Retroactive student loan alteration “disgraceful,” says Martin Lewis
Martin Lewis, better known as the MoneySavingExpert, has slammed the government’s decision to retroactively change the terms of student loan repayments, calling the decision to freeze the £21,000 repayment threshold “disgraceful.”
In an open letter to the Prime Minister, dated 12th of January 2016, the founder and editor of the popular blog explained that he had already hired lawyers to look into the legality of this backtracking.“Yet this is as much a moral issue as a legal one,” he says.
“A retrospective change will destroy any trust current a future generations can have in the student finance system, and perhaps… in the political system as a whole.”
The letter comes in a new effort by Lewis to challenge the government’s decision to alter the contracts of thousands of students after they had been signed. He says he hopes that this direct address to David Cameron will make him take a personal interest. There is also a video from November (see here) in which he explains his issues with the decision
Photo: HuffingtonPostIn George Osborne’s November Spending Review, the Chancellor introduced the “back door” change to the terms of agreement that were set during the change to student loans in 2012.
This meant that, where before it was agreed that this threshold would rise in line with average earnings from April 2017, it would be frozen at £21,000 for five years. Therefore, students will pay back £306 a year more in 2020-21 than in 2016-17. At the time, Lewis said, “I’m absolutely spitting teeth over this right now.”
There was even a consultation before the change, but even though only five per cent of respondents were in favour—with 84 per cent against—it was pushed through. “I am confused why, despite such cross-society opposition, your Government pushed through with the retrospective change anyway?” he says in the letter.
The former promise was a key part of information relayed to students on how high their loan repayments would be. In his open letter, Lewis highlights that a commercial lender would never be allowed to change a contract in the same way. “The regulator would never allow [it]… It is therefore surely wrong for the government to do so—retrospective changes have always been seen as bad governance.”
A Department for Business, Innovation & Skills spokesperson said: “Students do not have to pay anything back until they are earning £21,000 and will only pay back nine per cent of earnings above that amount.
“While the economic recovery is underway, graduate earnings haven’t risen as they were expected to and we consulted on the change with the sector and student organisations in the summer.”