'Urgent! Help fight the Government’s student loan U-turn that could cost...'

patanne

I too have emailed my, unfortunately conservative, MP, he's never been much use, even to them, so don't expect any sensible response but will let you know when I get it. If I don't I will definitely name and shame!

As he will be at the party conference at the moment (not 20 miles from his home) I am going to put on my nice hat and not out him until 1am Tuesday.

dizzie

If this change is to be made retrospectively, then the government will prove itself to be untrustworthy. This is NOT about whether there is too much or too little student debt paid back this is about a loan agreement and the terms and conditions that formed part of that agreement.

Most people do not realise that the government is not subject to the same laws as everyone else. When they trebled the tuition fees, this caused a considerable amount of concern for prospective students, and some of these started to question whether obtaining a degree would be good value for money. Student applications did drop somewhat, but the government went on a mission to try to keep student numbers up.....and much talk was made of the terms and conditions, and about how those terms made the loans affordable. Fiscal drag is a concept that successive governments have used to obtain more money. Yet prospective students were reassured that there would be no fiscal drag....that the repayment threshold would be uprated from £21000 from April 2017, in line with average earnings. This is a key condition of the loan since it massively changes what people could be expected to pay back.

We now have the most expensive tuition fees in Europe and if the government make the changes retrospective, then they will have lied and tricked students into taking out these loans. With any other financial institution, the terms and conditions agreed at the time are binding on BOTH parties. The government may have well have said at the time.....these are the conditions, but remember - if we are short of a bob or two, we are different! We can change the terms of your loan so that you pay back more than we originally agreed! In essence.....those terms and conditions that they were so keen to sell to placate anxious minds are NOT worth the paper they were written on.

The principle MUST be: People taking out a loan must be in full possession of the facts so that they can make an informed choice. To do otherwise is deceitful. After the new loans came in, one of my sons decided to do his degree elsewhere in Europe....at one sixth of the English tuition fees. Perhaps if people were not lied to about the terms at the time, more young people might have thought about doing likewise.

To say that I am disgusted and outraged at the prospect of a retrospective change would be an understatement. Even the pay day loan companies who fleece their customers are upfront about their terms! :mad:

dizzie

tomtontom wrote: »

Whilst I don't like the retrospective nature of the measure, I do think far too little student debt is repaid, and for that reason I support the change as a whole.

There is one big positive to this - your debt will be repaid more quickly

Tomtontom, this is an ethical question about whether the measures should be retrospective or not. The whole idea of publishing loan terms and conditions is so people can read them and digest them, and decide whether they want to go ahead with taking out a student loan. The small financial gains that would be made by applying any changes retrospectively would be massively undermined by the loss of trust. After all, what is the point of selling a loan based on terms and conditions.....and then deciding later that you are going to change those terms? Your bank would not be able to do that.

I for one would support a legal challenge if changes are to be made retrospectively! People should know what they are signing up to and should have the full facts at their disposal before deciding whether to go ahead or not. The stupid thing is, that the government were told at the time that the maths did not add up. It didn't even need someone with A-level maths to work that out? So why did they go ahead and lull thousands of people into a false sense of security and get them to take out these loans on false pretences? And HOW can we justify charging the most expensive tuition fees in Europe in the first place?

Ed-1

While I generally frown on retrospective changes, retrospective changes with student loans are more common than you think; they have certainly happened before, contrary to the beliefs of some (such as notably Martin Lewis). A friend of mine who started university in 2008 was promised 5 year repayment holidays coming in from 2012 as part of his loan terms and conditions. This was announced as part of a statement to the House of Commons by the then Secretary of State responsible for universities, John Denham on 5th July 2007 and can be accessed at the following URL:
http://www.theyworkforyou.com/debates/?id=2007-07-05b.1108.0. It was announced:

“Finally, we also want to offer graduates more choice about the repayment of their loans. Students starting in 2008 will have that option once they complete their degree. When graduates face significant new out-goings in their lives, such as buying their first home or starting a family, they will have the option of taking a break from their loan repayments. They will be able to take a break of one year, two or more, for up to five years. That will help graduates make flexible choices about their finances at key points in their lives and careers.” (John Denham, Secretary of State for Department for Innovation, Universities and Skills, 2007).

2012 introduced many reforms to student loans but repayment holidays were not one of them; the intention had been dropped.

This friend who started in 2008 was also promised that the intention was to uprate the repayment threshold from 2010 from its then level of £15,000 but at the start of 2012, its value still stood at £15,000 – the same as the level it was at in 2005.

