Plan 2 student loans reignite UK mis-selling fears (Full Transcript)

[00:00:00] Speaker 1: For one year of my degree, one year of study, it cost me the same. Everyone sat here, Oxford, Cambridge, Cambridge, LSE, everything they paid does not cover one year of my tuition. Do you think that's fair?

[00:00:15] Speaker 2: Will student loans be the next mis-selling scandal? Right, so there's been a lot about student loans recently. Let me just set the context a little bit. Most of this is focused on Plan 2 student loans. The situation is a bit different in Wales, Northern Ireland and Scotland. But in England, we're talking about roughly 4 million people. And the interest charge on these loans is RPI plus up to 3%. So it can be up to 6.2%. And you have got graduates now who are paying down those loans, but still seeing them increase. And the government's frozen, has introduced the idea of freezing the tax threshold for that. So we had a little look. Olly, we reckon you're closest to the situation. You've talked about your student loans. So what's the score with you?

[00:01:12] Speaker 1: Yeah, so I have a Plan 2 student loan. I was one of the cohort of people that were given that gift by the Lib Dems and the Tories. So this is 2012 to 2020? Yeah, exactly. That's when I went to uni, 2012. What does that mean in plain terms? It means that for one year of my degree, one year of study, it cost me the same. Everyone sat here, Oxford, Cambridge, Cambridge, LSE, everything they paid does not cover one year of my tuition. Do you think that's fair? First point of call. Right, yeah, that's the first place. What is the sort of most egregious thing on top of that is my three year course, nine grand a year for the tuition. On top of that, I have a maintenance loan. So roughly speaking, I left uni with about 37 and a half grand of debt, or I should have done when we're talking this question about, was it missold to me? From the day I started, I was charged interest, RPI plus a certain percent. RPI, by the way, a measure of inflation, the government doesn't like to use because they think it overrates inflation. They prefer a different measure, CPI, not when they're taking my money. Since I went to uni in 2012, just bear that figure in mind about my debt, 37 and a half grand. Since I went to uni in 2012, the amount of interest, I did the sums before I got here, that I have accrued is 32,000 pounds. So was it missold to me when I was told it was going to cost me nine grand a year? Yeah, I'd say so. On top of that, it's a regressive system. So if you're wealthy enough to pay the fees upfront, to pay your 27K, you don't get charged interest. So if you're rich enough, you don't pay the same as me. Is that fair? No, I don't think it is. There are some beneficial parts of the student loan system. So for example, if you're not a high earner, you don't have to pay. And after a certain period of time, it gets wiped. That's a good thing. Unfortunately, the government has unilaterally changed the terms of the loan. So we were told, when we went to university, it would start at a certain threshold and it would increase. It would keep in line with earnings. We're now in a situation where for a little more than the living wage, 500 pounds difference. If you work, if you're paid the living wage and you work 40 hours a week for a year, your salary, it's only 500 pounds under the threshold when you start paying it back. So basically, if you have a job, you're going to pay it. It shouldn't be like that. The government changed the terms of the loan that I agreed to. They did it unilaterally. I'd call that loan sharking. What's more, if I wanted to change the terms and I said, you know what, guys, I'm going to stop paying, what do you think would happen?

[00:03:33] Speaker 2: So what do you think should happen, Ollie? This is a cri de coeur from you, which I knew was going to be coming. Yeah, well, how else are we going to pay for it?

[00:03:42] Speaker 1: Well, how did you guys pay for it? The state paid for it, didn't they? They did. Good enough for you, good enough for me. So, look, I think education... APPLAUSE But do you think that's a realistic proposition now?

[00:03:52] Speaker 2: Is that what you would suggest now?

[00:04:00] Speaker 1: I think a government that was motivated by the politics of the soul rather than a politics of process could get their head around this. Yeah, look, I think education is a public good. I don't think it's a commodity. I think we all benefit from having an educated populace. And I'll be really clear and specific. I don't just mean undergraduate study here. I'm talking about vocational training. There is so much that we could change about our graduate system. Zia, I'll just add one thing. Sorry, Fiona. If we're talking about, like, doctors, Zia, you've spoken before about the difficulty of UK-trained doctors going into employment and the difficulty of them finding jobs. If there are skill gaps in our economy, why don't we say, if you're an engineer, if you're a doctor, if you're a nurse, no fees. We can train the right people. We can do all sorts of ways to make the system better. OK.

[00:04:39] Speaker 2: Muneera, obviously, this was something, I mean, I think, loads of us here, if we're old enough, remember Nick Clegg apologising and the various memes that then came from that for going back on the Lib Dem pledge not to introduce tuition fees. And, of course, they did. Do you think this is possibly going to be one of the biggest mis-selling scandals? Yeah. Or the next mis-selling scandal?

