Government Agrees To Change How Student Loans Are Presented To Prospective Students

In response to a report by the Treasury Committee, the government has committed to change the information provided to potential students so that they can make better informed decisions before taking out student loans.

It comes after the Committee concluded that the actions of the Department for Education (DfE) and the Student Loans Company (SLC) in relation to how student loans were presented to people before they took them out amounted to mis-selling.

The government responded by confirming it will redesign guidance to make it clearer and unambiguous. The new process will clearly set out that the terms of the loans are governed by legislation and therefore can be amended by future governments.

MPs also pushed the government and Student Loans Company to give students an indication of how much they are likely to pay off over their lifetimes. As a result, the government has agreed to share more information to help people understand how different life and career choices can affect their repayments.

In its initial report, the Committee said the Treasury had a moral obligation to reverse the decision taken in last year’s Budget to freeze the threshold at which student loans are repaid. The government does not reject this recommendation outright but says that all aspects of the student finance system are under review.

Recommendations to abandon the use of Retail Price Index to calculate student loan interest rates and to treat student loan holders in line with the rules of the FCA’s Consumer Duty, as private lenders must do, were rejected.

As part of the inquiry, the Committee invited people to fill out an online survey on their views about the student loans system. The survey received more than 52,000 responses, one of the highest ever response rates to a select committee inquiry.

Chair of the Treasury Committee, Dame Meg Hillier, said:

“The commitment to right a historical wrong by updating the information so that prospective students are properly informed before taking out a massive loan is an important step forward.

“Unfortunately, though, it doesn’t help graduates who are angry that they didn’t receive the same service and are now facing punitive repayment terms on a loan which keeps growing. And they are juggling that stress with other huge pressures like trying to get on the housing ladder and save for a pension. I say it again, we must give young people a fair chance.

“Importantly, the Treasury has not ruled out reversing the threshold freeze but instead says the whole student finance system is under review. I recognise that finances are tight but I continue to urge the Chancellor to look at this again. I sincerely hope he will use his upcoming Budget to give graduates some much-needed breathing space.”