We call for the current student loan statement to be scrapped
Posted on 16 May 2019
York, along with other top universities and MoneySavingExpert.com, has called for the student loan statement to be redesigned to make it less confusing.
The current student loan statement, with a focus on what is owed rather than what is repaid, is misleading and not fit for purpose. Therefore, MoneySavingExpert.com (MSE) and the Russell Group of universities launched their own version in February - the Graduate Contribution Statement.
The aim has been to produce a statement that informs people of their personal situation, but also uses this information to illustrate how student loan repayments really work over the short and long-term. This should help graduates see the true cost to them of their education. The new statement:
- Focuses on repayments to be made, more than the debt
For the majority of university leavers, their outstanding ‘debt’ is a mostly meaningless figure that bears only a loose resemblance to what they need to repay. However, this figure, and the interest added, is the primary data given on the current statement – leaving many unnecessarily scared.
- Details how the repayments actually work
Today’s university leavers repay 9% of everything earned above a threshold, currently £25,725 (in England & Wales) for 30 years, unless they clear the debt before that. So whether you owe £10,000, £50,000 or £3 million – with a £30,000 salary, you repay £385 a year. The only impact the size of the ‘debt’ has is whether you’ll clear what you owe before it wipes.
- Explains what contributions are made each month, and over the year
It shows how much graduates are actually repaying now on a monthly basis, instead of a long list of figures.
- Predicts the total cost of higher education
As it’s predicted that 83% of university leavers will keep paying for the full 30 years, the total cost is often not related to the debt. The statement estimates the total amount they will repay within the 30 years, both in cash terms and real terms while factoring in inflation – based on their earnings trajectory.
The Graduate Contribution Statement was tested by nearly 6,000 people, with 96% of respondents saying the new information is clear and 90% saying the statement helped them understand the student finance system.
MSE and the Russell Group are urgently calling on the Government and the Student Loans Company (SLC) to look at using their new statement as a basis from which to redesign the official version.