The Student Loan repayment system’s changing this year – here’s what you need to know
Fed up of hoarding letters from the Student Loans Company? You're in luck. The repayment system is (finally) getting a makeover – but are the changes good enough?
It's predicted that 83% of graduates with a Plan 2 loan won't pay off their Student Loan in full before it's cleared. But, too often, we hear stories of grads accidentally over-repaying their loans by pretty huge amounts, showing there are some major issues with the current system.
In the hopes of improving this, the Department for Education has announced plans to introduce a new online repayment service for the Student Loans Company (SLC) later this year.
Read on for more info and to hear Save the Student's take on the changes...
Changes to the Student Loan repayment system
In 2020, the government will be introducing a new online repayment service for Student Loans that could largely replace annual paper statements.
Under the current system, grads have typically been receiving a paper statement in the first April after they graduate.
While there will still be the option to opt-in for paper statements if you prefer, the new service will provide information online which is regularly updated and easy for grads to access. It's hoped that this will help people keep track of how much they owe, how much they've paid and how much is left outstanding.
Although there is currently a repayment website for SLC, the changes that have been announced are being presented as an 'overhaul' of the Student Loan repayment system.
Gavin Williamson, Education Secretary, said:
Student Loans can remain part of graduates' lives for many years, so it's only right we do all we can to improve the system for them.
These changes will make it easier for students to understand their balance, manage their loan and avoid over-repaying.
But, despite the improvements to the system, Chris Skidmore, Universities Minister, still urges graduates to consider using direct debit to pay the final repayments of their loan:
I urge all graduates to use this new service and to join the direct debit scheme as they approach the end of their loan to ensure a smooth end and not repay more than they should.
Although the new system's due to go live in 2020, it's not yet clear what the launch date will be – watch this space for more details.
Is enough being done to improve Student Finance?
While it's great to see the government taking the initiative to address some of the confusion around Student Loan repayments, at Save the Student, we're not quite convinced this online repayment service will really do enough to fix the issues.
It's concerning that Chris Skidmore is still urging graduates to switch to direct debit towards the end of paying off their loans to avoid over-repayments, even with the new service.
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Is it too much to ask that, if the government is overhauling the system, they could do so in a way that automatically prevents over-repayments?
And, as the majority of grads are unlikely to pay off all of their loans before they're cleared, we think there are other areas of Student Finance that should be invested in as a matter of urgency. Many students are struggling to make ends meet, so a priority for the government should surely be addressing how Maintenance Loans are calculated and fixing that system, too.
Our resident student money expert, Jake Butler, said:
We're glad that the issue of graduates over-repaying their loans is being addressed by the government, but it's disappointing that the new service doesn't seem to fully address the problems.
Even with online updates, it's unrealistic to expect grads to keep track of their loan repayments for decades and make necessary changes themselves to avoid over-repaying their loan. The technology should be there to prevent it automatically.
It's also frustrating that the government appear to be using this to assure the public they understand the issues with Student Finance. We're worried they're moving attention away from the real problem: the inadequate Maintenance Loans received by too many students.
It is unfair to calculate Maintenance Loans based on assumptions that parents with certain incomes will financially support their children at uni. This isn't always the case, and this is one system that needs to change, urgently.
A new online repayment system is a start, but there's still much more that needs to be done. We hope to see the government do more to address issues with Student Finance, and soon.
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