The Student Loans Company is giving graduates a “demoralising, damaging and dangerous” picture of their debts, according to the consumer finance champion Martin Lewis, who accused the company of pushing its users into making needless repayments.
Lewis, the founder of Moneysavingexpert.com, said a new version of the SLC’s repayments website exaggerated the status of outstanding loans of former students, and prioritised quick repayment options while failing to make clear that they make “diddly squat” difference to what most people need to repay.
“I will be writing to the Student Loans Company and the universities minister, Michelle Donelan, 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,” Lewis said.
Users logging on to 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 from the loans they took out as students, ignoring recommendations from Lewis and others that the figures should be presented with more context.
According to Lewis, the site underplays key facts about student loans in England: that repayments are fixed at 9% of a graduate’s income above £26,575, with the remainder written off after 30 years for university students from 2012 onwards.
“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 £3m makes no difference to your annual repayments,” Lewis said.
“The only impact the amount of debt has is whether you clear it or not within the 30 years before it is wiped. And it’s predicted the vast majority – 83% – of university leavers won’t earn enough that their repayments clear it in full. They’ll keep repaying for the whole 30 years, like an additional tax – so the amount of debt for them is pretty irrelevant.”
In response, David Wallace, SLC’s deputy chief executive, said the new online service was the result of extensive consultation with its users, who wanted more up-to-date information about their outstanding balance, as well as holding two meetings with Lewis’s organisation.
“We think we’ve done a really good job here for customers, the feedback we’ve had was good. So we were really disappointed at the reaction from Moneysavingexpert,” Wallace said. “We’re providing the balances that the customers have asked for, and it certainly hasn’t put off any prospective students from taking out student funding for higher education. So we think we are doing the decent thing for customers by listening to them and responding.”
SLC said the online service provided context “on the unique nature of student loans and the conditions of repayment” and makes clear that graduates should carefully consider their financial circumstances before making voluntary repayments.
“The quick payment option also makes it easier for the small proportion of customers who have someone – such as a parent – making repayments on their behalf and for overseas customers who are required to make monthly repayments,” a spokesperson for SLC said.
The company said that “in the coming months” it would contact users to remind them that they were only required to pay 9% of their earnings above the repayment threshold, regardless of the outstanding loan balance.
Moneysavingexpert.com’s analysis found that while the new site has added more explanation on how income-contingent loans work, too much emphasis was placed on making extra repayments, which facility is offered to users even before they log on. “Whether the explainers will be seen and understood against the noise of the numbers provided is questionable,” it said.
Lewis said that despite his efforts to provide clearer explanations, backed by the Russell Group of leading research universities and the government’s review of student funding led by Philip Augar, the SLC persisted in highlighting “this scary, but often irrelevant” outstanding loan figure.
“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,” Lewis said.
“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.”
Wallace said a “technical glitch” meant that information about future repayments had not been displayed when users logged in to make additional repayments but that had been fixed after Lewis’s organisation had pointed it out.
SLC administers loans and repayments for nine million current and former students. Students who started university in England last year are forecast to accrue more than £40,000 in loans from the SLC, on average, by graduation. Last year the company’s income-contingent loans totalled £140bn, more than double the amount of five years earlier.