Redbrick Investigates: Student Loans - Confusion and Contention | Redbrick | University of Birmingham

Redbrick Investigates: Student Loans – Confusion and Contention

After the government’s recent abolition of maintenance grants, Redbrick’s Joseph Timan and Erin Santillo investigate the effects of and reactions towards this move and other controversial proposals

This academic year saw the government controversially scrap the non-repayable funding scheme, replacing it with a student finance contract that is solely loan-based.

When the alteration was revealed in George Osborne’s 2015 Summer Budget, the National Union of Students (NUS) said that the alteration was ‘disgraceful’ and that it ‘could put off students from underprivileged backgrounds from applying’ to university. However, Osborne explained that the funding switch was due to the ‘basic unfairness in asking taxpayers to fund grants for people who are likely to earn a lot more than them’.

Speaking to Redbrick earlier this month, NUS Vice President for Higher Education, Sorana Vieru, said that the change means that some students are now being ‘punished because of being poor’, as those whose parents cannot afford to cover their living costs will leave university with more debt than their wealthier peers. She believes that the government’s motive for this change was ideological.

‘basic unfairness in asking taxpayers to fund grants for people who are likely to earn a lot more than them’.

Vieru, who was re-elected to her position for a second year in April, claimed that there will be no saving in public spending and that the government is just acquiring debt which it sees as a lucrative asset. She described the change as ‘economic trickery’ and expressed concern over the government selling off student loans to private companies - a move that the NUS strongly opposes.

Perhaps what’s most alarming about this recent change to the student loans system is that there was no parliamentary consultation on the proposal, and instead it was implemented by a small legislation committee of 18 MPs. Earlier this year, Labour MPs put forward a motion to annul these regulations that were ‘sneaked through’, but the motion failed.

In support of the fight against these changes, the Guild of Students’ officers team arranged for a large inflatable pig to be brought onto the University of Birmingham (UoB) campus in order to raise awareness of the issue and encourage students to lobby their MPs to protect maintenance grants. The Guild of Student’s current Education Officer, Chris Wilkinson, said that this was an issue that the student movement was ‘very engaged with’ and that it was only 11 MPs who swung the vote that allowed the government to go ahead with its proposal.

Steve McCabe, MP for Selly Oak told Redbrick, ‘it’s obvious that there is no way that switching from the existing grant and maintenance regime to the loan regime has saved the government money’. The Labour MP said that whilst it’s a ‘real possibility’ that the government will sell student loans to private companies, he doesn’t think that such a decision would be made in this current government.

'there is no way that switching from the existing grant and maintenance regime to the loan regime has saved the government money’

These concerns about rising costs in higher education have created a worrying schism in the world of academia that still pervades debate today, but perhaps more troubling are the recent claims of students being ‘mis-sold’ their loans due to ‘confusion’ over the details.

One such claim came from civil engineering graduate Simon Crowther, whose open letter to his MP went viral on social media in May this year. Crowther stated that he ‘had no experience of loans, credit cards or mortgages’ as a sixth-form pupil, and so upon applying for finance through the Student Loans Company (SLC) he did not envisage the accruement of debt interest in line with inflation, which has resulted in his overall sum increasing by more than £180 per month.

In response, the SLC said that the interest rate - inflation plus 3% - was ‘clearly set out’ in the contract’s ‘terms and conditions’, and so the legally binding agreement was still intact. They highlighted that all students sign a ‘declaration’ confirming they have read and understood the policy that they agree to upon taking out a loan. Both the SLC and the Universities Minister, Jo Johnson MP, were contacted by Redbrick on several occasions to comment on these issues, but the Department of Education’s media team refused to comment.

Whilst Crowther’s case of confusion over the student finance package was based on interest, Redbrick decided to investigate whether first year students have the same perplexity over the SLC’s scrapping of the maintenance grant system for this academic year.

In a survey of 100 UoB freshers, only 58 were aware that there had been changes to the contract in 2016, and only 50% of those students knew what the changes were.

Only 50% of those students knew what the changes were

Perhaps more telling is the fact that 89% of students surveyed claimed that they did not consider the changes to the contract when applying to university. This suggests that the prospect of increased debt was not enough to stop many prospective UoB students from making the jump to higher education. What might explain this lack of concern for an increased student debt is that only 33% of those surveyed believe that they will be able to repay their student debt before it is ‘written off’ after 30 years.

In order to explore these issues further, we spoke to a number of first year undergraduates at UoB anonymously for their views on the student loans system. On the subject of confusion about the contract, the majority stated that they felt they were ‘swept along’ into signing the agreement without considering it in-depth first.

only 33% of those surveyed believe that they will be able to repay their student debt before it is ‘written off’

Some suggested that their schools and colleges ‘should have done more’ to explain what they were signing up to. For example, one first year undergraduate told Redbrick that they had ‘presumed that the loan would cover [their] accommodation cost completely’ as they hadn’t been told otherwise. However, according to the Guardian’s personal finance editor, Patrick Collinson, teachers are not ‘regulated financial advisors, and nor should they have to be’, and so critics argue that students themselves should do more individual research into their contracts to complement their learning in class.