This friend was also promised that the intention was to continue to set interest rates on his loan at the rate of RPI or base rate + 1%, but in 2009/10, the rate did not follow this precedent as it was set at 0% rather than the -0.4% RPI rate from March 2009.

Both of these decisions are summarised in This is Money articles from 14th May 2009 which can be accessed at the following URLs:

http://blogs.thisismoney.co.uk/this_is_money_blog/2009/05/student-loan-interest-rate-decision-is-a-disgrace.html

http://www.thisismoney.co.uk/money/saving/article-1674618/Government-breaks-student-loans-pledge.html

They contain statements explaining the rationale for the retrospective decisions:

“The decision [on interest rates] has been taken because loans are already well subsidised, and it would be difficult to justify to taxpayers a situation whereby students take out loans in 2009/10 and their balances are immediately reduced.”

“The rate of interest makes no difference to borrowers’ monthly repayments. Borrowers repay 9% of their earnings over the income threshold of £15,000. Whatever the rate of interest is, that monthly repayment will not change.”

“The repayment threshold will also remain at £15,000 for the next 12 months. Had the Government used a negative RPI rate to calculate this, the threshold would have reduced and borrowers would have started repaying earlier and ended up paying more. Setting interest at 0% has prevented this from happening.”

All of these intentions were retrospectively altered for graduates with existing loans so I’m surprised by the likes of Martin Lewis in his flawed belief/arguments that freezing the repayment threshold at £21,000 would set a precedent breaking the principle of no retrospective changes to student loans, particularly as he wrote a blog giving ‘advice’ on repayment holidays when they were intended to be implemented (available at the following URL:
http://blog.moneysavingexpert.com/2007/07/10/student-loan-five-year-payment-holiday-take-it-take-it-take-it).

All of the above retrospective changes were intentions to student loans which had been announced but not been implemented. The uprating of the £21,000 threshold was announced by the Lib Dems but has not yet been implemented into the repayment regulations so the current government is free to keep the threshold at £21,000 by not implementing it.

People should stop whinging about a retrospective change. You all agreed to pay your loan back in accordance with the repayment regulations which say the threshold is £21,000 - any changes to this are intentions until they are implemented.

The £21,000 threshold is higher in real terms (as earnings are lower than forecast) so the loans (through the RAB charge) are more heavily subsidised without any changes to intentions. As with previous retrospective changes, it is hard to justify uprating the threshold to taxpayers when the threshold is much higher than it is supposed to be in comparison to earnings.

Previous students have had retrospective changes to the terms they started with so why are 2012+ students 'special'?

dizzie

setmefree2 wrote: »

I was someone involved in the long discussion about whether parents should pay tuition fees up front (and pay for their kids maintenance) instead of taking out 2012 Student Loans.

('Don't pay your kids tuition fees upfront' Discussion Area
https://forums.moneysavingexpert.com/discussion/3499355)

I seriously believe that MSE should now update the MSE Student Loan Calculator to reflect the outcome of a freeze to the threshold - (which I'm guessing is 99.9% the most likely outcome of this government review ) as the calculator is now very misleading.

http://www.moneysavingexpert.com/students/student-finance-calculator.

This page should also been changed too. Scenario 1, 2 & 3 should be recalculated to reflect the new information as it is misleading too.

http://www.moneysavingexpert.com/students/should-i-get-student-loan

MSE may not have any control over the government plans but it does have control over the information on this site. MSE may wish the freeze wasn't going to happen but it 99.9% will.

If this threshold is frozen will this change MSEs opinions on paying tuition fees upfront?

What about repaying student loans?

Seriously, you need to clarify your position instead of burying your heads in the sand.

Setmefree, if the government is allowed to get away with retrospective change, then it will have crossed the rubicon. The question need not be "Do the changes now warrant paying back the loan or as much of it as people are able to", but "Now they've changed the conditions once.....can and will they do it again?".

After all, they could decide to freeze the repayment threshold indefinitely...they could decide to reduce it......they could decide to put up the interest rate!!

After all, if they are allowed to get away with changing the terms and conditions on loans already taken out ONCE.....what is stopping them doing it again in the future?

patanne

Name the odd one out of the following

Liar, MP, principle, fraudulent claim, self interest.

Anyone not got the right answer?

dizzie

Ed-1 wrote: »

While I generally frown on retrospective changes......Previous students have had retrospective changes to the terms they started with so why are 2012+ students 'special'?

Ed, firstly repayment holidays do not alter the total amount that a graduate would pay back. And I would also like to see where the legislation said that the repayment threshold would be raised from £15000. Can you provide a link to that?

And you have the audacity to complain that the government also broke the rules by not charging -0.4% - in effect paying YOU to have the loan. Come on...that's ridiculous.

