Student Loan Repayments — House of Commons, 2016-06-27
Topic: Education
Valerie Carol Marian Vaz (Labour, Centre-left): I absolutely agree with the hon. Gentleman. I am coming to an aspect where student loans are treated differently from any other ordinary loans Let me turn to the contract. The Government are asking 17 and 18-year-olds to look at contract terms and understand them. These young people are not financial advisers or lawyers—they are going to university so that they can become financial advisers and lawyers. The role of teachers is to encourage students to go to university, not to give financial advice Under the new 2012 system, however, interest rates can vary across the lifetime of a loan, with one rate while the student is studying, another rate when they graduate but are under the repayment threshold, and another rate when they are over the threshold. That is a complicated system, unlike the one described by the hon. Member for Strangford (Jim Shannon), which is much clearer. How can a 17 or 18-year-old be expected to understand these terms, particularly when the table of circumstances is not set out in the contract or attached to it, and students receive no financial advice We are told that the guidelines and terms are set out in a separate publication, and the students are told to look at the documents online. The information that is provided and the representations that are made that lead them to sign the contract could be a form of mis-selling. The contract terms could be described as unfair or as "void for uncertainty" because it is not clear on the face of the contract what the student is signing up to—there are no clear terms regarding exactly what they have to repay Nor is any financial information provided—for example through a financial adviser. When we take out a mortgage, we have someone sitting down in front of us explaining everything. The students are not given that, but they are expected to sign up to paying back a loan—in some instances, of £45,000. We need to be able to protect our young people Worse still, student loans are not subject to financial regulations and consumer protections, as is the case with other loan agreements. That must change, and I say to the Minister that there is an opportunity in the Higher Education and Research Bill to add that extra regulatory protection. What assessment have the Government made of the exemption of student loan agreements, unlike other loans, from consumer credit protection? Why do the Government not want to protect our young people? Can the Minister confirm whether there are any plans to alter other terms and conditions of the student loans given to existing borrowers? It cannot be right that the Bank of England base rate is 0.5%, when students are paying RPI plus 3% on their loans. How can we treat our young people, who are the future, in this way? No wonder they are bewildered, confused and upset A Minister comes to the House to say that there will be an increase in the threshold, and the Government ignore it; the consultation gives an 84% response and the Government ignore it and press ahead with the proposal; and a young person has to sign a form with contract terms in another document online, with three rates of interest. Students should not be burdened by debts but should enjoy the benefits of their hard work and achievements