Furthermore, as fresher undergraduates will be the first to experience the new non-grant system, some interviewees described how they feel like ‘guinea pigs’ that the government are using them to test their plans. On the other hand, one student suggested that changes to student loans now and in the future are ‘inevitable’ in a post-Brexit country.

Another issue of both confusion and contention is the repayment system; in essence, graduates have to repay their loans at 9% of their earnings over £21,000. In last year’s Autumn Statement, it was announced that this payment threshold would be frozen until at least 2022, effectively increasing the repayment rate for students who were promised by the previous government that the threshold would rise with inflation.

Redbrick’s survey revealed that only 61% of first year students feel confident in their understanding of the repayment process, and that 51% do not know how much they’ll be in debt after graduation.

The pessimism about future finances was also reflected in many of the interviews, with first years stating that, in terms of university life, they were ‘focusing more on the debt than the benefits, i.e. a degree’ and that the debt was ‘unfair’ on new professionals; very few believed that the repayments would be ‘manageable’ as they would view them ‘just like any other monthly bill, like council tax’.

‘focusing more on the debt than the benefits, i.e. a degree’

It has been suggested that these negative viewpoints could be due to students’ confusion over their amount of debt after graduation and how long it will take to repay. This could partly be a result of sensationalist media stories that use terms such as ‘spiraling’ and ‘crippling’ to describe the debt, in complete contrast with what the SLC refer to as repayment in ‘three easy steps.’ Survey responses to the question ‘how soon do you believe you will pay off your student debt?’ varied from ‘3-4 years’ to ‘hopefully by [age] 50’ – revealing how perspectives of the debt differ from person to person.

Another related issue discussed by students was tuition fees, a polemical issue if ever there was one. In July of this year, it was announced that certain universities may be able to raise their fees to £9,250 in 2017 under a new mechanism called the ‘teaching excellence framework’ (TEF); a change that would even apply to current students who have already started their course. Adding to this, Education Officer Chris Wilkinson, stated that under the proposal, universities would also be able to raise tuition fees ‘each year in line with inflation, meaning that we’ll see £10k+ fees in the very near future’.

Commenting on the weaknesses of the TEF, Steve McCabe MP pointed to the fact that universities’ teaching quality will be assessed as an average across all departments, meaning that students on courses with a lower teaching quality might see a rise in their tuition fees if their university shows evidence of higher teaching quality in other departments.

‘the NSS was never intended to be linked to any funding decisions or tuition fees’

What’s more, Sorana Vieru said that the government will use the National Student Survey (NSS) as a metric in the test within the TEF and argued that ‘the NSS was never intended to be linked to any funding decisions or tuition fees’. For this reason, Vieru revealed to Redbrick that the NUS will support a boycott of the NSS if these plans go ahead.

All of the students we spoke to were disappointed by the government’s plans, and some referred to ‘universities acting like companies; putting money over education’. Although some of the benefits of extra funding are clearly visible, such as UoB’s new library development, concern was raised about how students from lower-income backgrounds will be able to access higher education once the changes come into place, with one first year going as far as to suggest that ‘education will become elitist.’

The NUS have also responded to the new finance plan, a part of the Higher Education and Research Bill, by calling the ‘marketisation of higher education’ a ‘failed experiment’. The student union has since produced 16 proposed amendments to the bill, which includes the requirement that parliament holds a vote before they make any changes.

In addition, Sorana Vieru told Redbrick that she’s a ‘great believer in a diversity of tactics’ and that’s why, as well as lobbying Tory MPs, the NUS will hold a mass demonstration in conjunction with the University and College Union (UCU) on the 19th November in London to show public support for their demands and opposition to the ‘attack’ on both higher and further education.

Despite the NUS’s efforts, Steve McCabe MP told Redbrick that ‘it’s extremely difficult to thwart some of the aims of this government’ and advised that lobbying of MPs should be concentrated on Tory MPs in marginal seats, which he said, as a former government whip, has the greatest impact. In reference to specific aspects of the Higher Education Bill, McCabe said, ‘at a time when the country is in so much trouble [these changes] could jeopardise the image of British universities across the globe’.

Meanwhile at UoB, Chris Wilkinson, said that the Guild of Students is now focusing on supporting students who have been affected by the abolition of maintenance grants. The Guild’s Education Officer told Redbrick, ‘we’re trying to ensure that students have the best experience here at Birmingham, and also making sure that they feel supported from start to finish’.

He also spoke of the Guild’s campaign against hidden course costs which aims to ensure that the amount of resources that students have to buy throughout their course are as low as possible, and pointed to the support available at Guild Advice who offer financial aid to students affected by these costs. Wilkinson said that he, alongside other Guild officers, uses blogs and social media to raise awareness of important changes that will affect students in higher education.

Using the recent abolition of maintenance grants as an example, Wilkinson said, ‘whenever these issues come up we are very vocal about them and we are always trying to communicate them and we always try to make it as jargon-free as possible’.


30th December 2016 at 3:29 pm