30 June 2016

Parliament to debate retrospective changes to student loan terms

A Labour MP has managed to bring the debate over changes to student loan terms to parliament – despite a petition being rejected last week.student debtCredit: Michael Fleshman – Flickr
The government has recently come under fire (but what’s new, eh?) after confirming that they’ll be making retrospective changes to the repayment terms of UK students loans.

In case you’ve been living under a final exam-shaped rock recently and missed all the commotion, the Conservatives have been up to some dirty tricks where tuition fee repayments are concerned.

Before students have even resumed speaking terms with them following the decision to triple tuition fees back in 2012, the government have cranked up their mission to become student enemy number one by backtracking on part of the official loan terms that was agreed back in 2010.

This manoeuvre would be considered illegal if these changes were being made to bank loans, and financial experts reassured students and graduates that retrospective changes to the terms would never happen. However, we remained sceptical, warning readers that unfortunately the government could technically make changes if they really wanted to.

Do you know exactly how much you’ll owe in your student loan repayments? Let our student loan repayment calculator work it out for you.

The loan term changes explained

confusedbritneyThe government have backtracked on a promise they made back in 2010 that from 2017 onwards, they would allow the loan repayment threshold to increase gradually over time along with average earnings.

This would mean that as inflation increases over time, and average UK salaries also increase (in theory, but recent research has found that this unfortunately isn’t always the case), the amount you’d need to be earning before you start paying off your loan would also increase.

By choosing to go back on their word and freeze the threshold at £21,000, this means that graduates will probably start paying their loans off earlier than expected as it will take less time to start earning over £21,000 as average salaries go up.

If the change goes ahead, this will also result in most students (once they’re earning above the £21,000 threshold) having to pay back more of their loan each month, as the gap between their earnings and the threshold will no longer be decreasing (remember, you repay 9% of anything that you earn in that gap between the threshold and your earnings. Therefore a bigger gap = higher repayments).

How students responded

angryCredit: Ryan Hyde – Flickr
First of all, recent graduate Simon Crowther wrote an open letter to his MP to complain about the changes. The letter went completely viral (shared over 20,000 times) (despite being factually incorrect – read our response to his letter here. Corrections included!).

A professor from Goldsmith’s also spoke out saying he believed that students should even receive compensation from the government for loans which he said were ‘mis-sold’ to students.

Then, a petition was put together by Alex True, a 22-year-old Engineering Student from Durham University, that sought to prevent the changes from going ahead.

However, despite getting 130,000 signatures the petition was, quite controversially, rejected for parliament discussion. Normally, if a petition reaches the 100,000 signature mark it has to go to parliament, so again – pretty unimpressive!

However, Labour MP Valerie Vaz has somehow miraculously secured the debate for parliament after a meeting with Universities Minister, Jo Johnson, this morning. Go Vaz!

A word from the original creator of the petition

I am hoping as a minimum that the threshold freeze will only apply to new applicants. At least this would go some way to restoring trust in the student loans system as it would be unfair (and possibly illegal) to change a loan agreement retrospectively without the consent of both parties.

Hopefully this will prevent any further attempts at retrospective changes to the student loans agreement. – Alex True

What happens now?

waitingWe wait! The debate is scheduled for parliament discussion on 18 July at 4.30pm.

So for now, we sit tight and cross our fingers! Sign up to our newsletter and we’ll keep you in the know.

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