[00:05:06] Speaker 3: Well, I think the system, and as Ollie has eloquently laid out, is broken because of the way that it has evolved since then. So, yes, there was our history in government for which, you know, we paid a heavy political price for going back on a promise not to raise tuition fees. But, actually, every day we were in government, we fought for maintenance loans for our poorest students so that they wouldn't end up borrowing more. As soon as the Tories were left on their own, they scrapped maintenance loans, so students from disadvantaged backgrounds are having to borrow even more. We fought to keep the threshold at which you start paying back at a higher level. As soon after we left government, the Tories cut that threshold, and now the Labour government is going to freeze that threshold for four years. This is yet another stealth tax, on top of the stealth tax we've got in terms of income tax, which graduates and all of us are having to pay. Do you know, by 2031, somebody on national minimum wage will have to start paying back their student loan? So, I don't think that's fair. So, I think we need to raise the threshold, and I think they need to keep rising in line with inflation. As Ollie has said, I think we do need to look at the interest rates. And I think you raised an interesting point about public sector workers. I was contacted this week by a couple in my constituency, both from working-class backgrounds, worked really hard to get to university, and are now teachers. We desperately need teachers. We've got a serious teacher shortage. And they said to me, we're each paying 250 quid a week, a month, and our debt is growing. So, I think we should be seriously looking at whether we can put measures in place for certain parts of the public sector, particularly where we've got shortages, whether it's doctors, nurses or teachers. So, there's a whole package of things that I think need to be looked at. But I think it's outrageous, and this stealth tax, this freeze, is going to mean your average graduate pays £7,700 more back under Labour's freezing of the thresholds.

[00:07:23] Speaker 2: All right, lots of hands up. Someone, I suspect, are going to be paying these loans. But let's kick off with you, sir, in the blue sweater.

[00:07:30] Speaker 4: Yeah, thanks. I was just wondering if the panel think this is another example of the broken social contract for under-30s, you know, whether that is climate crisis, cost of living, the housing crisis, all of these issues are not being pointed, you know, they're not supporting people our age. In my demographic, I'm under 30, was planned to as well. And I just think, you know, this is another example of the middle age ultimately prioritising themselves within politics. And it's actually the younger generations that are suffering. Younger people being let down. Yes, I agree.

[00:08:02] Speaker 2: OK. First, yes, in the middle there, yes. Yes, you.

[00:08:07] Speaker 5: So I'm 18, I'm starting uni in September, and it's already looking before interest I'm going to be paying about £60,000 worth back to the loans. And at the current rate of the job market, it's already going to be a challenge for me to get a job. Is it worth paying that amount of money to get a degree? And what can the government do to support me after I finish my degree and getting a job?

[00:08:31] Speaker 2: So has it made you have second thoughts? It sounds like you're going to go ahead and do it anyway.

[00:08:36] Speaker 5: Yeah, I'm going to go ahead and do it, but I have looked into apprenticeships. I know a lot of my friends are looking into apprenticeships instead of the traditional path.

[00:08:45] Speaker 2: Right, OK. There's a man right in the very far corner over there. Yes.

[00:08:49] Speaker 6: Hi there. I graduated last year, and I've got friends who have actually... One of my friends, Rory, has already started paying off his student loan, because he knows if he leaves it, it's just going to get more and more, and he's going to end up paying a lot more than he borrowed in the first place.

[00:09:04] Speaker 2: Right. Well, lucky for you he can do it. I guess not everyone's in that situation. Yes, there's a man here in the front in a white shirt and dark blue suit. Yes.

[00:09:14] Speaker 7: The interest rate seems to be completely abnormal. It seems to be much more expensive than taking out a mortgage. So, if it's fair that students do pay back, why not set the interest rate at zero? So, they just pay back what they've borrowed, and that's it. Simple.

[00:09:32] Speaker 8: APPLAUSE So, we did inherit this system, and it was introduced by the Tories and Liberal Democrats. I think that's worth saying. And the plan two that you're experiencing was introduced by those parties.

[00:09:49] Speaker 3: Labour introduced tuition fees under the Blair government.

[00:09:52] Speaker 8: Yeah, you trebled them, despite the fact... Yes, in fact, that was what Nick Toby talked about, not raising them, not introducing them. Yes, you were going to scrap them, if you remember it, in 2010, and then you trebled them. But anyway, and I voted against that at the time, if you want to settle the scores, but there we go. But as a government, we've got to try and balance here the fairness of the student loan system and also fairness for taxpayers more generally. So, you know, I understand the point that you were making here about your generation and how tough it is for your generation, house prices being a much bigger ratio against your salary coming in. That's why we are trying to do other things for your generation, for example, building the 1.5 million homes so that house prices aren't unaffordable for you, introducing renters' rights so that you have a better deal when it comes to renting from landlords.

