Previously, customers received an annual statement by post containing information which, depending on their situation, could be outdated. The SLC had faced criticism that this then resulted in excessive repayments on student loans, requiring repayments at a later date.
It has now developed a new Online Repayment Service (ORS), which SLC says would allow customers greater visibility into the final stages of their loan repayment, enabling them to make the decision to join the direct debit system at the right time and avoid repaying more than they had to.
However Martin Lewis, founder of the MoneySavingExpert site, criticized the operation of the new service.
“The first thing college leavers see when they log on, in large print, is the amount of ‘debt they owe’. It is demoralizing, damaging and dangerous.
‘Owing £30,000, £300,000 or £3m makes no difference to your annual repayments, which are set at 9% of anything you earn over a threshold (currently £26,575 a year) .
“The only impact of the amount of debt is whether or not you erase it in the 30 years before it is erased.
“And it is expected that the vast majority – 83% – of university leavers will not earn enough for their refunds to fully compensate for it. They will continue to pay it back for 30 years, like an additional tax – so the amount of debt for them is irrelevant,” he said.
Lewis argued that focusing on what he called “that scary, but often irrelevant number” might lead graduates to think they should seek to overpay their contributions, as they would with normal debt.
The new ORS home page includes a link to make voluntary student loan repayments without opening an account, with the option to pay by bank transfer, standing order or cheque.
“Yet unless you make huge overpayments, for most people who overpay, you 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 that it went live with a ‘quick refund’ system, without detailed warnings, caveats and explanations.
“It’s irresponsible and dangerous beyond belief – it doubles the damage,” Lewis said.
While welcoming the redesign, as it enables the SLC to provide more live data, Lewis said: ‘I will be writing to the SLC and to the Minister for Universities, Michelle Donelan, to request that the rapid reimbursement facility be removed immediately – this is far too flippant a tool for such a large and risky transaction.
“And I will again demand a major overhaul of this misleading new government website.”
In a statement, the SLC said: “The service was extensively researched and tested prior to launch and the main feedback from our customers was that they wanted quick and easy access to their loan balance online. .”
“Balance information is particularly important for customers in the later stages of a refund, as it helps them determine when to switch their refunds to Direct Debit.
“The online service provides additional information on the specificity of student loans and repayment conditions. This information makes it clear that clients should carefully consider their situation before making any additional voluntary repayments and that any outstanding balance is canceled at the end of the loan.
“The prompt payment option also makes it easier for the small proportion of customers who have someone (such as a relative) making repayments on their behalf and for overseas customers who are required to make monthly repayments. We have ensured that additional information on the unique nature of student loans and repayment terms is visible at this point.
“We are constantly listening to our customers to improve our service, and in the coming months we will be reaching out to customers to remind them that regardless of the outstanding loan balance, they can only be required to pay 9% of income above the repayment threshold, and that they should carefully consider their situation before making any voluntary repayment.
Online student loan repayment details are here.
By Pat Sweet
