WRITTEN MINISTERIAL STATEMENT
RT HON DAVID WILLETTS, MINISTER OF STATE FOR UNIVERSITIES AND SCIENCE; DEPARTMENT FOR BUSINESS, INNOVATION AND SKILLS
STUDENT LOAN REPAYMENT
23 February 2012
I am today confirming that there is to be no system of charges introduced for early repayment of student loans.
Last year, we consulted as to whether there should be a charge for early repayment, and if so, what form such a charge would take. This consultation, which closed on 20 September 2011, prompted 154 responses from the general public and key stakeholders including a diverse range of HE providers and representative bodies, consumer groups, employers and professional bodies.
Analysis of the consultation responses showed that a substantial majority of respondents were opposed to there being any restrictions on a borrower’s ability to make early repayments. A smaller number of respondents were sympathetic to the principle of protecting the progressive nature of the student support system, but most of these felt that restrictions on early repayments were generally an ineffective way of delivering progressivity.
Having carefully considered all the evidence and responses submitted, we agree that individuals should be allowed to repay without penalty if they so wish. We have therefore decided that we will not make any changes to the status quo and will not implement any early repayment system. The proposed new student finance package is fair, sustainable and progressive and will remain so.
Click here to view a summary of responses and a list of respondents.
Nothing in these mechanisms detracts from the advantages of students who are the children of parents who can afford to free them from debt. The deeper question behind these policies is their continuity with policies which promote inequality by promoting or permitting advantage the wealthy as opposed to others. This basic continuity is little affected by the window dressing now on offer.
Questions for Consultation
1) No, a high earning individual will already be paying higher tax rates and NI. If the loan is repaid in full then those funds are avialable for new students at an earlier date than if the loan runs for 30 years.
2) What this means is that you have miscalculated the cost of the student loans system and that you do not expect to recover all the monies loaned. If you were to recover it all then it woul be self sustaining.
3) It would cost more as you would charge a fee or levy.
Other concerns:
1) I do not know of a mortgage lender who charges a 5 percent levy on loan repayment so why should the goverment be able to charge this.
2) I think this goverment has totally missed the point…this is a debt and students think of it as such. You have provided the figures where early repayments are made even though no real interest being charged.
3) Shouldn’t you be making it easier for students to repay the loans not harder.
1 Yes
2 Hybrid Model
3 It is always good to encourage early repayment of debts, in any aspect of life. If we don’t allow early repayment, it suggests double standards – the country’s financial problems and individual’s financial difficulties have lagely been caused by over borrowing and at the end of the day, it is tax payers money. The more returned to the coffers, the more there is for future students.
I am commenting as someone who went through the University system thirty years and as the parent of a prospective graduate.
I agree with the principle that graduates should pay for their own education, so support the increase in fees and the new funding system. This is on the basis that a degree is still of material benefit and it is inequitable for graduates to receive a benefit funded by general taxation.
I can’t however, understand the logic behind the argument that higher earning graduates should be forced to subsidise lower earners through an early repayment charge. If there is a social case for subsidising lower earning graduates, the subsidy should be shared amongst all taxpayers. Why should a graduate earning £40,000 be forced to pay for a social good, but a footballer on £4m be exempt?
I am also concerned by the wider message. Most people in the UK have too much debt and too few real assets. Early repayment of any interest bearing debt – whether mortgage, credit card or student loan – should be encouraged not penalised.
Thanks for your help.
1. No, I don’t think it is fair to penalise people who want to repay their student loans early. Unlike a mortgage where you have a choice over what finance product to take, there is no choice within this system. I think these proposals are very unfair. The interest charged should cover the cost of the loan ergo if someone chooses to pay off the loan early, they should pay less interest. Unlike a mortgage company which is a business and therefore exists to make a profit and can therefore justify the early repayment charges, the Student Loans Company is supposed to be only covering the cost of lending.
