19 July 2016

Government defends decision to retrospectively change student loan terms in parliamentary debate

Yesterday, MPs gathered at Westminster to debate the government’s decision to make  changes to student loan terms. Here’s what you need to know.

As most students will be well aware by now, the government recently revealed plans to make a pretty hefty change to the official terms of plan 2 student loans (2012 and later).

The change, which will see the amount that graduates need to be earning before they start repaying their student loan frozen at £21,000, would result in them having to repay hundreds more, and in the case of lower-income graduates, potentially thousands over the lifetime of their loan.

Although MPs weren’t originally allowed to vote on the change, the government consulted a panel of experts before making their decision – and were overwhelmingly advised against making the move (84% of those asked said it was a bad idea!) but they went ahead with it anyway.

We tried to warn students that the government could make changes to the terms at any time if they wanted to back in 2011 in our Big Fat Guide to Student Finance but young people were consistently told that changes wouldn’t happen, even by schools.

A petition against the change was put together by Alex True, a 22-year-old Engineering Student from Durham University, in the hope that if MPs had a chance to discuss the retrospective changes in parliament, they might not go ahead.

The discussion made it to parliament yesterday, and whilst a lot was said in support of students and against the changes, it seemed to us more like an opportunity for Universities Minister, Jo Johnson, to defend the decision to make the changes than anything else.

We watched the entire debate, and we’ll be honest – it wasn’t the most riveting watch (but that’s why we’ve condensed it for you!).

So what happened in the debate?

ball-loansThe room was made up almost entirely by MPs there to argue against the retrospective changes, and on the opposite side, Universities Minister Jo Johnson representing the government in defence of the change. Awkward!

Labour MP for Warrington North, Helen Jones, opened the debate by pointing out that the government snuck this change through in the last budget without saying much of anything about it, so it’s taken a while for students to catch on to what’s happening.

In fact, if it weren’t for sites like Save the Student informing students about these matters, as well as university professors speaking out against the changes and one particular letter from a graduate complaining about the loan terms going viral (despite being factually incorrect), we wonder if students would have been informed about the matter at all.

As one MP said, undergraduate students have been hoodwinked.

What you need to know: In a nutshell

  • It’s estimated that government will make an extra £3.2billion over the lifetime of the loans with the change in place.
  • The government got the fee structure wrong (introduced in 2012): They failed to create enough skilled and high-paying jobs for graduates, and have now realised that graduates aren’t paying back as much as they had anticipated because they’re not earning enough – freezing the repayment threshold is a way of clawing back the loses they made with this error. So essentially they’re making students pay for their own mistakes!
  • The government snuck this change through in the last budget and students have taken a while to realise what’s going on (also because it was overshadowed by the scrapping of maintenance grants).
  • If this was a commercial company loan, the government would even be intervening; it seems that as they themselves have made this retrospective change, different rules apply.
  • The retrospective changes will affect mid-to-low earners the most. Figures published show that those who earn between £21-31k will repay £6,100 more over the life of their loan (due to the threshold freeze and the new fee structure) compared to those earning over £40k only repaying £400 more.
  • Statistics also show that women and ethnic minorities will be hit the hardest by these new changes, which raises questions about the Conservative government’s ambitions to allegedly widen the access to universities.
  • This is set to be the first generation that will earn less over their lifetime than their parents and there is a real issue with inter-generational fairness.
  • One speaker was part of an independent taskforce that toured schools in 2011 to educate future students about the introduction of the new £9,000 a year fees and how they would work. The taskforce told prospective students that changes like this one weren’t likely to happen, as this is what the government advised them at the time. Now, many members of this taskforce feel that they themselves were tricked and lied to and are therefore fighting this issue very strongly.

The government’s defence of the changes

not voting
After all of the speeches were made it was Jo Johnson’s turn to defend the Conservative government and their decision to make these changes.

He spent much of his time prattling on about how the government has actually increased the access, quality and funding for universities, claiming that this retrospective change to the loan terms had to be made in order to keep that positive growth going.

He then also fired out facts about the increase in university attendance by students from poorer backgrounds, whilst taking a few digs at the previous Labour government – in short, detracting from the discussion at hand.

The defence argument: In a nutshell

  • The government have a £3 billion shortfall (created by their own miscalculations) and it was a matter of either students or taxpayers having to foot the bill.
  • If the new fee system was introduced today, they would’ve set the threshold for repayments at £19,000 rather than £21,000.
  • He called the changes ‘minimal’ and emphasised repeatedly that possible changes to the student loans agreement were clearly mentioned on page 3 of a document that students have signed, so the government are within their right to make the change.
  • Bizarrely, he then went on to suggest that freezing the £21,000 repayment threshold wasn’t ‘technically’ a change but a matter of the terms of the loan staying the same. We were pretty appalled by this argument, as Johnson clearly knows that semantics aside, the government told students that the threshold would rise with average earnings in the UK.

