Student Loans Company’s new ‘quick repayment’ tool is dangerous and irresponsible
New website design has ignored recommendations from MSE, universities and independent post-18 education review
MSE calls for ‘quick repayment’ system to be removed, which risks graduates overpaying by £1,000s
The UK’s biggest consumer website, MoneySavingExpert.com (MSE), is today slamming “irresponsible and dangerous” changes made to the Student Loans Company (SLC) website, which fly in the face of evidence and recommendations presented to the Government and SLC.
The site has been moved from SLC.co.uk to Gov.uk. Far from taking on board widespread concerns that student loans information is misleading and promotes financially poor decisions by graduates, the SLC has in some places “doubled down on the opposite”, according to MSE founder Martin Lewis.
Last year Martin Lewis, MSE and the Russell Group of universities proposed a radical redesign of the student loan statement, backed up by a 91% success rate when tested for understanding (1). The proposed statement aimed to reflect the true cost of higher education, painting a more accurate picture of a graduate’s lifetime repayments based on earnings, rather than a nominal ‘debt’ figure which bears only a loose resemblance to the real cost for most.
They called on the Government and SLC to use the new statement as the basis from which to redesign the official version, as well as to rename the statement – and further, the system – a “graduate contribution” statement.
However, the SLC has now launched its redesigned student loan repayment system, apparently disregarding these key proposals for the new statement and system, even though they were included in the recommendations of the independent, Government-commissioned Augar Review of Post-18 Education and Funding (2).
Most concerning and irresponsible is the ability to make ‘quick repayments’ – in part or in full – without logging in. For many graduates making extra payments doesn’t make any difference to what they have to repay in future and is therefore just flushing money away unnecessarily (3). Worse still, once voluntary overpayments are made, they cannot be undone.
This quick repayment system had been live for a week with no warnings for graduates of this danger, until MSE notified the SLC that it was planning to start this campaign (on Friday 17th July). On the back of this notification, the SLC did thankfully add some warning text, but it’s still far from ideal.
Even when logged in the new Gov.uk site still has the large, overall ‘debt’ figure front and centre – continuing to focus on the damaging ‘your balance’ figure against expert recommendations, which could scare graduates into making repayments that aren’t in their best interests.
While the logged-in site has, to a certain extent, added a few more explanations about how the system works and welcome information about how student loans differ from other forms of borrowing, the overall experience seems to be about promoting extra repayments. Yet whether the explainers will be seen and understood against the noise of the ‘numbers’ provided seems unlikely.
Martin Lewis, founder of MoneySavingExpert.com (and former head of the independent taskforce on student finance information), said: "The first thing university leavers see when they log in, in a large font, is the amount of ‘debt’ they owe. This is demoralising, damaging and dangerous. Owing £30,000, £300,000 or £3 million makes no difference to your annual repayments, which are set at 9% of everything you earn over a threshold (currently £26,575 per year). (4)
"The only impact the amount of debt has is whether you clear it or not within the 30 years before it wipes. And it’s predicted the vast majority – 83% – of university leavers won’t be earning enough that their repayments clear it in full. They’ll keep repaying it for the whole 30 years, like an additional tax – so the debt amount for them is pretty irrelevant.
"Yet this new site follows the old one in majoring on this scary, but often irrelevant, number. That makes many think they should overpay like a normal debt. Yet unless you’re making huge overpayments, for most people overpaying does diddly squat – you’ll still continue to repay 9% of everything over the threshold for 30 years. Overpaying is a total waste of money.
"So I was flabbergasted to see they went live with a ‘quick repayment’ system, without detailed warnings, cautions and explanation. That’s irresponsible and dangerous beyond belief – it's doubling down on the damage.
"Part of this redesign was so the Government could give more live data, and that’s a good thing. But it’s trivial compared to the negative risk of presenting student finance this way, prompting fear and distress for millions of graduates – which echoes across society and risks wrongly deterring many from a future of higher education.
"We worked with the Russell Group on a redesign to the student loan statement so it gave all the information needed, explaining the system in a proportionate way. The Augar review agreed it was better and should be done, so we had hoped the new website would work towards that, not away from it. Sadly, we were wrong.
"I will be writing to the Student Loans Company and the Universities Minister, Michelle Donelan MP, calling for the quick repayment facility to be removed immediately – it is far too flippant a tool for such a substantial and risky transaction – and calling again for a thorough overhaul of this misleading new Government website."
Notes to editors
(1) The redesigned student loan statement detailed how repayments actually work – including when the outstanding balance is wiped – and predicted the total amount a graduate would repay before this point (factoring in inflation and their earnings trajectory). For more on this, read MSE’s news story.
The graduate contribution statement was tested in an online survey of 5,796 students, former students and parents, some institutions (such as students unions) as well as in a series of student focus groups.
a. 96% of respondents said the new information is clear.
b. 90% said the statement helped them understand the student finance system.
c. A 91% success rate was achieved when respondents were tested to ensure they really did understand the more complex information correctly.
(2) In May 2019, the independent panel Review of Post-18 Education and Funding – chaired by Dr Philip Augar – published its report. It validated the findings of MSE and the Russell Group, acknowledging that the ‘loan’ is indeed more of a 9% extra tax and operates differently to commercial loans. It also confirmed that total ‘debt’ balances used by the Student Loans Company reinforce misperception and are “misleading”. The Augar review took MSE and the Russell Group’s compelling evidence on board and formally recommended renaming student loans a “student contribution system”. For more on this, see pages 175 and 176 of the report, recommendation 6.7.
(3) According to the Institute for Fiscal Studies, 83% of graduates who started their course after 2012 will not have fully repaid their loans by the time they are written off, 30 years after graduation.
(4) Martin’s comments are based on the current student loans system.