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Rumoured changes to Student Finance repayment terms

Normally I wouldn't put much stock in a rumour. But Martin Lewis generally knows what he's talking about and he has the right contacts to confirm/deny. Full story available on Martin Lewis's blog dated 9/1/15 hosted on the Money Saving Expert website (apologies, don't think I'm permitted to post the link).

Basically, if you took out SF from 2012 onwards, there may be changes to the Terms & Conditions which increase the amount you pay once you reach the earnings threshold. The apparent plan is that the proportion of your wages going towards the repayment - currently 9% of anything you earn above £21,000 - could be increased year on year from 2016 onwards. There is no indication of whether a maximum proportion will be set.

Unless you can guarantee annual wage increases or bonuses to cover the increase, you may find yourself taking home less and less money.

We need to make this issue as public as possible. There is an election in a few months and we know the sort of lies told about SF at the last one. We need to get this plan out in the open and make the politicians talk about it. If there's enough bad publicity - which no political party can afford at the moment - it may be quietly dropped as a "rumour" and never become policy.
Original post by Klix88
Normally I wouldn't put much stock in a rumour. But Martin Lewis generally knows what he's talking about and he has the right contacts to confirm/deny. Full story available on Martin Lewis's blog dated 9/1/15 hosted on the Money Saving Expert website (apologies, don't think I'm permitted to post the link).

Basically, if you took out SF from 2012 onwards, there may be changes to the Terms & Conditions which increase the amount you pay once you reach the earnings threshold. The apparent plan is that the proportion of your wages going towards the repayment - currently 9% of anything you earn above £21,000 - could be increased year on year from 2016 onwards. There is no indication of whether a maximum proportion will be set.

Unless you can guarantee annual wage increases or bonuses to cover the increase, you may find yourself taking home less and less money.

We need to make this issue as public as possible. There is an election in a few months and we know the sort of lies told about SF at the last one. We need to get this plan out in the open and make the politicians talk about it. If there's enough bad publicity - which no political party can afford at the moment - it may be quietly dropped as a "rumour" and never become policy.


I've had a quick look on the website, and can't see where the issue you're talking about is mentioned.

I borrowed under the old SF system, where I understand the repayments increase yearly based on inflation. Is this what's being suggested, or is an above inflation rate of increase being suggested? Alongside this, the repayment threshold should also go up, again, in line with inflation.

Ultimately, the problem is that the system set up when the new fees were introduced is unsustainable- most people will not pay back everything they borrow and those paying extra interest will not cover the shortfall. Equally, universities are not getting enough funding to cover the cost of their more expensive courses (STEM subjects, mostly). I expect the system will change again under the next government, meaning the way the current system is dealt with won't ever be a major issue.

Previous student borrowers have had the system changed for them, so people do have to accept this is possible when taking student loans out.
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Klix88
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Here's the link - apologies to Mods and I'll understand if they need to delete.

http://blog.moneysavingexpert.com/2015/01/09/a-deliberate-threat-to-the-government-u-turn-on-the-21000-student-loan-repayment-threshold-i-will-organise-mass-protest/

Martin Lewis certainly seems very worked up about it. The suggestion seems to be that contributions will be increased year on year if graduates are over the £21,000 threshold - regardless of whether their wages increase. The original principle was that payments would be affordable. The suggested changes would effectively mean that graduates couldn't plan ahead for things like mortgage commitments as it would be possible for their wages to stay the same or slightly increase, whilst they took less and less money home after SF deductions. It may also be a concern to a mortgage lender, if they have applicants whose income might actually decrease in an unpredictable way in the future.

I should add that I have no dog in this particular fight as I started in 2008 so this specific proposal won't affect me.
Thanks for posting the link. I think the starting paragraph is quite poorly worded, actually, and I'm not entirely clear on what is being proposed.

Despite everything said on the blog, it has always been clear that the government can change student finance terms however they want. This was definitely on the loan agreement I signed, and I believe it's still included in SFE literature.

I can totally see why this would be a problem, and I don't think the government should do it.

However, I think protesting about this issue is rather missing the point. The ConDems changed a university funding system which was arguably fit for purpose for one that doesn't work for anyone. It doesn't work for students, as they end up in huge amounts of debt, where the repayment terms can be forcibly changed without consultation. It doesn't work for unis, as the most expensive courses are now underfunded. It also doesn't work in general as the whole system is unsustainable, as most people will never pay back everything they've borrowed.

The SFE system needs changing, urgently. The current system cannot carry on as it is. If it's changed quickly, then it doesn't matter so much if the system is unsustainable. If it's not, I would imagine that students who borrowed under this system will face ever more difficult repayment terms to try and make the system more sustainable.
I just thought I'd also post an explanation of why the current system is unsustainable in case anyone reading this is unsure why this is the case-

Say the average student who studies for 3 years comes out of uni with around £40,000 of debt. This is to be repayed over the next 30 years. In order to repay £40,000 over 30 years, you'd have to be repaying £1334 a year. At the moment, you'd start repaying this sort of figure when you earn a salary of £35,000.

Many graduates will never earn this level of income, and certainly most graduates won't earn it straight away. This was supposed to be compensated for by charging people real interest on their loans- but it's worth bearing in mind that very high earners will actually pay less in total than someone earning around £35,000, because they'll repay the loan faster- and of course some people may chose to repay early to avoid being hit by so much interest.

Also, there will be a lot of graduates who don't work for the full 30 years. Some people will take career breaks to become stay at home parents, or to travel or to do charity work. Some people will do internships at the start of their career. Some people will face periods of unemployment. A small number of people may suffer illness/accidents that leave them unable to work.

This also doesn't take into account people who borrow more than 3 years worth of student finance, because they do 4+ year course, because they change course/drop out and reapply, because they do a foundation year first. The people will have more debt and be even less likely to repay in full.

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