Student Loans
Debate between Meg Hillier and Vikki Slade
Dame Meg Hillier
One good thing is that the Government have recognised that problem in their response to us. We are dealing with mostly teenagers under the age of 18. Sometimes those going to university for the first time do not have other people around them who can advise them about the impact of a loan, and many have no choice and have to take out a loan. The cohort now paying back under plan 2 is being further penalised by the threshold change, so more and more is being layered on that particular cohort. There needs to be more fairness in the system.
Vikki Slade (Mid Dorset and North Poole) (LD)
I speak as the mother of three students, one of whom has just graduated. Two of them have a plan 2 loan, and one has a plan 5 loan. They and I were unaware that they are not allowed to start repaying their debt until they graduate, yet the interest starts from the very first day that they take the loan, which can be a gap of three or four years or, as was suggested earlier, even six or seven years. That adds between £5,000 and £8,000 to their borrowing. Did the Committee look at that? Has it made any recommendations on that specific issue?
Dame Meg Hillier
The Committee certainly received some evidence on that issue. There is a logic to not paying back the loan until that point, because students are mostly not working, so there would be a real challenge in paying it back while someone is an undergraduate or graduate student. The hon. Lady rightly highlights that that has caught a lot of people unawares, as they were not aware of how much it ratchets up. There is layer upon layer of complexity, and the fact is that parents do not fully understand the impact.
The hon. Lady says that she has children on plan 2 and plan 5 loans. The bigger picture, which I have looked at over many years, is that Governments of different colours keep changing the student loan package, and each package is more complicated than the last. Plan 5 is paid back over 40 years, but plan 2 is paid back over 30 years. Try keeping up with that! It is very confusing. The Government’s commitment to greater transparency is welcome, but it is only a first step.