Student Loans Company

Baroness Garden of Frognal Excerpts

Wednesday 1st May 2019 Lords Chamber

[Baroness Garden of Frognal (LD)]

My Lords, I thank the noble Lord, Lord Mendelsohn, for introducing this debate on the Student Loans Company, a company which has had more than its fair share of problems. It has had four CEOs within a matter of months. As we have heard, Steve Lamey was suspended and his contract terminated. He was followed by interim CEO David Wallace; then the veteran Peter Lauener took over, also as interim CEO. Finally, in September 2018, Paula Sussex was appointed to this role. To lose one CEO seems careless, but to have four within such a short period smacks of a real disquiet.

The job of the SLC, as we know, is to manage money, pay maintenance grants and loans to learners, and pay grants to HE and FE providers. As the noble Lord has said, this is a complex business, and it appears to be a challenge too far. We know that Mr Lamey was appointed in spite of reservations, apparently on the advice of one of the Minister’s special advisers, and he was appointed with an extended probationary period. But then, on 7 November 2017, he was sacked without pay for gross misconduct in public office. Criticisms were made of his leadership and management style, and various other allegations were made which might have been foreseen. Was an injustice done to Steve Lamey?

The Student Loans Company has been plagued by a series of executive scandals. In 2009, two senior executives resigned after the company failed to cope with more than 1 million applications for loans, after taking over responsibility for loans from the local authorities. In 2010, the then CEO Ralph Seymour-Jackson resigned over thousands of late and failed repayments that left undergraduates without cash and universities having to resort to distributing emergency funds. In 2013, the then CEO Ed Lester resigned after he avoided tax by getting his salary paid through a private company. In 2014, the former chair of the company offered their resignation after the SLC used letters from a fictitious debt collection company to threaten legal action against graduates who had missed repayments. Regulators forced the company to change the wording of the letters. It is a short and unhappy life leading the SLC.

The student loan repayment process has been widely criticised. In 2016-17, 85,000 graduates paid off more than they owed and 40 people overpaid by more than £10,000. The Student Loans Company now recommends that graduates transfer to paying their student loan contributions by direct debit in the final two years to avoid overpayments, but only 34% of eligible graduates do this. However, HMRC and the Student Loans Company have now developed a protocol that allows them to exchange data weekly rather than annually, and hopefully this will prevent overpayments.

Interest on student loans is linked to inflation and is capped at 3% above RPI inflation for the highest earners. By contrast, the Bank of England base rate is 0.75%. This should certainly be reviewed. It seems outrageous that students are expected to pay interest at rates so much higher than other people’s. In March 2017, outstanding student loan debt exceeded £100 billion for the first time, which is more than double the outstanding debt from five years ago. Should we be worried about this?

The Education Select Committee has criticised how the Student Loans Company assesses the eligibility of “estranged students”—those who are no longer in regular contact with their parents—for student finance. The National Union of Students has evidence that the Student Loans Company is trawling through the public social media posts of these students to identify conversations between them and their parents.

The Student Loans Company’s new chief executive says that governance is improving—it could hardly get worse. However, as of October 2018, the new chief executive had not met a government Minister. Ministers are supposed to meet the chief executive at least twice a year. Could the Minister say whether such meetings have now taken place?

All of this makes me really nostalgic for the much-maligned Liberal Democrat policy of no fees. Think of all the money spent on the Student Loans Company that would have been saved—money spent on its administration and chasing students, rightly or wrongly, for payments—and the fact that over half of students will not repay the loans, so the Government will be paying anyway. How wonderfully simple it would have been, and arguably more economic, to have adopted our fully costed policy in 2010. Alas, it was not to be and the moment has now passed, but can the Minister say what the actual costs of the student loans are?

The Liberal Democrats would reverse Conservative cuts to higher education so that it remains open and outward-looking and promotes opportunity for all. We would also reinstate maintenance grants for the poorest students, ensuring that disadvantaged young people do not have the highest loans to repay. We would argue for the reinstatement of nurses’ bursaries, recognising the urgent need to address the crisis in NHS recruitment and retention. We would lower the cap on interest rates so that it better reflects the cost to government of administering the loans and establish a review of higher education finance in the next Parliament to consider any necessary reforms. This would include the option of a graduate tax, in light of the latest evidence on the impact of HE finance on access, participation and quality.

We all wonder what the long-awaited Augar review will say. We need a better assessment of how the policy would work and its impacts, and to design one which has the proper interests of its stated objectives in mind: namely, students, higher education and the strength of the UK.

I have just come from being awarded a fellowship by Birkbeck. What are the Government doing to restore faith in adult and lifelong learning and how can the loans company contribute in a positive way to this essential part of education?

The Student Loans Company was branded the worst place to work at one stage, with severe discontent among employees. However, last month, it celebrated obtaining silver-standard accreditation status from Investors in People for its ongoing commitment to supporting, developing and empowering its staff, so maybe things are looking up. Last year, the then Minister Sam Gyimah ordered a review of the SLC. I can find no evidence of this review. Am I not looking in the right place? Can the Minister say what has happened to that review?

We hear that in the five years to 2023, the amount lent to students is expected to grow by almost £5 billion, partly due to the increase in maintenance loans following the ending of grants. Do the Government have any plans to reinstate grants? We know that, particularly for adult learners, the prospect of debt is a considerable deterrent to learning, yet the country needs all the adult learners we can encourage if skills gaps are to be filled. It is important that FE is funded and supported, just like HE.

There are questions aplenty to answer over this beleaguered company, and we look forward with interest to the Minister’s reply.