The fact is that putting up the tuition fees from circa £3000 to £9000 per year was a huge leap - and one that made many people think twice about going to a British university. But the government were keen to set out the terms and conditions and that uprated £21,000 was not sold as an "intention" but rather a "commitment".

Let me ask you Ed, let's say you bought a car on hire purchase. What would make you more angry? (i) Not being allowed a repayment holiday after all...although you'll still pay back the same amount (ii) Not being charged a negative rate of interest such that you actually make a gain out of having a loan, or (iii) being told that now you've signed on the dotted line and taken the finance, that terms and conditions will now be changing so that you'll pay more?

Your choice Ed: (i), (ii) or (iii).....and then let's hear you whinge about the "whingers".

Playing_with_Fire_2

Email and letter sent. I've paid off my loan so this doesn't impact me, but it's important as it reflects the value of education and that it should be available regardless of wealth.

I agree that the issue is that the change is retrospective. If they do this then why not change the rules next time to say that current loans will have an interest rate equal to Wonga's? Past mistakes are no excuse for current mistakes.

If this goes through I'll march against it.

Ed-1

dizzie wrote: »

Ed, firstly repayment holidays do not alter the total amount that a graduate would pay back. And I would also like to see where the legislation said that the repayment threshold would be raised from £15000. Can you provide a link to that?

And you have the audacity to complain that the government also broke the rules by not charging -0.4% - in effect paying YOU to have the loan. Come on...that's ridiculous.

The fact is that putting up the tuition fees from circa £3000 to £9000 per year was a huge leap - and one that made many people think twice about going to a British university. But the government were keen to set out the terms and conditions and that uprated £21,000 was not sold as an "intention" but rather a "commitment".

Let me ask you Ed, let's say you bought a car on hire purchase. What would make you more angry? (i) Not being allowed a repayment holiday after all...although you'll still pay back the same amount (ii) Not being charged a negative rate of interest such that you actually make a gain out of having a loan, or (iii) being told that now you've signed on the dotted line and taken the finance, that terms and conditions will now be changing so that you'll pay more?

Your choice Ed: (i), (ii) or (iii).....and then let's hear you whinge about the "whingers".

Not paying interest when inflation is negative means the loan balance is growing in real terms, meaning you can easily pay more back than you should. This is no more ridiculous than the retrospective change to the intention on the threshold as it was part of the terms and conditions that interest would be RPI inflation or base rate + 1%.

The intention to uprate the £15,000 threshold was not in "legislation" as it was an intention.

Confirmation of the intention is in the response to this freedom of information request at the following URL: https://www.whatdotheyknow.com/request/student_loan_repayment_criteria

"During the passage of the Higher Education 2004 Bill, Parliament agreed that the income threshold for repayment would be increased to £15,000 from 2005 (from £10,000) and remain at that level until April 2010 when the intention would be to uprate it annually by the Retail Price Index."

Secondly, repayment holidays could easily change the amount you pay back. If you earn (say) £50,000 for 5 years you'd be repaying an awful lot of your student loan. If you took a repayment holiday you wouldn't pay back anything over that period. If you then took time out of work, you'd still not pay back anything. The lack of repayment holidays which were promised can easily mean making repayments over 5 years which you otherwise wouldn't have done.

Finally, you are implying that the uprating of the £21,000 was not an intention, but part of the terms and conditions of 2012+ loans. This is the crucial point that is wrong as there is nothing in the repayment regulations to say the £21,000 will be uprated.

Anything not in the repayment regulations is an intention until it is written into the regulations. Uprating of the £21,000 repayment threshold is not in the regulations so it is an intention, not a term of 2012+ loans:

The legislation says: http://www.legislation.gov.uk/uksi/2012/1309/regulation/11/made

The government are not making use of the clause in borrowers' loan agreements saying they can change terms and conditions as uprating the £21,000 threshold is not yet part of the terms and conditions (this is the BIG misunderstanding).

N1AK

dizzie wrote: »

And you have the audacity to complain that the government also broke the rules by not charging -0.4% - in effect paying YOU to have the loan. Come on...that's ridiculous.

No, it's a embarrassingly naive distinction by you. The people who took a student loan did so based on terms, and the government ripped them up and chucked them out which is completely wrong.

There is no difference between changing a loan from -0.4% to 0% and changing one from from 2.2% to 2.6%. You wouldn't expect to be called ridiculous when a mortgage lender added 0.4% to a fixed rate mortgage for example before they felt like it.

- - -
On the main topic. I've written my own letter on the subject to my MP. The fact the government has done something immoral before doesn't make it any more ok for them to do it again.