Revamped student loans payment service dubbed ‘irresponsible’

The Student Loans Company’s (SLC’s) launch of an online repayment service with a tool allowing graduates to make early lump sum voluntary repayments without signing into their account has been slammed as ‘irresponsible and dangerous’ by leading consumer rights campaigner Martin Lewis

Previously, customers received an annual statement by post containing information which, depending on their circumstances, could be out of date. The SLC had faced criticism that this then lead to over repayments on student loans, necessitating refunds at a later date.

It has now developed a new online repayment service (ORS), which the SLC said would enable customers to have greater visibility of the final stages of their loan repayment enabling them to make the decision to join the direct debit scheme at the right time and avoid paying more back than they owed.

However Martin Lewis, founder of the MoneySavingExpert website, criticised the operation of the new service.

‘The first thing university leavers see when they log in, in a large font, is the amount of “debt they owe”. This is demoralising, damaging and dangerous. 

‘Owing £30,000, £300,000 or £3m makes no difference to your annual repayments, which are set at 9% of everything you earn over a threshold (currently £26,575 per year).

‘The only impact the amount of debt has is whether you clear it or not within the 30 years before it wipes.

‘And it's predicted the vast majority – 83% – of university leavers won't be earning enough that their repayments clear it in full. They'll keep repaying it for the whole 30 years, like an additional tax – so the debt amount for them is pretty irrelevant,’ he said.

Lewis argued that focusing on what he called ‘this scary, but often irrelevant, number’ could lead graduates to think they should seek to overpay their contributions, as they would with a normal debt.

The front page of the new ORS includes a link to making voluntary repayments towards a student loan without signing into an account, with the ability to pay by bank transfer, standing order or cheque.

‘Yet unless you're making huge overpayments, for most people overpaying does diddly squat – you'll still continue to repay 9% of everything over the threshold for 30 years. Overpaying is a total waste of money.

‘So I was flabbergasted to see it went live with a “quick repayment” system, without detailed warnings, cautions and explanation.

‘That's irresponsible and dangerous beyond belief – it's doubling down on the damage,’ Lewis said.

While welcoming the re-design, as it allows the SLC to provide more live data, Lewis said: ‘I will be writing to the SLC and the Universities Minister, Michelle Donelan, calling for the quick repayment facility to be removed immediately – it is far too flippant a tool for such a substantial and risky transaction.

‘And I will be calling again for a thorough overhaul of this misleading new government website.’

In a statement, the SLC said: ‘The service was extensively researched and tested prior to launch and the overriding feedback from our customers was that they wanted to be able to quickly and easily access their loan balance online.

‘The balance information is particularly important to customers in the final stages of repayment, as it helps them to determine when they should switch their repayments to direct debit.

‘The online service provides additional information on the unique nature of student loans and the conditions of repayment. This information makes clear that customers should carefully consider their circumstances before making any additional voluntary repayments and that any outstanding balance is written off at the end of the loan.

‘The quick payment option also makes it easier for the small proportion of customers who have someone (such as a parent) making repayments on their behalf and for overseas customers who are required to make monthly repayments. We have ensured the additional information on the unique nature of student loans and conditions of repayment is visible at this point.

‘We constantly listen to our customers to improve our service, and in the coming months we will be contacting customers to remind them that, irrespective of the outstanding loan balance, they can only be required to pay 9% of earnings above the repayment threshold, and that they should consider their circumstances carefully before making any voluntary repayments.’

Online student loan repayment details are here.

By Pat Sweet

 

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