MSE News: MPs debate retrospective student loan changes in Parliament

MSE_Luke

The long-awaited parliamentary debate on retrospective changes to the student loans agreement is taking place today...

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'MPs debate retrospective student loan changes in Parliament'

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jamesd

The Hansard transcript of the debate is available.

Ed-1

MSE_Luke wrote: »

The long-awaited parliamentary debate on retrospective changes to the student loans agreement is taking place today...

Read the full story:
'MPs debate retrospective student loan changes in Parliament'

Click reply below to discuss. If you haven’t already, join the forum to reply. If you aren’t sure how it all works, read our New to Forum? Intro Guide.

Confused as to why Martin describes the minister's statement as using 'sophistry'. The fact is Government announcements don't become law until they are put into legislation and passed by Parliament.

The minister rightly said that the Government weren't changing the terms of the loans. They were leaving them unchanged. Totally correct as the terms students signed up to were in legislation (regulation 11) and in the guide to student loan terms and conditions 2012/13 (and all future versions so far) which they must agree to when they make an application. Both state that the borrower agrees to repay 9% of their earnings over a threshold of £21,000.

The uprating was announced but never put into the terms so it may as well never have been announced (very common in Government). There is therefore no need to retrospectively change anything as the threshold remains at £21,000.

Also confused as to this talk of the Higher Education and Research Bill which has nothing to do with student loans (other than introducing a power to make available Shariah-compliant loans). This Bill would allow the implemention of the Teaching Excellence Framework by providing for tuition fees to increase by varying amounts up to the rate of inflation depending on a higher education provider's TEF rating of teaching quality which the Government will implement through implementing the TEF into regulations under this Act (at the moment Government can only increase the maximum fee by up to inflation for all providers thanks to section 26(2) of Labour's Higher Education Act 2004 - they can't increase fees by differing amounts for different providers). Regulations under 26(3) set the inflation index to be used as RPIX (Retail Price Index excluding mortgage payments). So in effect, the Higher Education and Research Bill limits the fee increases to providers judged by the TEF to have high teaching quality. Parliament approved it at second reading today (by a majority of 36) and subject to it passing through the later stages of the House of Commons and then the Lords it will become law as the Higher Education and Research Act. The list of higher education providers eligible to increase fees by forecast RPIX inflation of 2.8% (so to £9,250) in Year One of the TEF (2017/18) is here. You can read more about the TEF in the white paper. For providers with a TEF level 1 rating in 2017/18 and 2018/19, they will be able to increase fees by the full inflationary increase. From 2019/20 onwards, providers with a level 1 TEF rating will only be able to increase fees by 50% of the inflationary increase; providers with a level 2 or 3 TEF rating can have the full inflationary increase. With inflation due to rocket as a result of Brexit, expect fees to rocket over the next few years!

Wes Streeting's comments about tabling amendments over this Bill which has nothing to do with student loans was merely to be awkward to the Government in trying to throw things in the way of its passage through Parliament. In the event no amendments were selected.

The bottom line is that Martin is now demonstrating a misunderstanding of the loans and the legislation surrounding the repayment terms. Parliament can't force a Government to implement a policy, it can only block legislation that the Government brings forward. It doesn't need to bring forward any legislation to implement a threshold freeze as it can leave it as it is with a threshold of £21,000 which students signed up to.

This talk of retrospection is rubbish. If the Government had already implemented a threshold uprating term for the £21,000 threshold and then retrospectively altered it (even though they can do that with income-contingent student loans) it would be much worse, but then again could've been blocked by Parliament as it would have required an amendment to regulations.

See the briefing note available here:

"The changes to the repayment threshold [in 2012] were brought in under the Education (Student Loans) (Repayment) (Amendment) (No. 2) Regulations 2012. Regulation 11 states that the repayment threshold for a borrower with a post-2012 student loan is £21,000, however the regulation does not include a provision to uprate the threshold."

"The Government’s position is that freezing the repayment threshold for these loans does not require a change to the existing secondary legislation underpinning loan repayment ... no change from the current loan arrangements would be required."

The invisible uprating 'term' that Martin claims is retrospectively being changed is not even in the guide to terms and conditions which students signed and indicated they had read when they applied. Terms are not made orally! They must be in the regulations. Until the term had been made it should have come with a health warning on all third party sites - and indicated to be an intention, subject to future Government - as it was a Government announcement only (which, by the way, the Lib Dems allowed not to be implemented when they had the chance to implement it). In the event, the Government decided not to implement it before it would've come into force. Also students should be guided to the relevant documents on MSE - they should not solely rely on third party websites when taking out financial products.

But even if it had've been in the terms at the time, it's still a fundamental misunderstanding as to how income-contingent loans work. As I wrote here (and by the way no-one seemed to have passed on my comments to members in the debate...) even terms that have been legislated for in the past (by the Labour Government - the minister missed a chance to come back at them in the debate) have been retrospectively changed and this is the crux: income-contingent loans are as much a tax as a loan. What Martin should be saying is "the £21,000 threshold is even more generous than was intended (because it's 83% of average earnings, not the intended 75%), still more generous than currently applies to pre-2012 students in real-terms, and in all circumstances means students can afford to go to university for the first time at least" (ELQ rules restrict loan access for further undergraduate degrees and so affordability is conditional on accessing student loans).

No matter how much you want to make income-contingent loans regulated loans (that is regulated by the Consumer Credit Act) like the old mortgage-style loans were (they had terms that had to be fixed at the time of application due to their commercial-like terms), you can't as the Teaching and Higher Education Act 1998 which the loans are made under says they aren't regulated loans. My view (and I'm someone with these loans) is that as these loans are not on commercial terms it is asking a lot to have the same protections as commercial loans. It's rather like saying that I want certainty over what my income tax threshold will be over the next 30 years as it keeps retrospectively being changed! I suspect that is exactly the reason that Tony Blair's Labour Government of 1997 did not legislate to make these regulated loans. If they had've done it would be a different story.