The Student Loans Company is offering graduates a “demoralizing, harmful and dangerous” picture of their debts, according to consumer credit champion Martin Lewis, who accused the company of pushing its users to make unnecessary repayments.
Lewis, the founder of Moneysavingexpert.com, said that a new version of the SLC’s repayment website exaggerated the status of outstanding student loans and prioritized quick repayment options, without being able to clarify that they make the “rude” difference with what most people need to repay.
“I will write to the Student Loans Company and to the minister of universities, Michelle Donelan, asking to immediately remove the rapid refund facility – it is too irreverent a tool for such a substantial and risky transaction – and I will ask again to review this misleading new website of the government, “said Lewis.
Users accessing the SLC’s new online student loan repayment system – launched earlier this month after its move to the gov.uk domain – are shown an overall balance of the loans they have taken as students, ignoring the recommendations Lewis and others that the figures should be presented with more context.
According to Lewis, the site explains the key facts about student loans in England: that repayments are set at 9% of a graduate’s earnings over £ 26,575, with the remainder canceled after 30 years for college students from 2012 onwards.
“The first thing college students see when they log in, in large print, is the amount of ‘debt’ they owe. This is demoralizing, harmful and dangerous. Due to £ 30,000, £ 300,000 or £ 3m it makes no difference to your annual repayments, “said Lewis.
“The only impact that the amount of debt has is whether or not you cancel it within the 30 years preceding its cancellation. And the vast majority – 83% – of college graduates are not expected to earn enough to pay them back completely. They will continue to repay for all 30 years as an additional tax – so the amount of debt for them is rather irrelevant. “
In response, David Wallace, SLC’s deputy executive director, said the new online service is the result of extensive consultation with its users, who wanted more up-to-date information on their outstanding balance, as well as holding two meetings with the organization. by Lewis.
“We think we’ve done a great job here for the customers, the feedback we’ve had has been good. So we were really disappointed with Moneysavingexpert’s reaction,” said Wallace. “We are providing the sales that the customers have asked for and certainly not discouraged prospective students from taking student funding for higher education. So we think we are doing the right thing for customers by listening and responding. “
SLC said the online service provides a context “about the unique nature of student loans and repayment terms” and clarifies that graduates should carefully consider their financial circumstances before making voluntary repayments.
“The quick payment option also simplifies the small part of customers who have someone, such as a parent, who repay on their behalf and for foreign customers who are required to make monthly repayments,” said an SLC spokesman.
The company said it “will contact users in the coming months” to remind them that they were required to pay only 9% of their earnings beyond the repayment threshold, regardless of the outstanding loan balance.
Moneysavingexpert.com analysis found that while the new site added further explanations on how subordinated income loans work, too much emphasis was placed on making extra repayments, which structure is offered to users even before they log in. . “Whether the explanators will be seen and understood against the noise of the numbers provided is questionable,” he said.
Lewis said that despite his efforts to provide clearer explanations, supported by the Russell group of leading research universities and the government’s student funding review led by Philip Augar, the SLC continued to highlight the figure for loans “frightening, but often irrelevant”.
“This makes many think that they should overpay like a normal debt. However, unless you are making huge overpayments, for most people, overpaying sucks – you will still be repaying 9% of everything over the threshold for 30 years. Overpayment is a total waste of money, “said Lewis.
“So I was amazed to see that they went live with a” quick refund “system, without detailed warnings, precautions and explanations. It is irresponsible and dangerous beyond imagination – double the damage.”
Wallace claimed that a “technical problem” means that information about future refunds was not displayed when users logged in to make further refunds, but that they had been corrected after the Lewis organization reported it.
SLC manages loans and repayments for nine million current and former students. Students who started university in England last year are expected to accumulate on average over £ 40,000 in loans from the SLC per degree. Loans for the company’s potential income totaled £ 140 billion last year, more than double that of five years earlier.