3. A early repayment mechanism (which I would argue is regressive) would further damage the public’s perception of the Student Finance System which is already in tatters.
Likewise I feel it is very unfair that people are charged more interest, the more they earn. Interest should be charged at the RPI rate which will cover the cost of the loan.
We have a horrible, unfair, hybrid system of student finance which is about to get worse. The amount of debt that a student accrues at university is dependent on their parents’ financial situation, yet when it comes to paying it off it is their personal debt and has nothing to do with their parents. So you could end up with a situation where someone froma low income family studies physics (an expensive subject) and ends up earning £100 000 Good for them but they will have lower student debt because they will able to access grants and will thereby accrue less debt during university.
Then you could have someone from a middle class family e.g. both parents working and earning £70,000. This is not a huge income particularly in the SE. This student might study a Humanities subject (much cheaper to run than a laboratory science). They might end up working in a average paid job and will have more debt to pay back even though they are paying far less. Regardless of whether they will ever pay the debt back, how is that fair? To make the system truly fair, remove parents from the equation. It is not their debt and they won’t be responsible for repaying it. I think the new system is hugely unfair in so many ways. Although I wasn’t keen on a straight graduate tax where all graduates paid a % of their salary in to the Higher Education system, it would have been fairer than the proposed system which is simply a tax through the back door based on your family’s social class.
1) Should BIS introduce a more progressive mechanism for early repayment of student loans?
- First, this policy, in its impact, is potentially far from ‘progressive’, so please drop the buzzword.
- I can see why BIS would want to, but I think it’s unrealistinc and goes against the market ethic. If I, as a consumer, have a debt and I find a way to repay that debt and save money through lower cost borrowing, I expect to be able to do that. I can accept a fee to cover administrative costs but a punitaive additional cost is anti-consumer.
2) If BIS should introduce a more progressive mechanism, which model best delivers BIS’ stated aims of ensuring the progressiveness and sustainability of the student finance system?
- Sustainability of the govenment’s policy is the govenment’s problem, not the consumer’s. If the policy is so poorly thought through that it is unsustainable (as this one is), the graduate shouldn’t carry the can. Where this situation occurs in markets there is a cap on over-repayment without charge, and chargers based more on costs of changes to lending contract rather than punitive recovery.
3) How would a more progressive early repayment mechanism affect you or your organisation’s perception of and relationship with the student finance system?
- It would reinforce my impression that the policy makers thought this policy through very poorly leading to a policy that is only superficially progressive and financially irresponsible for both goverment and taxpayer.
Mortgage companies charge early repayment penalties so that they may adequate profit to contribute to their businesses. The governement should be providing loans with interest that covers inflation so that individuals can afford to go to university. The govenments should not be making a profit out of the interest payments. Graduates should be allowed to pay off their loans at any point. Your proposal is immoral.
1. No – students with the highest earning parents will be able to buy themselves out of the system by paying fees unfront. Additionally, the highest earning graduates will also pay less becuase they will earn a large amount over the threshold quickly enough not to be stung by compound interest on the loans (i.e. your proposals are regressive at the upper deciles of the income scale). What you are proposing to do by having charges for early repayment is to hit those on middle incomes even harder than they are being hit already.
I think that for early repayment, the interest rates should be kept lower compared to what private student loans are. Also, if it is repaid early on a voluntary basis, there should be no interest charged as an incentive to work hard to repay the loan. Finally, the interest earned should be placed into a trust or an endownment for future students to help pay for future education.
1) No. The government should simply make loans available to those who would not otherwise be able to afford a university education, and encourage young people to repay those loans as quickly as they can and by whatever means.Debt is debt, it is immoral for the government to sanction such a enormous rise in fees and so (for most) in debt. it is also inconsistent with the government’s insistence that the nation should pay its debts as fast as possible.
2) If the government is determined to introduce ameasure regardless of the consultation, I would opt for the proposal which impacts only the high earners. However, i agree with the comment about theproposed fees/loans system being a mess – partly based on family income and partly on graduate income. Some of those high earners (from “rich” families)will as a consequence have a great deal more to pay off than others. How is that fair?
