Each week a different blogger takes on a money topic and lets loose. This time the founder of Levitate Student has something to say about some student money rules that rankle.
Whatever the often-disputed meaning of the phrase the “exception that proves the rule”, there are many money rules where some students find, frustratingly, that they are exceptions. Here are a few examples about student finance.
When can the repayment terms on a loan change after you have signed the agreement?
When you are a student of course!
Back in the crazy coalition days, when much politicking was shrouded in an illusion of compromise, the Government increased the higher education tuition fees in England to £9,000 for the 2012 cohort of higher education students.
The government was offering new students reassurances regarding affordability and repayments of student loans, but worries began to creep in. Keen-eyed Student Money Advisers in a taskforce led by Martin Lewis spotted new caveats added to the student support regulations about the government being able to change the funding rules at any time.
Vince Cable, the Secretary for Department of Business Innovation and Skill, announced a new higher student loan repayment threshold. Repayments would only start when one of the 2012 cohort was earning £21,000 per year, up from the previous £15,000. This meant a student under the new 2012 system could earn more before having to start repaying their loan.
‘As announced on 3 November, that income threshold will be £21,000 as from 2016, compared with the current threshold of £15,000. Our modelling to date has assumed that that threshold should be uprated every five years in line with earnings. In order to give better protection for those on lower incomes, we now propose that the uprating should instead be made every year. Around a quarter of graduates will be better off in this new, more progressive regime than under the current regime.’
Similarly from the Department for Business, Innovation and Skills document “Student finance myth buster“, published in 2011:
Q – I’m worried that I’m going to be saddled with a lifetime of debt as a result of the changes
A – Graduates won’t have to pay back anything until they are earning more than £21,000 a year.
The £21,000 earning threshold will be uprated annually in line with earnings from April 2016.
It sounded great. Worries that the new system of funding might not bring enough monies back into the public purse to be cost-effective were dismissed by the Department for Business Innovation and Skills.
Fast forward to Chancellor George Osborne’s Autumn Statement in 2015. Buried in the text, he announced the student loan repayment threshold would not be up-rated in line with inflation:
2.76 To reduce government debt, the student loan repayment threshold for Plan 2 borrowers will be frozen until April 2021. The discount rate applied to student loans will be revised to 0.7% above RPI, to bring it into line with the government’s long-term cost of borrowing. Taken together, this will reduce the government’s estimate of the long-term student loans subsidy to around 30%
This was unprecedented, changing the repayment terms once a student has already signed up to the system!
The government consulted on the “Freezing the student loan repayment threshold” and only 5% of the respondents agreed with the proposal “Keeping the threshold of £21,000 the same for all post-2012 borrowers until April 2021”. But the Chancellor still implemented the freeze.
Martin Lewis was not happy and wrote an open letter to the Prime Minister. Alex True, an affected student, successfully petitioned for the matter to be debated in parliament. All, in the end, to no avail.
Previously, significant changes had only affected new cohorts of students, so at least the prospective students had opportunity to make an informed choice before signing up to the system.
Given the student loans have a 30 year repayment term, the potential for future changes to the student loan T&C’s are rather worrying.
What commercial lender could get away with such practices?
When doesn’t every child matter?
When you have an ambition to move on to higher education but you don’t satisfy the residency requirements… The residency rules are complex and it’s common for young people to get caught up in their complexities.
There are young people who have lived in the UK for nearly all their lives, may pass through the entire UK schooling system but at 18, excited at the prospect of university, they are prevented from doing so by the residency requirements. Often no one has explained that this might happen to them.
I have supported a number of academically brilliant young people in this situation. It is not uncommon for the young person to be unaware of the full story of how they arrived in the UK. One case:
a student who had been illegally trafficked into the UK at the age of 8, spent time in local authority care and yet succeeded against the odds to do well at school. Ten years on, by aged 18, their immigration status was not settled by the Home Office. They failed to satisfy the required residency requirements that would allow them to be funded at university.
A welcome tweak to the relevant regulations was eventually applied in June 2016, acknowledging this as a concerning issue, by introducing a funding eligibility category based on long residence. While it isn’t a catch all, it does help.
Long Residence 13.—(1) A person who on the first day of the first academic year of the course— is either—
(i) under the age of 18 and has lived in the United Kingdom throughout the seven-year period preceding the first day of the first academic year of the course; or
(ii) aged 18 years old or above and, preceding the first day of the first academic year of the course, has lived in the United Kingdom throughout either— (aa) half their life; or (bb) a period of twenty-years.
When your parents are British, work for the UK government and pay UK, you will get funding, right?
Imagine this scenario – you are 18, your parents are British Citizens who work as civil servants for the British Forces in, for example, Cyprus. They have worked all your life outside the UK supporting the armed forces personnel overseas. They are employed by the UK government and pay their taxes to the UK. You have always lived with them at residencies with British Forces Post Office addresses. You apply for funding to go to university in your parents hometown, in the UK, where your Grandma lives, you would be eligible, right?
Unfortunately, it ain’t necessarily so. If the student themselves was born outside of the UK and the number of years the family has spent outside the UK is not deemed as a temporary absence, then funding could be refused.
Serving forces personnel and their children are exempted from this. But not so their Civil Service colleagues, including teachers working in British Forces schools, aren’t. This means the children of these teachers, studying in schools for forces personnel, could be ineligible for funding to attend a UK university while their classmate, the child of a soldier, would be eligible.
No information about these exceptions
The problem with all these exceptions is that there is little to no information about them on government web-sites or the student finance web pages. It may surprise some that the government can change the student loan lending rules even after the loan is taken out. Students are unlikely to be aware of the devil in the detail of the relevant statutory instruments.
And there are yet more exemptions and exceptions for students in many benefit rules – but I’ll write another article about those!