Student Loans Agreement

Liz McInnes Excerpts

Monday 18th July 2016 Westminster Hall

[Liz McInnes (Heywood and Middleton) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Pritchard. I thank my hon. Friend the Member for Warrington North (Helen Jones) for securing and leading the debate on this very important issue and for her work chairing the Petitions Committee. I also thank the 130,000 signatories who have highlighted to Parliament their dissatisfaction and concern about the changes to the student loan repayment structure. Many of those signatories come from areas that have Tory MPs. One could be forgiven for not realising that, given the attendance from Tory MPs in this debate, which I am pleased to note has recently increased by 200% from a grand total of none.

Since becoming an elected Member of this House, I have seen the Conservatives continually attacking workers’ rights and the healthcare system and freezing public sector wages. We have witnessed unequal cuts to welfare and local councils, as well as a substantial reduction in front-line police officers and firefighters, but no single group in society has been given as unfair a deal as our students. They have seen an unfair deal at every turn. There has been the loss of the education maintenance allowance, which gave people from the poorest backgrounds £30 a week. That might seem a small amount to some, but it gave 12,000 young people their only chance to go on to further education. Many of them went on to university. The coalition Government cut that allowance, and that affected my constituents in Heywood and Middleton. They found that they could no longer afford the bus fares to attend Hopwood Hall, a further education college in my constituency.

State sixth forms have lost a third of their funding, as it has not been ring-fenced from cuts. Mental health services have been overlooked and hugely underfunded. Youth support and advice services have been lost. There are also the changes to voter registration, the lowest rate of house building since the 1920s, the alteration of student nurses bursaries, which have been turned into loans, and the astronomical increase in tuition fees from £3,000 a year to £9,000 a year. In her role as Home Secretary, the new Prime Minster wrongly deported 48,000 international students, and that was before we voted for Brexit.

Students are clearly receiving the worst dealt hand of the lot. The retrospective changes to the student loan repayment system are unacceptable, unjust and underhand. As many Members and hon. Friends have pointed out, if the Government were a registered commercial company and made retrospective changes to their loan terms, the regulator would not permit the process. We are now the regulator in this House and we should not permit the process. We cannot and should not play politics with people’s education.

The average increase in loan repayments will be just under £2,000 across all graduates. As has been mentioned, those from the poorest 30% of households will repay an average of around £3,000 more under the new rules. Freezing the repayment threshold has a proportionately larger impact on repayments by graduates with lower lifetime earnings. All that equates to 2 million graduates who will end up paying £306 more each year by 2020-21 by comparison with 2016-17. The average student leaving university will have a debt of £44,000 before even acquiring his or her first job.

When the introduction of the tuition fees hike to £9,000 was announced in 2010, the former Prime Minster and the former Chancellor of the Exchequer said that students would only start paying the money back at a graduate’s salary, proclaiming that was “fairer” and “progressive” and “helped social mobility”. In 2015, the Department for Business, Innovation and Skills looked at the current proposal and concluded that it would have a disproportionate impact on women, disabled students and students from the most disadvantaged backgrounds. The National Union of Students calculated that students previously eligible for maintenance grants who took out their full loan entitlement on a three-year course would graduate with debts worth more than £50,000. That is not progressive; it is not fairer and it certainly does not help social mobility.

The change will not only affect students; it will also have a significant effect on the taxpayer. The Office for Budget Responsibility estimated that, in 2046, when the first set of graduates on £9,000-a-year fees can have their debts cancelled, £11.6 billion will be scrapped. That will increase to £19.9 billion only two years later. In total, 73% of graduates are now expected to never fully pay off their debt, by comparison with 32% under the old system. Figures from the Royal College of Nursing show that it would take 247 years to repay a NHS loan on a staff nurse’s salary. I know that life expectancy is increasing, but I had not realised that the Government expect it to be on that scale.

In their last two manifestos, the Government have said, “We should live within our means,” and, “We shouldn’t pass on levels of debt for future generations to pay,” yet we have seen the debt double to £1.7 trillion since 2010. We have now lost our triple A credit rating, all while burdening younger generations with £44,000-worth of debt before they even get on the job and housing ladder. That is unsustainable and unattainable.

It is now clear that it is the Conservatives who have been reckless and maxed out the nation’s credit card, and it is our children who will be footing the bill. I believe that an investment in knowledge pays the best interest. I hope that the Government will rethink this regressive policy, which is at the heart of all that is underhand, unscrupulous and unfair. If they do not, it will be seen as an act of betrayal for a generation. It is not just a financial and legal issue; most importantly, it is a moral issue.

--- Later in debate ---

[Joseph Johnson]

I reject the characterisation of our labour market as a failure. Clearly, when we look at the unemployment figures today, we cannot but be struck by the extent to which we have succeeded in getting many thousands more young people into work. The latest unemployment data from the ONS show 23.1 million people working full time, which is 300,000 more than even a year ago, let alone than in 2010. The percentage of young people out of work is now at a record low altogether.

[Liz McInnes]

While the Minister is quoting employment figures, will he tell us how many of those jobs are high-paid graduate jobs?

[Joseph Johnson]

Graduates from our universities do spectacularly well on the whole in moving into graduate employment. Obviously, we want variability across the system to even out and we want to ensure less patchiness in the system, but graduates do go into graduate employment on the whole.

The funding system put into place is also progressive. Interest rates after graduation increase with income, so that high earners repay more. For those earning £21,000 or less, the interest rate is set at RPI flat: the loan balance does not increase in real terms. For borrowers who earn more than that, the interest rate increases to a maximum of RPI plus 3%. It is only fair that borrowers who have benefited most from their education should repay the most back into the system.

Student loans are very different from a mortgage or credit card debt. Repayments are determined by income, not the amount borrowed. Borrowers are protected. If at any point their income drops, so do their repayments. Borrowers will repay only if they earn above the threshold and the loans are cancelled after 30 years, so many borrowers, as I said, will not repay the full amount. That is part of the taxpayers’ investment in our country’s skills base.

I recognise hon. Members’ concerns that students may not be fully aware of the terms and conditions of their loans at the time of application. The Student Loans Company does, however, provide students with a clear statement of the terms before the student completes their application for a loan. On page 3 of “Student loans—a guide to terms and conditions”, it states clearly—this is not hidden in some small footprint—that

“The regulations may change from time to time and this means the terms of your loan may also change. This guide will be updated to reflect any changes and it’s your responsibility to ensure you have the most up-to-date version.”

Furthermore, it is worth noting that the threshold freeze did not actually change the terms and conditions; it merely left them unchanged.

That information includes the way that interest will be applied and the repayment terms that will apply. Students are asked explicitly to confirm that they understand the information before they are granted the loan. All the information that the SLC provides to students is reviewed regularly to ensure that it is both accurate and accessible.