To introduce “progresssive” measures such as those proposed would be a double whammy for many, particularly in the early years. Families and students have had too little notice of these changes to have the chance to save money for the fees. They may be able to scrape together some money during the time that the student is at university and in the first years after they graduate. Do you seriously propose to penalise them if they then want to pay off part or all of the student loan?
There is a risk that early repayment penalties will discourage philanthropic giving to universities, because graduates will feel that they have paid more than enough in interest rates. As a society, wouldn’t we rather encourage donations to universities, than so called “progressive” and compulsory extra payments to the SLC?
To me this sends out a clear message to people that loans are not something that you should be encouraged to repay – which is totally and utterly irresponsible. If we are to encourage an attitude of responsible lending, and financial prudence, then we should not make ANY penalties for early repayment. Early repayment is good money management – not something that the government should profit from.
Graduates who are lucky enough to get higher wages will anyway, be paying higher rates of tax – why should the Government have it every way?
I feel that Government reforms in university education are increasingly discouraging people from pursuing degrees – is this what they really want to do?
The phrase “institutional loan sharking” comes to mind. I wonder what industries are represented on ‘dream team’, banking per chance ?
Maximum loan term for loan banks = maximum cost for us ( our children )
“Progressive” = maximum profit to banks.
How many ‘bites’ at the apple does this industry want before they bankrupt us all ?
So, thats a NO vote from me.
I believe many parents will want to help their children avoid a huge debt and would like to pay off at least some of the fees before their child starts a course. Therefore, I would be in favour of having a flexible starting point where contributions from families can be made so that the loan borrowed will not be the full amount. I do not suggest this as a wealthy parent but it is what I would try and do to help my child avoid such huge debts.
Sue, thanks for your comment. No student is obliged to take out a student loan, in full or in part. This means that it is currently possible, and will remain possible, for individuals and their families to pay some or all of their tuition fees up front, if they wish to do so.
It is madness to have a progressive early prepayment charge on student loans:
- the government must not encourage continued debt when it can be paid off
-the government is not in the banking business and must get unsecured loans off it books as soon as possible. Borrower circumstances could change adversely.
-We already have a progressive tax system — it is simply wrong to add yet another penalty on what could be just moderate success
-Young people don’t need yet another reason to pass on higher education
1. BIS should not introduce early repayment charges
Graduates who repay early already make the following early repayment charges:
a) They give up the “life insurance element” of the student loan system. If you die, the debt is written off. If you die after making an early repayment, you don’t get the early repayment back. ONS data show that a 21 year old has a 4.6%/2.7% chance of dying (male/female) in the subsequent 30 years (http://www.statistics.gov.uk/downloads/theme_population/Interim_Life/ilteng-reg.xls). The figure is substantially higher for mature students. Graduates may well have lower mortality rates (reduced rates of smoking, working in dangerous occupations, etc), and graduates who die will have paid off some of their loans. Nevertheless, it is plausible that the state will typically lose 1% of the initial loan because of death. Someone making an early repayment at the start of their career therefore makes a de facto “early repayment charge” of around 1%.
b) They give up the “income contingent loan right off”. If your income is insufficient, the loan is forgiven after 30 years. Given the way in which fees have risen, many people are likely to fall into that category. People who pay off now are giving up what is quite a valuable asset – the right to have their loan written off. We should place no obstacles in their way – they are making a large voluntary tax payment. All the evidence is that many of the people making repayments are debt averse, rather than rich (They have an average income of £18,400). Many will have had their debts written off had they not made early repayments.
c) It is costly for the government to run the SLC. Earlier payers reduce the costs on government
d) The SLC loses some people through administrative error. It is costly to find them, and costly not to find them, in that they make no further repayments. Early payers reduce these costs to government.
