MONEY guru Martin Lewis is telling students to rip up loan statements as they’re “worryingly misleading and dangerous”.
The founder of consumer website MoneySavingExpert and the Russell Group of universities are piloting a redesign of the student loan statement as the language of the current one has “disastrous consequences”.
Martin Lewis is telling students to rip up student loan statements as they’re “worryingly misleading and dangerous”
At the moment, students simply receive a statement of their outstanding “debt” and the interest that is being added.
It doesn’t mention the fact that graduates who are earning less than £25,000 per year won’t have to make any repayments, or that if they remained on this income until the “debt” wipes, they wouldn’t have to pay anything at all.
The new statement by Martin and the Russell Group – an association that represents 24 universities across the UK – focuses on the actual repayments that students have made, and what they’re likely to repay in future until the loan is paid off or written off.
Martin Lewis said: “The student loan statement is misleading and dangerous.
“For most university leavers, their outstanding ‘debt’ is one of the least important figures, yet the statement only lists this and the interest added, panicking many into poor decisions that cost some £1,000s.”
When are student loans written off?WHAT year your repayments will stop depends on when you started studying, but it’ll happen regardless of how much you have left to pay.Started higher education 1990 – 1997 (under 40s): 25 years after your first payment or when you reach 50
Started higher education 1990 -1997 (over 40s): When you reach 60
Started higher education 1998 – 2005: When you reach 65
Started higher education 2006 – 2011: 25 years from the first April after graduation
Started higher education after 2012: In England and Wales, 30 years from first April after graduation
It’s 35 years for Scottish students and 25 for Northern Irish.
“In practice, university leavers repay nine per cent of everything earned above £25,000 for 30 years, unless they clear the debt before that. So whether you owe £10,000, £50,000 or £3 million, if you earn £30,000, you repay £450 a year, Martin added.
“The excessive focus on the language of ‘debt’ both inures young people to other, more dangerous borrowing and can mis-prioritise their finances.
“One woman told me her fear of the growing interest on her statement meant she used an inheritance to overpay thousands.
“Yet she was in a low-earning profession, with little likelihood of clearing much of the debt so she had effectively flushed her inheritance down the loo.
“If we are going to tell our youth that they’re in debt, we must also educate them on what that actually means.”
Meanwhile, Sarah Stevens, head of policy at the Russell Group, said: “The language of ‘loans’ and ‘debt’ can be misleading and difficult for students and their families to navigate.
Alamy Graduates only have to start paying back their student loans once they earn at least £25,000 per year
“Because of the income-contingent features of the student finance system, tuition fee and maintenance loans do not resemble normal, commercial loans.
“Yet the way information on student finances is presented masks this: the current statement does not mention the Government’s pledge to cover any amount that a graduate’s salary does not enable them to repay.
“Changing the mechanics of how information is communicated should help ensure that student debt is properly understood and avoid disadvantaged young people being wrongly put off university because they assume they cannot afford it.
“With the Government reviewing arrangements for student finance, we hope that action to better communicate how the current system works could also help ensure the wider debate on fees and funding is better informed.”
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In his latest MoneySavingExpert newsletter, Martin Lewis revealed whether you should buy holiday money now or wait until after Brexit.
Earlier this year, he also shared his best “comping” tips as one mum wins £75,000.
And he told Brits how you can save thousands of your mortgage.
Martin Lewis reveals he wasn’t able to eat for a WEEK after suffering agonising throat ulcer
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