What will happen now?

jo johnson looking guilty
In truth, not much. It quickly became clear to us that this debate (which Johnson originally rejected) was more about the government being given an opportunity to defend their decision to make the changes, rather than open a space for compromise.

However, one MP declared that if none of this is mentioned in an upcoming Higher Education debate, he’ll make sure it’s brought to discussion. Let’s hope Theresa May shows a bit more compassion for students than our last PM did – although it’s not looking likely.

Jo Johnson’s tactic of continually referring to the fact it states on page 3 of the loan terms that changes can be made at any time has also left us a bit worried that this might mean future changes are also in the pipeline.

Essentially, as Helen Jones quite accurately put it, the whole situation has taught students a really tough lesson: that they cannot trust the government, and who can blame them?

If you’re confused about anything to do with your loan repayments, feel free to drop us a line and we’ll try to help where we can.

Also, if you’re really up for it, you can watch the 2 hour debate here.

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9 Responses to “Government defends decision to retrospectively change student loan terms in parliamentary debate”

  1. Dan

    20. Jul, 2016

    As a recent graduate myself, I entirely agree that this is a really underhanded method of correcting what was clearly government miscalculation. However, I don’t agree with the implication that the government recouping loaned money is somehow wrong.

    “…would result in them having to repay hundreds more, and in the case of lower-income graduates, potentially thousands over the lifetime of their loan.”

    I may be misunderstanding the intent of this, but it comes across like saying that students shouldn’t have to repay their loans in full, because if you’re looking at full repayment, this changes very little from what I understand. In fact, if earnings rise but the base repayment threshold doesn’t, you should pay your loan off sooner as you’ll accrue less interest. You’d be worse off short term, but better off in the long run.

    Sure, you can argue for/against the loan system, or even paid education at all, but once a loan is agreed to, you have to be prepared to repay it with any interest. As students, I think we are (or perhaps “were” for graduates) often guilty of a sense of entitlement when it comes to receiving money from the government to study, and this is entirely wrong. Let’s not forget that the loans themselves are funded by taxpayers, many of whom won’t see the benefit of our higher education. Sure, higher education is vital for society as a whole, but we shouldn’t kid ourselves: most of us are in it primarily for our own satisfaction (perhaps medics can be exempt here!).

    It also seems to overstate the effect this will have on low-mid earners, as well as women/ethnic minorities (as no stats were given here, I can only assume it’s because they are more likely to fall into the former category of earners). £21-31k isn’t an especially high salary, but it’s also not one where you’d generally struggle for the extra £29/month that the upper estimate of £6,100 over 25 years roughly equates to. Assuming no dependants, that is.

    The government should have planned the loan structure better from the start, but the fact that we SHOULD be repaying our entire loan over its active period is unchanged. Suggesting that we are being hard done by to have to repay more of the money we’re liable for hints at an ill considered view of what the student loan is. If I’ve misunderstood the point or any facts, I apologise, but I pretty much see it as the government looking to make sure they get their money back, which seems fair enough, really. The fee hike was a slap in the face, but this is more just the reality of a loan.

    • Jake Butler

      20. Jul, 2016

      You have understood this in some way. The main issue overall though is not centred around the amount of repayments and repaying the loans but simply the fact that the government has made the miscalculation and it punishing students for that. They have retrospectively changed the loan agreement and, in effect, lied to 100,000s of students.

  2. Janine Cannon

    19. Jul, 2016

    There is no 2 ways about it ! The threshold should rise with the cost of living . The purpose of this loan was to help students build a future , not for them to be knocked down when that future becomes today …. Where are the ethics ?

  3. John Smith

    19. Jul, 2016

    Good idea to make students pay it back and lower thresholds. Why should the tax payer have to cover the costs when the student knew they were getting into debt.

    • Jake Butler

      20. Jul, 2016

      John, would you be happy if you took a loan from the bank and they changed the terms half way through your repayments? I would assume not… Why should the student have to cover the costs when the government know it was there decision that was incorrect?

      You have fallen into the trap that Jo Johnson wants everyone to. This is why he made a clear point to make this a taxpayer vs student issue when in fact it’s not.

  4. Georgina

    19. Jul, 2016

    Is there a way of knowing if your local MP attended this debate?

    • Jake Butler

      19. Jul, 2016

      Hi Georgina, who is your local MP?

      • Rory

        19. Jul, 2016

        I bet I know where my slimy, privileged wet rag of an MP stands on this. Was Philip Dunne (Con) there?

        • Jake Butler

          19. Jul, 2016

          The only conservative there at the start of the debate was Jo Johnson (he pretty much had to be there) but there’s one other Conservative that appeared (very late in the day) and chose not to speak.


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