2. The comparison with mortgages is not valid. Most mortgages do not have early redemption penalties. Those that do fall into one of two types. The first are mortgages where the lender pays the borrower cash up front. This might be in the form of an actual cashback, or it might be in the form of free legal fees, no application fees, free valuation and so on. My first mortgage had a 2% cashback – on completion, Cheltenham and Gloucester paid me 2% of the value of the mortgage. Clearly if there was no lock-in, everyone would apply for a mortgage, take the 2%, and redeem it immediately. The second type of mortgage with early redemption penalties are fixed rate mortgages. Here the lender enters into swap deals – they borrow money long at fixed rates, and lend it out again at fixed rates. If interest rates fall, and there are no redemption penalties, borrowers will remortgage, and the lender will be stuck with a legal obligation to pay what is now a high rate of interest on the money that it borrowed, and no ability to lend that money profitably. My previous fixed mortgage was of this type. Even then, it allowed me to overpay by 10% of the original sum borrowed. Furthermore, the mortgage sector is competitive – there are many deals that have no lock-ins, and lock-ins tend to be for the first 2-5 years only, after which unlimited repayments are allowed.
3. Work by the IFS and others (such as Neil Shepherd) show that the amount of extra revenue raised by the so-called progressive interest charge is negligible, so this proposed policy is trying to solve a problem that hardly exists.
4. A scheme like this makes the loan system more like a tax than a fee. It undermines the idea that you have a debt, which you incurred out of choice, and which you have to pay off. If we are to have a progressive graduate tax, we should have a graduate tax. If we want a progressive tax system more generally, we should increase taxes that bear more heavily on the affluent. But if we want a student loan system we should have a loan system in which student debts are treated as debts, and viewed in commercial terms. That would point to a small discount for early repayment, on account of the reduced administration costs, and the loss of the life assurance and income contingent assurance. It is not compatible with any additional costs being placed on those who repay early.
1. No I do not believe that BIS should introduce a more progressive mechanism for early repayment of loans. Why should students be penalised for wanting to clear themselves of any debt. Debt is not a good thing to have and many students will want to try and repay early even if they are on a high income.
2. Do not believe this should be introduced.
3. Another negative piece of advice to have to give the students.
My daughter wants to do medicine at uni which means she will end with very high tuition fee debts. Her salary will be relatively high because of the 48+ hours per week, including nights and weekends, and will take on increasing responsibilities. Her hourly rate will not be so big. So, it does not seem fair that she will have to make additional contributions in this progressive systems to help those who earn less because they are on less hours or less responsibility. Surely this needs to be taken into account. Its not just about the bottom line of your pay packet, it’s much complicated. Also, she will be paying a lot more tax and so its as though she will be paying double. Again this seems so unfair and even discriminatory!
I am responding as both the parent of a current student and one who will hopefully start in 2012. I , therefore, will have one child covered by the current system and one by the new system. I do not consider our family wealthy and we will not be in a position to fund either the new higher fees or the element that covers living costs – my daughter will, therefore, be applying for the maximum loan.
1
The current system has significant advantages in that it is simple, but it benefits the wealthy and those on higher incomes who are able to afford to make early repayments. It, in effect, provides them with a source of cheap finance, whereas they probably have the ability to fund both the fees and the living costs themselves – the tax payer and other, poorer, students are therefore subsidising the wealthy and well-paid. Because of this I have no objection to a more progressive mechanism subject to my answer to the second question.
I am not sure using evidence about early repayments under the current system is valid. Under the new system high wealth individuals will be less likely to take out a loan than at present because the interest rates are more commercial than at present
However, I have real concerns about the complexity of a progressive system. The SLC is not exactly a model of efficiency and they seem unable to cope with the system as it is, as evidenced by the difficulties my older daughter has had with her loan each year because of the SLC’s poor systems and administrative processes. A progressive system is likely to be resource hungry and will either divert the SLC away from dealing with loan applications or increase their costs as the ye recruit staff and develop the necessary IT.
