By Vivi Friedgut, CEO and Founder of Blackbullion
Today we welcome the thinking coming out of the Russel Group Universities and MSE around the student loan statements.
Martin Lewis has branded the current statements received by students to be misleading and we believe that is true of the whole student loan system.
Unlike every other type of loan, student loan totals are far less relevant to borrowers than repayment amounts. Because the loan is cleared after 30 years – and does not count towards your credit score (though it does impact affordability checks) – the total is less “consequential” than the media would have you believe.
Students, parents, or guardians, shouldn’t be asking; is university worth £60k – the current stated average – but they should be asking is it worth £30 a month (if their graduate earns £30k, which would be slightly above the national average).
It is the taxpayer that needs to determine if a university education is worth £60k per student because ultimately the taxpayer will foot the bill for over 80% of students who never fully repay their loan. However, for the student and their parents/guardians, this is the wrong question to ask.
Which brings us back to today’s announcement.
Like with most debt, seeing a big owed total can be both disconcerting and scary. People with mortgages face this each year and far too many people receive credit card statements with high owed amounts – and very high interest rates for that matter – too.
Researchers at Cambridge University discovered that financial phobia affects more than 9 million people in Britain. According to the research, dealing with money matters can be so anxiety inducing that some people don’t even look at their credit card statements for fear of what’s inside.
So making statements clear, concise and easy to understand is important. It brings clarity but it doesn’t help people to make better decisions about their money.
It’s an overview not an aid to decision making.
That comes much earlier.
The time to be clear and concise is 4 years earlier, when prospective students and their parents/guardians are discussing the prospect of university and the financial implications. That is the point to ensure students have access to information, are able to understand the true costs of university, and have clarity when it comes to options about how shortfalls maybe covered.
It is pre university we should be ensuring that all students – with a special focus on widening participation; first in family students, care leavers and other vulnerable groups – understand what help is available and what funds they might be able to access.
All help is welcomed, all discussion important and we hope that better statements do indeed help students and their parents/guardians make better decisions. But If 90% of students are going to understand the fee system, let’s help them do that before they start, not after they graduate!
It is pre university that we need to ensure everyone is money ready for uni.