New online student loan repayment service to launch in 2020
A new online student loan repayment service will launch in 2020 to give graduates more up-to-date information about their loans, largely replacing paper statements.
At the moment, graduates with student loans are sent an annual paper statement from the Student Loans Company (SLC) from the April after they graduate.
The statement shows the graduate's student loan balance, including the interest that's been added and how much they've paid off. But MoneySavingExpert.com has criticised the current student loan statement as misleadingly focusing on the 'debt' the graduate owes rather than the cost of repayments, and has called on the Government to adopt our redesigned version.
Today, the Government announced that the paper statements will be largely replaced by an overhauled online student loan service in 2020, in an attempt to modernise the current repayment system and provide students and graduates with more up-to-date information about their loans.
But the Government has yet to confirm whether it will be changing how student loan statements will be presented as part of the new online service.
See our Student Loans Mythbusting guide for more help understanding your loan.
Martin: 'More live data is an improvement – but that alone won't come close to fixing the problem'
Martin Lewis, founder of MoneySavingExpert.com, said: "The student loan statement system is broken. The Government's tinkering to give more live data is an improvement, but that alone won't come close to fixing the problem. Unless there are substantial further changes, these statements will remain blunt, misleading and financially dangerous.
"These statements prompt often-unnecessary fear and distress from many of the millions who receive it. Worse, that fear reverberates across society, and risks wrongly deterring many from a future of higher education.
"The problem is the outstanding 'debt' figure – the one that is being updated – is the main focus, and for most graduates is a nearly meaningless figure that bears only a loose resemblance to what they need to repay. A predicted 83% of current students in England won't clear their nominal 'debt' within the 30 years before it wipes. For them, the outstanding amount is therefore a poor indicator – as in fact it doesn't act like a debt, but more like a 30-year 9% extra tax on earnings over £25,725.
"The fact statements currently and will continue to frame it as a fast-growing debt means some are even spooked into overpaying £1,000s, even though they won't gain a penny from doing so.
"In the last year, together with the Russell Group we proposed a redesigned student loan statement that tries to paint a more accurate picture of lifetime repayments based on earnings. It met a 90% success rate in our testing with graduates, students and parents, and the Augar report recommended a shift towards this. So it'd be very disappointing if the Government doesn't take this opportunity to fix the problem – and help millions of students and graduates."
How is the online student loan service changing?
Data about student loan balances will be updated monthly as part of the new online repayments service. The current paper statement uses annual data, so graduates will be able to see more recent information about their loans under the new system.
But the Department for Education says the details of how these online statements will be formatted hasn't yet been finalised.
After the overhaul of the online service, most will no longer be sent a paper statement at all – though the Government says graduates can choose to continue receiving them.
The Government is also urging those who are close to paying off their student loans to switch to repaying by direct debit rather than through salary deductions, to avoid accidentally repaying once the loan is cleared.
What does the Government say?
Education Secretary Gavin Williamson 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."
Universities Minister Chris Skidmore said: "The Government is investing in the student loans system to make it as simple and easy for people to use as possible.
"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."
MSE weekly email
FREE weekly MoneySaving email
For all the latest deals, guides and loopholes simply sign up today – it's spam-free!
Join the MSE Forum discussion