Student loan changes for existing and future students

Former_MSE_Will

Hi folks,

The Government is consulting on changing student loans for people who started uni after 2012. It always said that the repayment threshold will be £21,000 – and that this threshold will rise every year with earnings.

Now they want to freeze the threshold at £21,000 for new and existing students, for five years. This will mean that more people will pay more back, and sooner than before.

The Government says it needs to do this to pay down the national debt, and they haven’t said what happens after five years.

What do you think of this possible change?

Do you think the Government should be able to change the terms of student loans retrospectively?

Do you think the terms of loans should be honoured – and no Government should be able to come in and change them retrospectively?

Or do you think that times change and different governments need to have the flexibility to make changes like this?

agarnett

All post 2012 Student Loans were hopelessly and irretrievably missold from the outset, sadly much of the mis-selling being abetted from this website. Martin has expressed some regret I think about the way he got sucked in. Where is Willetts now, by the way? And what happened to the head of steam behind that court case alleging misselling and / or breach of human rights ? Yes I know the case failed but is it just a case that no-one has yet seized any new initiative to get restarted? There must be a few £9,000 per year tuition fee third year law students now who have the skills and contacts to restart a test case?

Amazing that a government believes it can brazen it out and get away with all that, particularly when it further believes that it is permitted to mislead gullible young citizens into feeling secure when it fully intends to sell these hopelessly missold loans down the river to private interests. Interests which will not think twice about exploiting and harassing those youngsters well into middle age, but there you have it. Erudio what ... did you say?

I look at it as just an extremely amateurish solution seized by a government that has no control of its own destiny but is just desperate for cashflow - a bit like the decades long and even prolonged government sponsored mis-selling of mobile phone services. The government took billions in selling frequency licences in return for turning a blind eye to the rips offs in roaming charges connection charges, and charges for 08 numbers for the last 20 years, the health risks of allowing mobile masts to be erected almost anywhere, and all the mis-selling practices and Data Protection breaches necessary to create a wildly profitable industry from scratch funded by ? ... the same world class financiers who are systematically being given tranches of student loans to play with and exploit privately I guess.

What's the plan for a promising Masters course undergraduate who will owe the best part of £100,000 before graduation ? Who really knows what the mortgage market will say to them in 2019 when they've worked for a year at £21,000 pa and a bit, and ask for a mortgage? Has cuddly Ray Boulger at John Charcol got it all worked out yet? Better get something ready for 'em Ray! You'll recognise them once they start arriving at the door, they're the ones who come in with one shoulder already heavily weighed down!

How is that individual student supposed to "feel" about having their name on such a wobbly "student loan" contract as they study, and read about the government's latest kite-flying, and wonder what they can make of themselves ? Are they "safe"? Are they doing "the right thing"? Is the system as bad as the American system, or worse? The American house mortgage system was said to be better for Fanny Mae defaulters than the UK system was for Northern Rock defaulters. Americans had the right to just hand back the keys and walk away more or less Scot free to start again. If Northern Rock customers did that, they just put their head into the noose. I think it was five years ago now when the level of outstanding student loan debt in the USA first exceeded Credit Card debt there. Are we there yet in the UK? Is the UK system the worst of the two? Should students have gone to Europe for more enlightened governments subsidised EU educations? Do "locked-in UK current undergraduates need to break out of any fearful mindset caused by the weight of the numbers associated with their daily mounting debt to SFE? And not let it distract them? Can they get medication to help? Do they need to pay for the prescription?

What really happens if they have to drop out half way through, or is dropping out for the wimps and the factionless?

What a miserable excuse of country we have become.

We've become morally bankrupt as well as actually bankrupt.

Let's just keep printing the money and securitising anything that moves ... keep the hamster wheels turning ... don't let anyone see what happens to the hamsters who fall out of the wheel ... but truth be told, everyone does eventually, dontcha know?

patanne

No they shouldn't be allowed to change the t & cs of a loan retrospectively, they don't allow banks to do that so why should a government. They also shouldn't be allowed to sell one of those loans to a debt collection agency unless the loan is not being adhered to. But that one has already happened - see agarnett's comment about erudio - the latest disaster for ex-students with too low income to repay.

ericctheking

The T and Cs are being changed to aid in the selling off of the loans to dodgy American owned debt collectors. This is all fact.

Ed-1

Everyone is missing the point. Despite common belief, the terms and conditions are not being changed retrospectively.

The terms and conditions at the moment simply state that the loan is repayable at a rate of 9% of income above £21000 a year. This will continue to be the case.

If it was not possible to change the terms and conditions retrospectively it would not be possible to change that figure of £21000 at all.

What is being changed is the intention to change the terms and conditions made by the last (Coalition) government. The terms and conditions were originally planned to be amended in 2017 and each year thereafter to replace £21000 with another figure uprated for changes in earnings.

However it is now accepted that the figure of £21000 is a lot higher in real terms (because average earnings are a lot lower than was forecast) than was expected in 2010 when that figure was set.

So to continue to ensure the system is sustainable, the government are planning to delay changing the terms and conditions (which currently state the threshold is £21000) while average earnings catch up to more like the level they were expected to be at by now in 2010. How is that unfair? I think it's entirely reasonable. What would probably have been better is if it had been stated at the outset that the threshold is, say 75% of average earnings, but it is easier presentationally if an actual figure is set so that students can see explicit calculations of how repayments work. Repayments will still be very affordable - £21000 frozen is still a very generous amount of income at which no repayments are made at all. Freezing it does little to change that but it will ensure the system remains sustainable and operates within the budgetary margins intended when the system was set up in 2010.

Terms and conditions of income contingent student loans have been changed retrospectively many times in the past which a lot of people don't seem to realise - the threshold was originally £10000. The terms and conditions were then changed in 2005 to replace that figure with £15000 etc. The terms and conditions changed to include 5 year repayment holidays announced in 2007 and then changed again not to include 5 year repayment holidays in 2009! Interest rates were set above the rate of inflation in 2009/10 (0%) when RPI was negative at -0.4%. The £15000 repayment threshold was not changed for inflation in 2010 or 2011 even though that had been intended originally. The terms and conditions of income contingent student loans are and have always been flexible - they can be amended at any time for both positive and negative changes. That is the sacrifice made for having repayments that are essentially a tax. You cannot have a new repayment system operating every time you want to change the terms and conditions as the tax system would fall over. Every time a government wants to change tax rates, they do so retrospectively. Income contingent student loans are in practice the same entity which is why comparing them with commercial loans (where terms and conditions cannot be changed retrospectively) is like comparing peaches with bananas. They are both called 'loans' but they are entirely different entities.

erudioed

Heres a piece by Andrew Mcgettigan on the same issue:
http://andrewmcgettigan.org/2015/07/23/government-confirms-preference-for-retrospective-price-hike-on-undergraduate-study/

Heres what Paul Lewis from the BBC thinks about the consultation process currently ongoing concerning whether the above will happen or not: "it will happen regardless of consultation and five yr freeze may be just the start!"