MONEYSAVINGEXPERT FOUNDER MARTIN LEWIS SAYS THE ‘SCARY’ NUMBER PROBABLY DOESN’T EVEN MATTER – AND YOU SHOULDN’T BE PRESSURED TO REPAY MORE THAN THE MINIMUM EACH MONTH
Personal finance campaigner Martin Lewis has once again stepped up to protect graduates, by challenging the Student Loans Company (SLC) over their re-launched website. He says he believes the site is unnecessarily alarming and even misleading for hundreds of thousands of young people who are already anxious about their financial situation.
Focusing on reminding graduates of the scale of their debt, without enough context or explanation, is “demoralising, damaging and dangerous” according to Lewis, who is also calling for the new ‘quick repayment’ facility to be removed immediately.
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This is not the first time the MoneySavingExpert founder has challenged the SLC – in 2015 he campaigned against the decision to freeze the loan repayment threshold, which he said was a massive “breach of promises” and something “no commercial lender would’ve been allowed to do”.
OVERPAYING DOES “DIDDLY SQUAT”
Lewis’s issue with the SLC this time centres on their recently redesigned student loan repayment website. Now, when graduates log in, the first thing they see is the total amount they owe. For many people, this figure can be a very scary sight and when the new website went live there was no explanation or context provided to help graduates understand this figure.
Not only does Lewis believe focusing on this “scary, but often irrelevant, number” is “demoralising” and could cause undue distress for hundreds of thousands of graduates, he believes it could mislead many in to thinking that they should or need to make overpayments, which could actually be a wasted use of their money.
FIGHTING THE GOOD FIGHT: Martin Lewis and Graduate Fog’s founder Tanya de Grunwald met at the LSE in 2019. Lewis told de Grunwald he fully supports Graduate Fog’s campaign for fair pay for interns
The truth is that the overall amount you owe makes no real difference to the amount of money you actually repay. This is because the annual repayments are fixed at 9% of everything a graduate earns over the threshold, which is currently set at £26,575 per year. Reducing the total amount won’t reduce the annual repayments, like it would with a credit card or bank loan.
As Lewis says: “Unless you are making huge overpayments, for most people overpaying does diddly squat… [it’s] a total waste of money”.
SLC “DOUBLING DOWN ON THE DAMAGE”
It’s not only the design of the new student loans account screen that has come under fire. Lewis is also challenging is the new ‘quick repayment’ tool, which allows graduates to make overpayments without even needing to log into their account first. Lewis believes this tool is “irresponsible and dangerous beyond belief — it’s doubling down on the damage”.
According to Lewis, the redesign has completely disregarded any of the concerns and proposals he had previously raised about the system. Lewis has been actively campaigning alongside the Russell Group of universities for changes to be made to the loans statement and system for a year. Lewis said:
“We worked with the Russell Group on a redesign to the student loan statement, so it gave all the information needed, explaining the system in a proportionate way… we had hoped the new website would work towards that, not away from it. Sadly we were wrong.”
The Student Loans Company has fought back, stating they believe they have “done a really good job here for customers,” and saying that they’ve received good feedback from users about the new design.
While they admit that a “technical glitch” meant some key information was missing from the repayments page (which they say was fixed after being pointed out by Lewis) and they believe that they provide more than enough “information on the unique nature of student loans and conditions of repayment.”
They also insist they make it clear to users that they should consider their options before making voluntary additional repayments, and say they 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” in the coming months.
This might not be enough for Lewis, who is once again calling for a “thorough overhaul of this misleading new Government website”. He believes that the new account design and repayment facility puts too much emphasis on the ‘big numbers’ and on making repayments, and not enough on providing accurate and truthful explanations as to how the student loans system actually works.
Graduate Fog’s founder Tanya de Grunwald said today that the SLC’s timing could not be worse:
“Everyone knows that students and graduates are extremely anxious about their future and finances right now, as many face graduating into a job market reeling from the lockdown, and the nature and speed of the economic recovery remains uncertain. Against this backdrop, why would the SLC choose to pile extra pressure on to stressed-out young people? The insensitivity they’ve shown here is astounding.”
