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'Once I’ve got a student loan, can the government change the terms?' blog discussion

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'Once I’ve got a student loan, can the government change the terms?' blog discussion

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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.

Replies

  • danothydanothy Forumite
    2.2K posts
    Tenth Anniversary Combo Breaker
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    Thought it would be interesting to place these two extracts aside one another:

    The recent article on changing the rules:
    At this point having fought back some of the myths and misunderstandings around this system, to shout from the battle-tops a complex message which will be heard as "the whole thing’s based on jelly" could be extremely counterproductive and put even more people off.

    From an article about student loan interest rates in Sep 2009:
    Everyone's rate should be minus 0.4%, but the government exploited a post-1998 loans technicality to prevent this.

    ...

    But the real concern's the principle. Now we've slightly uncoupled inflation and student loan interest, who knows where it'll go in the future?

    I've heard people describe student loans as being mis-sold and others say that it's just the understanding of them that is poor.

    My thoughts on it are that understanding of student loans is undoubtedly poor, but that they are also peddled as linked to inflation and the reason for this is so that you pay back in real terms (spending power rather than nominal) what you borrowed.

    The fact is that this principle has been violated already in 2009 (technicality or otherwise) and while I am only slightly out of pocket because of it, the description (which one might call an advert) of what the loan will be isn't being adhered to.

    If it can be considered unacceptable for clauses to be invoked when the advertising gives an impression they won't be over a few pence a month for a phone then how can it be ok to decouple a multi-thousand pound student loan from inflation when the whole description of the loan system was based on being inflation linked?
    If you think of it as 'us' verses 'them', then it's probably your side that are the villains.
  • jamesdjamesd Forumite
    24.7K posts
    Part of the Furniture 10,000 Posts Name Dropper
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    The government has changed the law for existing loan contracts in the past, with the Early Settlement Regulations which overruled existing loan terms for repayment penalties. So it's clearly entirely possible to rule that student loans, whichever company makes them, have some term changed.

    It's based on jelly and precedent. It's not avoidable that it is and not worth a major campaign about it. Worth mentioning in guides as an unlikely but possible event.

    In times of need such as the situations in Greece, Ireland and Spain a government can and will tear up laws and contracts as seems necessary. That's included things like recently nationalising some private pensions in both the UK and Argentina. Student loan repayments for those making more than minimum wage would be an easy target compared to some.
  • wozearlywozearly Forumite
    202 posts
    People could make a similar argument for setting aside huge personal retirement savings in the expectation that the state pension could be withdrawn or dramatically changed at any time, although precedent and logic suggest this is incredibly unlikely due to the political fallout attached.

    Similarly, the tax system or the law could (in principle) be changed and applied retrospectively, but the chances of this happening are so remote that no-one wastes time and money trying to protect against it happening or demanding government guarantees that they won't do it.

    The 2009 shenanigans and creative use of "we can opt to not charge interest in any given year" to make student loan interest on some loans 0% rather than -0.4% so that the government avoided misrepresented headlines of "giving money to graduates during a recession, conpletely out of touch with ordinary people, etc" is the kind of political tweak that might be expected. Major retrospective changes are very unlikely.

    Completely agree that talking about this in a major campaign would create the impression that its being highlighted because there is a reasonable risk of it happening. That's not going to help anyone make a rational decision about whether to go to university or not.
  • jago25_98jago25_98 Forumite
    623 posts
    As much as I like Martin I guess he's been on the beeb more than a few times too many to be reliable.

    I don't buy the advise now. I really don't.

    The only good thing about debt is the crushing inflation offsetting it.

    Who's to say the rate won't increase?

    They have already changed the terms for some people. They sold the debt to rendering firms!

    And it's not a no-win no-fee investment. If you aren't paying it off it grows. All you've done is delay and you could be delaying to a day when very desperate measures come into play.

    Don't listen to Martin!
    Order of events: Banks lose our money -> get bailed out -> were inflating GBP to cover it -> now taxing us -> next will grab your funds direct -> things get really desperate to balance the books. What should have happened?: banks go bust and we lost our money much quicker
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