Student Loan Repayments

Patrick Grady Excerpts

Monday 27th June 2016 Commons Chamber

[Valerie Vaz]

I thank the hon. Gentleman for his intervention. I can say in his defence that most of us were taken by surprise that the Adjournment started so early. I agree with him that the Northern Ireland system seems to be much fairer.

I do not call the figures that I have just given progressive, and nor does the Institute for Fiscal Studies, which found that the impact of freezing the threshold was that the largest increase as a proportion of earnings was among lower earners. Can the Government explain why they have chosen to make the student funding system less progressive by removing the central elements of the 2012 reforms?

What of women, black, Asian and minority ethnic and disabled graduates? They are most likely to be on salaries in the region of £21,000 to £30,000. The Government have acknowledged that. Let me give an example. In the 2013-14 cohort, 8,000 more women than men were paid in that range six months after graduation, and 51% of BAME graduates were employed on salaries in that range, compared with 45% of their white graduate counterparts. What measures have the Government implemented to mitigate the disproportionate effect on those on low incomes, women, disabled graduates and BAME graduates? Those groups earn less than other graduates, so they are more likely to be middle earners—those who face the largest absolute increase in repayments.

What of prospective students in the nursing profession, who could be deterred by high levels of debt? The Royal College of Nursing is concerned about the change to a loans-based system, which will leave many nursing students with debts of £60,000 for a three-year degree. We are desperately in need of nurses from this country who are trained and qualified in this country.

The National Union of Students, which represents more than 95% of all higher education and further education unions and more than 7 million students, has expressed concerns. First, the repayment threshold will not increase in line with earnings, so students have to start repaying their loans on a lower income. Secondly, those on lower incomes pay more than they otherwise would. Thirdly, the NUS is concerned about the Government being able to change terms retrospectively and about the impact that that would have on existing borrowers, which the union says sets a terrifying precedent.

[Patrick Grady (Glasgow North) (SNP)]

I congratulate the hon. Lady on securing the debate. I declare an interest because, despite having graduated in 2001, I am still paying off student loans, although I fall under the old system, where the threshold is the median wage. However, that means that payments can go up or down, depending on someone’s earnings. I have paid off student debts for a while, gone back down below the median and then re-accumulated interest, which has negated the payments I previously made. However, does the hon. Lady share my concern about the Government’s continual selling-off of student loans? It seems to be a never-ending chain, and it is not entirely clear who benefits, other than the private companies that own these loans.

[Valerie Vaz]

I absolutely agree with the hon. Gentleman. I am coming to an aspect where student loans are treated differently from any other ordinary loans.

Let me turn to the contract. The Government are asking 17 and 18-year-olds to look at contract terms and understand them. These young people are not financial advisers or lawyers—they are going to university so that they can become financial advisers and lawyers. The role of teachers is to encourage students to go to university, not to give financial advice.

Under the new 2012 system, however, interest rates can vary across the lifetime of a loan, with one rate while the student is studying, another rate when they graduate but are under the repayment threshold, and another rate when they are over the threshold. That is a complicated system, unlike the one described by the hon. Member for Strangford (Jim Shannon), which is much clearer. How can a 17 or 18-year-old be expected to understand these terms, particularly when the table of circumstances is not set out in the contract or attached to it, and students receive no financial advice?

We are told that the guidelines and terms are set out in a separate publication, and the students are told to look at the documents online. The information that is provided and the representations that are made that lead them to sign the contract could be a form of mis-selling. The contract terms could be described as unfair or as “void for uncertainty” because it is not clear on the face of the contract what the student is signing up to—there are no clear terms regarding exactly what they have to repay.

Nor is any financial information provided—for example through a financial adviser. When we take out a mortgage, we have someone sitting down in front of us explaining everything. The students are not given that, but they are expected to sign up to paying back a loan—in some instances, of £45,000. We need to be able to protect our young people.

Worse still, student loans are not subject to financial regulations and consumer protections, as is the case with other loan agreements. That must change, and I say to the Minister that there is an opportunity in the Higher Education and Research Bill to add that extra regulatory protection.

What assessment have the Government made of the exemption of student loan agreements, unlike other loans, from consumer credit protection? Why do the Government not want to protect our young people? Can the Minister confirm whether there are any plans to alter other terms and conditions of the student loans given to existing borrowers? It cannot be right that the Bank of England base rate is 0.5%, when students are paying RPI plus 3% on their loans. How can we treat our young people, who are the future, in this way? No wonder they are bewildered, confused and upset.

A Minister comes to the House to say that there will be an increase in the threshold, and the Government ignore it; the consultation gives an 84% response and the Government ignore it and press ahead with the proposal; and a young person has to sign a form with contract terms in another document online, with three rates of interest. Students should not be burdened by debts but should enjoy the benefits of their hard work and achievements.