IF GOVERNMENT CAN BACKTRACK ON OTHER LOAN GUARANTEES, WHY NOT THAT ONE TOO?

Not too bothered about your student loan, as you know anything you still owe in 30 years’ time will be written off?

Students and graduates should be much more worried about the security of that guarantee, a leading financial expert has warned. The government is already showing it has no qualms about backtracking on other details of the supposedly cast-iron deal that new students signed up to when starting at uni. So why not the 30-year promise too?

Martin Lewis, founder of personal finance website MoneySavingExpert, says the Treasury’s unexpected 2015 announcement of a five-year freeze on the minimum income threshold for repaying loans is “disgraceful” as the original terms of the loan clearly stated this would rise in line with average incomes. This is important as a £21,000 salary will be buy less in the future than it does now, meaning people will start repaying their loans when they feel much poorer, and on average a former student will pay £306 a year more in 2020-21 compared with 2016-17.

But Lewis told the Guardian there are much wider implications to this row too – as this change effectively sets a precedent that the government (and future governments) can change anything they like about a financial contract that millions of young people have signed. He said:

“There’s a serious issue about trust here: if students are being promised the threshold will go up, and it doesn’t, what’s to stop current or future students finding suddenly the interest rates goes up, or debts aren’t written off after 30 years, like they were promised?”

Lewis says this retroactive change amounts to mis-selling of loans and “no commercial lender would get away with this.” Changing the terms of a loan once the loan has been given is completely unacceptable in UK lending law. Lewis also expressed frustration at how it had fallen to him to lead the charge on such an important issue (echoing Graduate Fog’s feelings on the campaign for fair internships). He said:

“I feel slightly disappointed that I’ve been the official opposition on this.

“I have tried everything — hiring lawyers, speaking to senior people in No 10, putting in submissions to the autumn statement, debates in parliament, but this is totemic to me.

“This is about how young people can trust politics, when people can retroactively change a contract, if they are lied to in contract? It is an absolute disgrace.”

On Monday night, Labour MP (and former NUS President) Wes Streeting tabled two amendments to the higher education and research bill, firstly to bar the government from making retroactive changes to student finance without it being looked at by an independent panel, and secondly to bring student loans under regulation of the Financial Conduct Authority (FCA). Though Tory MPs defeated the amendments in the Commons, Streeting said he hoped Labour peers will take up the amendments in the House of Lords:

“If any commercial bank or pay day lender behaved like this there would be outrage and the FCA would be stepping in.”

“But these aren’t regulated by the FCA and so George Osborne decided this was a nice little money saver and drove a coach and horses through the expectations students and graduates had about what they would be paying at what point.”

The Labour MP said he hoped that a new regime at the Treasury would be convinced to look again.