WARRINGTON North MP Helen Jones has slammed changes to the student loan agreement as “a betrayal of our young people”.
The MP led a Westminster Hall debate earlier this week on the matter, pointing out that when the system was introduced the Government promised that the threshold for making repayments would be updated from 2017 in line with average earnings but they have chosen to freeze it until at least 2021
The controversial decision was buried on page 126 of the Budget papers.
MP Helen Jones said: “The worst thing about that decision is that it is retrospective, so that students who take out a loan at the beginning of this process have found the conditions of that loan changed, without any right of appeal or recourse to any other relief.
“People have said, quite rightly, that in a commercial organisation that would not be allowed, but it seems that the Government are not prepared to adhere to the standards that they impose on others.”
The Government rejected the overwhelming message it received in its consultation on the subject – 84% of respondents expressing opposition to a freeze and only 5% in favour.
“We have to find out what was really going on.
“The Government expected such a move to generate an extra £3.2 billion over the lifetime of the loan.
“There we have it. The Government were not getting enough money in, so they resorted to that rather underhand tactic to get more.”
The MP identified two reasons as to why the Government were not getting enough money in, saying that firstly, they have failed to create enough highly skilled jobs resulting in graduates working in low paid, low skilled and insecure jobs.
This means they cannot reach the level of wages necessary to payback their loans.
She then went on to point out that the student loan system is in chaos.
“The National Audit Office warned BIS (Department of Business Innovation and Skills) that it was in danger of wasting hundreds of millions of pounds because it did not have enough information on the recipients of its loans. In fact, it had no employment information at all for 368,000 people, so it did not know whether they should be paying back or not.”
By using RPI (Retail Price index) instead of CPI (Consumer Price Index) to calculate interest rates the MP said students were facing a ‘double whammy’.
She added: “By freezing the earnings threshold at £21,000, the Government are ensuring not only that more people are on the wage level at which they start to pay back loans, but that they pay them back with a higher rate of interest.
” It is a double whammy. Such a piece of chicanery really should not be allowed to go unchallenged.”
The MP finished by highlighting the problems faced by many young graduates:
· little hope of getting into decent jobs;
· no hope of getting onto the housing ladder;
· stuck in rented accommodation, and;
· likely to be the first generation to earn less than the one before.
“This is a real betrayal of our young people. What the Government have done with student loans adds to that betrayal. As in so many other matters these days, the Government are making young people pay the price for their failure.”