Dependent on the option chosen I am not sure it makes it more complex for borrowers and their families.
2
Option A – I am against this. The justification behind the new increased fees is that the student taking out the loan will earn more and everything else is based on that presumption, Option A goes against that principle. Dependent on the limit it will benefit high earners and penalise those modest and thrifty earners who wish to pay off their loan early.
There is a huge danger it will deter students from undertaking courses that only offer modest incomes after graduation (e.g. teaching).
This is yet another attack on middle-income households.
Option B – I favour this as it is based on an individual’s actual earnings and continues the principle that higher earnings are a result of having undertaken higher education. There is some logic in the earnings limit equating to the 40% or high rate tax band or as a multiple of the earnings limit at which repayments start. It seems unlikely that low earning high-wealth individuals will take out a loan in the first place now the rates are more commercial, so I am not entirely convinced that this will be an issue.
This will ensure that students who move into jobs with high earnings (e.g. banking) will pay their share
It will not deter students from undertaking courses that only offer modest incomes after graduation (e.g. teaching).
Because it is based on earnings this option should be relatively simple for borrowers and their families to understand.
Option C – This seems complicated and will be difficult to administer and for borrowers and families to understand.
It has all the disadvantages of Options A and B with the advantages of neither.
3
This will depend on the option chosen and the ability of the SLC to deliver
If i am in a position to pay for my daughters tuition fee in full and up front, and directly to her University, will I be able to do so without penalty?
Paul, thanks for your question. Individuals who pay for their tuition up front will not incur any charges over and above the published fees.
I don’t believe that an early repayment penalty would stop wealthier families from getting out of the overall mechanism as people can simply pay the tuition fees without the loan in the first place if they have the money. I think any early repayment penalty is only penalising those who come into money beyond graduation, some of which are simply entering a high paid job which mayto be one of their individual objectives of entering higher education anyway.
Perhaps a compromise to this would be to have a mortgage style overhang limit for graduates to repay an extra amount on top of their standard repayments up to a set limit.
I would feel more negative towards student loans if this penalty mechanism came into play, as it’s turning the loans into more serious burdens rather than the softer loans they once were: although the new commercial rates of interest have already made this change. It may also have cultural implications, along with the new high interest rate, for Islamic students where families wish to reduce interest payments in line with Sharia Law.
If I were 17 and planning on higher education, I would put it off for a number of years until this complete mess is sorted out. Why would I want to get tangled up in a financial arrangement with the government where it is not clear from the outset exactly how much I am borrowing, what the rate of interest is, how much the repayments are per month and for how long?
I have just graduated and am very reassured that I can pay back my student loan as early as I want to. In answer to the consultation questions:
1.No. The government should not prohibit early repayment just as it is illegal for banks to do so. I am very much in favour of a more progressive system but it should be up to individuals how quickly they want to rid themselves of the debt.
Early repayment, theoretically at least, is a stupid choice for a graduate to make. The debt doesn’t affect credit ratings (and hence mortgage and loan purchases) and after 30 years it is written off. For most students they will never pay off the original amount in this time, so to pay it off sooner is of no advantage.
In that same sense, it is in the interest of the government to permit (and encourage) early repayment, in order to recoup all of the money owed.
2. No “progressive” system is suuitable. What is to say that someone from a low-income background cannot go on to a highly paid job after graduation? Would you prohibit these people from paying back their debt in the interests of “progressiveness”?
3. I think prohibiting early repayment will put off some students from applying for student loans (and hence from attending university).
The government will look hypocritical in one one hand trying to encourage its people to spend within their means and cut spending to reduce its own deficit, whilst on the other telling graduates they can’t (or shouldn’t) reduce their own.
These proposals are morally bankrupt. Paying off a debt early should be positively encouraged.
If fees can be paid by the student or parents direct to the University to avoid taking out a loan (thereby avoiding ANY interest whatsoever) then what justification can there be for imposing any form of early repayment penalty?
