selling. The loans should all be declared unenforceable.

    I hate crooks. I especially hate crooks in government.
  • jamesd
    jamesd Posts: 26,103 Forumite
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    agarnett, it's good to know what past governments have done and what is written into the formal rules or not. Also good to know what public marketing undertakings were at the time the loans were issued, since normal practice is that those would be binding on a normal financial services firm making such claims.
  • silvercar
    silvercar Posts: 46,945 Ambassador
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    I'm becoming more and more concerned about my children's student loans. Younger one is being charged 5.5%, seems a rip off rate.
    I'm a Forum Ambassador on The Coronavirus Boards as well as the housing, mortgages and student money saving boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Forum Ambassadors are not moderators and don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com (it's not part of my role to deal with this). Any views are mine and not the official line of MoneySavingExpert.com.
  • silvercar wrote: »
    I'm becoming more and more concerned about my children's student loans. Younger one is being charged 5.5%, seems a rip off rate.

    You are right to be concerned,
    Also after the election it will be sold off to a very nasty debt collecting agency. See "erudio student loans" thread.
    Do you want your children to have to deal with firms that make Wonga look like saints.?
  • agarnett
    agarnett Posts: 1,301 Forumite
    jamesd wrote: »
    agarnett, it's good to know what past governments have done and what is written into the formal rules or not. Also good to know what public marketing undertakings were at the time the loans were issued, since normal practice is that those would be binding on a normal financial services firm making such claims.
    I agree. It is the deliberate political spin and point-scoring against upright good citizens with consciences that I cannot abide.

    This is already a huge mis-selling scandal. Mis-selling scandals always gain traction at MSE. Once identified here, the miscreants may kick and scream here and elsewhere, and they might even win a few battles, but they never get away with it in the end.

    I am sick to the back teeth of posh boys who don't know the price of milk, and their reliance on votes from a dumbed-down workforce of so-called striVers with a capital V. Not simply satisfied to accept self-applied cheap lapel badges pronouncing themselves as "strivers" from tray full of shiney self-aggrandisement baubles wheeled in by the toffs and spivs, they then gladly take on the suggested mantra that higher education is a luxury, and not something to be funded by public taxes, and even welfare protection is about survival of the fittest.

    Village idiots! Wise up!

    Jumped up pipsqueaks and gullible fools are good bedfellows. Together they amount to no country at all worth the name.

    We must straighten a few real values. Gathering around a reliable public conscience is a very good place to start.
  • Ed-1
    Ed-1 Posts: 3,888 Forumite
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    Not every borrower would find that the freezing of the £21000 threshold would be a bad thing. Those with both pre-2012 and post-2012 loans would actually find it a good thing as they repay above a lower threshold anyway and freezing the higher threshold would allow more of their repayments to be allocated to the loans with higher interest rates (ie. the post-2012 loans) as repayments above £21000 get allocated to plan 2 balances and repayments below to plan 1 balances.

    Personally I don't see the next government having much choice as you can't justify running a loan system with a 50% RAB charge, especially when that wasn't the intention when the system was set up. The threshold is higher in real terms than they thought it would be based on (now shown to be inaccurate) estimates of inflation and earnings in 2010. They shouldn't have made promises they weren't sure they'd be able to keep (where've I heard that before?!) but that was in part down to messy Coalition compromises and the Coalition won't be around forever. Corrective action of some sort needs to be taken to tweak the system into a more sustainable position.

    There are all sorts of defects in the student loan system, not least the use of RPI (now a discredited inflation statistic) in setting interest rates and the repayment threshold is just another fault.
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