We’ll update all Graduate Fog readers with any developments in this argument between Lewis and the SLC. We know who our money is on!
STUDENT LOAN REPAYMENTS: KEY POINTS FOR GRADUATES TO REMEMBER:
- You only pay 9% over the threshold, which is £26,575 for loans taken out in England and Wales (thresholds are different for Scottish and Northern Irish student loans).
- If you earn under this threshold, then you won’t make any student loan repayments.
- Repayments are fixed, so lowering the total amount — unless you pay the whole lot off — will make no difference to what you pay each month/year.
- After 30 years, any outstanding debt will be wiped off. It’s estimated that 83% of university leavers won’t earn enough to clear their entire debt.
- If you have savings or are given some extra money from your parents, consider paying off other types of debt you may have before your student loan debt.
- Any over-payments made on your student loan are non-refundable.
- Your student loan doesn’t go on your credit report, meaning it won’t affect your application for any other types of loan (e.g. mortgage, credit card).
* WHAT DO YOU THINK OF THE NEW STUDENT LOANS COMPANY WEBSITE?
Is it alarming to see the amount that you owe, or are you comfortable with the debt? Does the website help you understand the loans process? Have you made an overpayment you now regret? We’d love to know your views, so have your say below…
Just to clarify, that English repayment threshold above is for Plan 2 students – English students who started a course anywhere in the UK on or after 1/9/12.
Plan 1 students – English students who started a course anywhere in the UK on or after 1/9/98 – currently repay 9% over £372/wk (£19,344 p.a.).
https://www.gov.uk/repaying-your-student-loan/which-repayment-plan-you-are-on
Personally I treat Student Loan Company debt as a de facto graduate tax I’ve rarely earned enough to pay, so essentially meanigless.
Especially compared to the overdrafts and other commercial debt many undergraduates and graduates get into.
My student loan debt is just over £19,500. I am on the old system where the interest is ‘only’ 1.1%. I lose about £115 each month to loan deductions so easily over £1,000 a year.
I simply did not appreciate aged 18 that I was making a decision that would hinder my ability to achieve homeownership. Loan deductions are eating into my ability to build up a deposit and access more favourable mortgage rates. As Alex W states it is a de facto tax and my modelling shows I have another 14 years or so before I will clear the balance.
I was simply too young to be making a financial decision that is having repercussions years later…
I’m guessing you went to university before 2006 Rod?
I owe something like 32000 on a plan 2 loan (the new ones with 9000 per year tuition fees) and 4000 on a plan 1 loan from when the tuition fees were 3000 a year.
I’ve stopped caring about either.
I thought, that when I graduated in 2015 with a 1st class degree, I would be able to get at least a modest graduate job and pay the plan 1 loan off. Never happened. I have never earnt above minimum wage (I also have an MSc btw).
A lot of graduates leave the country to never return. I want to join them, either in Norway, Denmark or Canada. There is no future for people like me in the UK and I couldn’t repay my student loans even if I wanted to.
No — 2012. I graduated into the Olympics and a youth unemployment crisis.
My finances and CV have now recovered. However, I have a lingering sense of regret that graduating into a recession was the defining event of my 20s.
I requested an itemised list from SLC that details the dates/amounts I borrowed, along with details of any amounts and the dates I have re-paid during the lifetime of this loan
What they provide is a list that details every date/amount for
– Loan figure
-interest rate used for each month
-interest figure for each month((your student debt is growing EVERY day, every month of the year)
-yearly summary of repayment figures, received from me through HRMC
*the yearly summary switched to monthly as of Jan 2019 when SLC got a system update.
prior to this, depsite me making monthly repayments via my emplpoyer to SLC, SLC would only find out at the end of every tax year how much I was repaying via my employer. Meaning SLC continued to charge me monthly interest on a growing balance, which I was paying off via my employer but they didnt have any knowlege of it to the close of the year.
