Martin Lewis slams Student Loans Company for 'dangerous' new repayment tool

Money saving expert Martin Lewis has accused the Student Loans Company of making a ‘demoralising, damaging and dangerous’ change to its website.

The Student Loans Company, which has recently moved its website from SLC.co.uk to the Gov.uk domain, now offers university leavers ‘quick repayment options’ and tells students about the amount of ‘debt they owe’ when they log in to the website,

Mr Lewis claims this could scare graduates into submitting extra payments, meaning they could end up ‘flushing away money unnecessarily’ as it doesn’t affect their monthly repayments.

The consumer finance champion, who as well as being the founder of MoneySavingExpert is the former head of the independent taskforce on student finance information, said: ‘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 £3 million 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.

‘Yet this new site follows the old one in majoring on this scary, but often irrelevant, number. That makes many think they should overpay like a normal debt. 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.’

When former students log in to the new website, they are shown an overall balance on their loans, but without context explaining that a student loan acts more as a tax than a debt.

It is taken off a graduate’s pay check each month, is written off after 30 years and does not affect credit ratings.

And anyone visiting the website can see an option to voluntarily ‘make a payment’ towards a student loan at the top. These can even be done without logging in to the website, and can’t be refunded once the transaction has been completed.

The website relaunch comes after Mr Lewis and the Russell Group of universities called for a redesign of the student loans statement last year, saying it ‘didn’t reflect the true cost of education’ as most students will never pay the loan back in full.

‘I will be writing to the Student Loans Company and the Universities Minister, Michelle Donelan MP, calling for the quick repayment facility to be removed immediately – it is far too flippant a tool for such a substantial and risky transaction,’ added Mr Lewis, ‘And I will be calling again for a thorough overhaul of this misleading new Government website.’

Once the MoneySavingExpert website contacted the Student Loans Company, some warning text was added.

An SLC spokesperson said in response: ‘The online repayment service provides the most up to date student loan account information that has ever been made available to customers.
 
‘The service is designed to make it easier for graduates to access their account, manage their student loan and to avoid over repayment. 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.

‘However, if they don’t take this action and go on to over-repay, we make every effort to refund their money. Since March of this year, where we hold up to date customer details, we have started to automatically refunding customers who have over-repaid, directly into their bank account.

‘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.’

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