Martin Lewis has slammed the “irresponsible and dangerous” changes made by the Student Loans Company to its website.
MoneySavingExpert.com has criticised the changes for flying “in the face of evidence and recommendations presented to both it and the government”.
The Student Loans Company, also known as SLC, is a non-departmental public body company in the United Kingdom that provides student loans.
It is owned by the government’s Department for Education, the Scottish Government, the Welsh Government and the Northern Ireland Executive.
But criticism has followed since the Student Loans Company moved its site from SLC.co.uk to Gov.uk.
There have been widespread concerns regarding the clarity of student loans information offered on the site, as well as fears the way information is presented is misleading and promotes financially poor decisions by graduates.
It was believed the new site could act on these concerns.
MoneySavingExpert founder Martin Lewis has said the SLC has in some places “doubled down on the opposite”.
Last year Martin, MoneySavingExpert.com 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.
The proposed redesigned statement aimed to reflect the true cost of education, offering 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.
Along with the Russell Group, MSE called on the government and the SLC to use the new statement as the basis for redesigning the official version, and to rename the statement, as well as the system, so it is about “graduate contribution” instead.
But the SLC has since launched its redesigned student loan repayment system and seemingly disregarded the proposals for the new statement and system – despite the redesign being included in the recommendations of the independent, government-commissioned Augar Review of Post-18 Education and Funding.
What’s wrong with the new Student Loans Company website?
Martin Lewis said the “most concerning and irresponsible” aspect of the site is the ability to make “quick repayments” – in part or in full – without logging in.
The finance guru said for most graduates, making extra payments doesn’t make any difference to what they have to repay in future – so it is unnecessarily flushing money away.
Problematically, once voluntary overpayments are made, they cannot be undone.
The quick repayment system was live for a week with no warnings for graduates of this danger – until MSE notified the SLC.
On the back of this notification, the SLC did add some warning text but it could still lead many graduates to making unnecessary payments.
Even when logged in, the new Gov.uk site still has the large overall debt figure taking centre stage – continuing to focus on the damaging ‘your balance’ figure against expert recommendations, which could scare graduates into making repayments which aren’t in their best interests.
Keep up to date with local news in your area by adding your postcode below:
While the logged-in site has added a few more explanations about how the system works, and has welcome information about how student loans differ from other forms of borrowing, MSE say the overall experience seems to be about promoting extra repayments.
Martin Lewis 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).
“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 it 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.”