[00:10:42] Speaker 2: Talking about the graduate loans, you've got Martin Lewis, who's a very well-respected specialist in kind of all affairs to do with money. He says freezing the salary threshold, which is what is going to happen from April... From April. It is... Freezing the salary threshold is a breach of contract because that is not the basis on which people took out graduate loans. Now, do you think he's right, or do you think, sorry, we've just got to find the money somewhere?

[00:11:08] Speaker 8: Well, we have to find the money somewhere. We've got a tough fiscal situation. Those who graduate do earn more over their lifetime than those who don't go to university. So, you know, as I said, we've got to balance the fairness of the student loan system with the fairness of the tax system as a whole, and we are in quite straitened fiscal circumstances.

[00:11:27] Speaker 2: Zia, will student loans be the next mis-selling scandal?

[00:11:31] Speaker 9: Yeah, that was the original question, and I think that's a really well-worded question. Mis-selling, meaning what was the promise made to people taking out their student loans and going to university versus what did they actually get? And it was Tony Blair who arbitrarily set the target of half the country going to university. At the time, it was only about 20-odd per cent. And now we look to that. I speak to so many young people who I think would be better off not going to university and actually going and doing things like apprenticeships. We need a lot more manufacturing jobs in this country, for example. And, look, one of the things I would also make the point about is that I totally understand and genuinely do sympathise. As somebody who had a student loan myself and paid it off, albeit not... I was just before, you know, the rates that you had to pay. Look, who is going to have to pay for that? And it's invariably going to have to be people who wait on tables, people who work in care homes, people who work on construction sites, who didn't go to university, who are paying their taxes. And so one of the things... Look, I'm head of policy at Reform. One of the things we are looking at is the fact that, look, our universities are an amazing asset for this country. Three of the top ten universities on this planet are on these little islands. We should be really, really proud of that. But we should also be really clear, there are underperforming universities in this country. There are universities that are, frankly, being propped up by public sector money. And I do think, going back to the original question, are mis-selling their degrees to young people. And we have to look at that and have an honest conversation about it.

[00:13:03] Speaker 2: Julia?

[00:13:04] Speaker 10: Yeah, I think it's not wrong in principle to pay for an aspect of your education. But when I went, it was £10,000 that I paid in my loan. And what's going on at the moment is extremely worrying for people, particularly with the new changes that have been made at the budget. I think Zia's right that, you know, we were the generation where Tony Blair suggested that half of everybody should go to... 50% of the population should go... of young people should go to university. And that has unfortunately led to the creation of a large number of low-value degrees. And the real tragedy is that some people are not going to be ever earning enough to be able to repay those loans because they haven't got the better jobs for those university degrees. And that's actually going to be bad for the taxpayer as well, because the taxpayer will probably end up paying a large chunk of those loans. So the system's not really working for anybody. And I think we have to find a way to shut down some of the low-value degrees, move some of the funding into apprenticeships, and find a better way for some of those people that are in very tricky situations with the loan repayments, because it's not... There's so many aspects in which it's not good for having that level of debt for younger people, particularly a demographic aspect. We need people to be having children. We need them to be getting onto the housing ladder and building the next generation. At the moment, there is a debt trap there.

[00:14:25] Speaker 2: So would the Conservatives, I don't know, change the amount of interest being paid, change the time period over which it gets paid? What would you do to do that?

[00:14:32] Speaker 10: Well, we certainly wouldn't have made the changes that Rachel Reeves has made at the Budget.

[00:14:36] Speaker 2: What do you mean, freezing the tax threshold?

[00:14:38] Speaker 10: Yeah.

[00:14:39] Speaker 2: I mean, the Tories also froze the tax threshold. Well, they cut the threshold. Between... Repayment thresholds were frozen between 2021 and 2025, I think it's fair to say.

[00:14:49] Speaker 10: We made some changes on the loan repayment in 2022. And, you know, I say what we would do is to move some of the money away from the university sector into apprenticeships and try and rejig the system that way. I'm not going to make up...

[00:15:06] Speaker 2: Rather than change the amount the students have to pay?

[00:15:07] Speaker 10: Well, I'm not going to make up policy on the sport in terms of how we would deal with the loan book. But I think we have to look very carefully at the loan book and what it's doing to younger generations.