This alone is very conffussing and doesnt sound like it gave me an accurate picture of what I owed.
Anyways, at the bottom of the statement is one final figure of your outstanding balance.
The numbers on the sheet don’t have any context…so I had a 3 hour call with SLC to ask for the formula as to how they got to the interest rates I was being charged on my statement.
The 1st telehone rep said this a complex and she doesnt know, and impossible. She transfeed me to another rep who gave me a text book ‘Interested is calculate on your balance each month, thats how we get the interest rate’.
He told me to see a financila adviosor.
I said I was offended and that if I am being chagged by SLC, I have every rate to ask them for the formula to how they got to the charges. I pressed him for 10 minutes and he finally spoke to supervisor how gave him this formula:
Take your loan figure
Then multiply the loan figure by the Interest rate (interest rate changes depening on inflation so check SLC to find unique interest rate for each month/year)
Then divide that figure by 12 (12 months in a year)
and that will give you the interest you were charged on your loan figure for that month.
The interest is added on the last day of EVERY month and adds on top of your loan amonunt.]
The telephone rep and myself both tried the interest formula out on the very first interest figuire list on my SLC statement. We both came out with the same number but the number that SLC had on my statment was drastically different. This broke any confidence that any interest amounts after this are incorrect and my totally owed figure in incorrect.
Despite the SLC phone rep and myself having come out with the same number but a different one on my statement, he point black said ‘it is correct’, even though it wasnt when we both did the math. I felt like I was talking to a crazy person!!!
2 hours later he finally said he could escalate this ‘one’ interest amount to their admin team in Glasgow to check if the one month interest rate is wrong and said its up to me to check the interest that SLC has calculated on a monthly basis from aprill 2006 all the way to today, nov 2020 – that 228 months – they do not do that.
I have went through great efforts with a spreadsheet looking at the amount I borrowed from the government and calculated every monthly interest from April 2006 up till present day what is worring is their interest rates on my statement (which arent’ even accurate if you use their formual) when put into a spreadsheet, come out to a different end figure to whats on my statement.
I’m also concered that I seen Martin Lewis saying in online videos encouraging graduates are better off not paying out their loans because they will only ever pay back 9% of any of their earnings that are over the threshsold. This is true, but what he is not mentioning is that EVERY month interest (at the highest it was 4.80% in Sept 2007 -Aug 2008, then 3.80% from Sept-Nov 2008, 3% Dec 2008 and 2.50% in Jan 2009) so the amound you grow is literally growing every single day. Morally, I think it’s of bad character to borrow and not pay back what you owe. In theory, when you owe money, as the borrower you are a slave to the lender and they are profiting of you, the mental stress of carying a debt that you owe is heavy. When you crunch the numbers, what I pay every year to SLC over a year, if you multiplied by 16 years (the remaining amount of time I have till my loan is written off) totals to MORE than what my current loan balance is. And this does not even factor things like my income will increase (so SLC will require me to pay more back each month) and the monthly interest rate that SLC use WILL also increase/decrease. I would encourage any graudate you are always better off and in a position of power, when you have more of your money back in your pocket. When you get paid and then are giving it away to SLC, they get richer and you get poorer.
I feel I am disguted, feel hopeless and in such a state of despair with the information on my loan available.
I have a student loan bill from SLC and have zero confidence any of it correct. For anyone reading this, I encourage you to contact SLC and request and itemside list of all your loan amounts, charges and any details they have on repayrments you have made and go through with a fine comb and CHECK them against your payslips. It’s a huge mess, their systems are shocking.
Icing on the cake – the telehone rep said he escaleted a internal query to admin re the month I noticed the interst was wrong and said I have to call back – Despite my clear distress and concerts and request for help, he had ‘other customers’ to talk to and aside from that was ‘not allowed’.
To any SLC directors reading this, your customer care and process for support and information are very poor and for a non-profit you need to invest and revisit the support made available to graduates like myself who are asking for support with very basic information about what you are telling us we owe.
I feel like I am in business with crooks.