Treasury inquiry on loans and graduates is ready for launch

The Commons Treasury Committee has been preparing for an inquiry into student loans and the taxation of graduates by seeking information from the public and the Department for Education.

Today sees the publication of quantitative and qualitative summaries of the public-facing survey, and a selection of informational material that DfE provides for use in schools and similar settings (along with some largely unedifying email trails about people asking for copies of slide decks). This all comes ahead of the first hearing, scheduled for Tuesday 2 June and featuring Universities UK, Vivienne Stern, a selection of think-tanks and campaign groups, and Philip Augar.

This inquiry kicked off amid the excitement about Plan 2 repayments earlier this year – which saw many graduates alarmed to see the “size” of their loan rising faster than repayments due to interest.

The survey ran from 12 March to 14 April, and was promoted on social media. It saw around 52,000 self-selecting responses, the results of which are presented without any attempt to make the sample representative of either student-loan holders (the largest component – some 49,000 – had at least one loan, with a further 1,300 considering a loan) or the general public. Likewise, there has been no attempt to control for (or even describe) sample bias. To be fair, this absence of analysis has been caveated – which is welcome. But it would have been straightforward to describe the demographics of respondents, and given the sample size it would have been possible to select an appropriately weighted sub-sample for analysis.

The results here are largely predictable – an overwhelming majority of respondents found the financial impact of repaying their loans “worse than expected”, and found the level of interest and repayment terms unreasonable. Vanishingly few made additional repayments on their loan after graduation, thankfully.

Of more interest are the questions that pertain to the narrative that applicants were mis-sold these loans – more than half felt they did not understand the terms of their loan before signing up, and just over half felt that they would not take out a loan knowing what they know now.

However, a majority would have been unable to attend university without a loan, more than half said their course helped them to get their current job, and about four in ten reported (at, to be clear, various stages in their career) that their HE course “enabled them to secure a job with higher pay” than they might have had otherwise. Apologies to survey design fans for that last – multiple hypothetical – question.

Looking at the 1,332 prospective students, about six in ten felt less likely to take out a student loan given press coverage of the problems with the system. That is a worry – however much sample bias played a part, however bad information about student loans may be I’d hate to think that young people gave up on their ambitions because of an op-ed in The Times filtered through TikTok.

The short (seven page) qualitative report suggests the impact of the coverage – most of the arguments made (to be clear, absolutely valid arguments) come straight from the press coverage – and the suggestions for “solutions” are also familiar. What’s unquestionably powerful, whatever their genesis, are the direct quotes from free-text answers.

On threshold freezes:

Changing the conditions and rules, e.g. freezing repayment thresholds, after the loan has started is totally wrong. If a commercial lender did this it would be illegal and they would be prosecuted.

On fairness:

If I am on the same salary doing the same job as a wealthy graduate who paid upfront, I will pay far more for far longer compared to them. This means that my parents’ circumstances have a profound effect on my debt and availability of money. This is not a progressive system and means the poorest stay poor whilst the rich get richer.

On the impact on mortgage lending:

I was told it would not affect my ability to get a mortgage, when in fact I was refused a mortgage on affordability grounds due to my student loan.

On wider impacts:

Having student loans is also simply another deterrent for me choosing to have children, as I hate the thought of years’ worth of repayments simply being undone, due to the interest reaccumulating during maternity leave.

A key plank of any case made on loan mis-selling will be the requested submission from DfE. The committee asked for presentations and scripts used in Student Finance Tours, documentation concerning the way these were approved, and a summary of information on repayment forecasts and voluntary repayments.

There’s no smoking gun within the email clearance chain – indeed, we can see evidence that DfE officials were active in securing the accuracy of materials used with prospective students.

We get a presentation and other student- and teacher-facing documentation aimed at 2019-20 entry, and equivalents for 2020-21 entry. The contents of the pack promise presentations and materials aimed at 2022-23 and 2026-27 entry, these have not (yet) been published by the committee.

And while the materials themselves maybe could be clearer (repayments being “always manageable and affordable” feels like a reach given the range of individual circumstances possible) the information, while as complex as a complex system would demand, seems to be accurate.

The big obvious thing that is missing is any indication that the government could or would arbitrarily change the terms – the repayment threshold and the interactions between earnings and interest are presented as absolute in the presentation and as being “adjusted annually in line with average earnings” in the printed guidance. There is no information given regarding the four consecutive years of Plan 2 threshold freezes (2021-22 through 2024-25) – and nothing at all on the decision to freeze the postgraduate loan repayment threshold indefinitely at £21,000 (now below the full-time minimum wage).

That, to me, is the most addressable issue – and the most egregious failing – of the loan system. It is something that the Treasury Committee should be very exercised about.