How much is this “consultation” costing? Get your act together – smell the coffee – save us all the money and drop these ludicrous proposals.
1. No. The idea is not “progressive” so please stop calling this something it isn’t. The introduction to the document talks about a “form of graduate tax”. However, the policy was introduced as increased fees with loans to help students and that is how it was sold to the public. If it is intended to be a graduate tax say so, and say that for graduates, the tax rate above £21,000 will be increased by 8% (or whatever figure it is). It sounds as if telling the public that income tax would be increased was unpalatable to the government so they came up with this.
2. The BIS should not introduce the system, full stop. I agree with the commentator who said that if there is a social case for subsidising lower earning graduates, the subsidy should be shared amongst all taxpayers.
3. At present, apart from one bad experience, my children have had fairly neutral experiences of SLC. However, past reports of massive problems at the SLC and current reports of SLC continuing to charge students after their debt has been paid off mean that I do not have a good opinion of it. Not being able to pay off a debt early would certainly lower my opinion of the company – the term “loan shark” would come to mind.
Pingback: Why shouldn’t I pay stutent debt back when I want to? « ED in order
1. Should BIS introduce a more progressive mechanism for early repayment of student loans? No, not in the way that you are attempting to define progressive. Early repayment is a decision that should be made by the person with the loan, without any penalty whatsoever. It is immoral to charge extra to someone who is acting in a way which is financially savvy and responsible. Furthermore, students have no idea what their income will be, so they have no way of determining whether the loan is a good option if you charge extra for early repayment. You should not be able to force people to make such a blind financial decision.
2. If early repayment penalty is required to make the student finance system progressive and sustainable, then rethink it. I do not believe your models should be considered progressive, as they have little to do with low income families now, it’s whether the student is able to make more in the future, and that, surely, should be what everyone wants for them.
3. Enactment of any of your models into the student finance system would cause me to reconsider whether my children should go to university in this country.
1. Should BIS introduce a more progressive mechanism for early repayment of student loans?
- No. The use of the word “progressive” makes it clear what this idea is: a bodge to try to give a loan system some of the advantages of a graduate tax. It is a loan, not a tax, and it goes against all the principles behind calling it a loan to penalize people for paying it off. If you want a progressive system, come clean and set up a graduate tax. And make it applicable to those, like myself, who benefitted from subsidized education and from the build-up of national debt before the financial crash. Do not place all the responsibility for paying off the national debt on the shoulders of those too young to have any responsibility for building it, and too young to have voted for the present government.
2. If BIS should introduce a more progressive mechanism, which model best delivers BIS’ stated aims of ensuring the progressiveness and sustainability of the student finance system?
- That is not something someone without detailed access to the figures (and a lot of spare time) can assess. What I can say is that, if you really insist on this ridiculous idea, any penalty should be based only on income, not on the amount to be paid.
3. How would a more progressive early repayment mechanism affect you or your organisation’s perception of and relationship with the student finance system?
- It would give the system something of the flavour of a dodgy loan shark: something to avoid getting tangled with because, once in, you can’t get out regardless of what happens in the future to inflation (which is not necessarily tied to earnings).
N.B. I don’t think I have ever seen a more transparent euphemism. “A more progressive mechanism” can be replaced with “penalties”, which is a much more straightforward term, accurately summarizes the mechanisms which are proposed, and makes the questions much simpler to read and understand. The substitution of this euphemism leaves me concerned as to whether this is a genuine consultation, or already a foregone conclusion.
why is it wrong to repay a student loan early? by making this punitive you are risking people being encouraged to not repay at all. Such huge loans, which young people have no choice in if they wish to study HE, should have a system whereby if they are able should actually be encouraged, or at the very least not weighed down by ‘clauses’. Think about what you are doing, this is wholly unfair to so many people in so many ways.
A …. Sudden introduction of £9k fee; has become a huge disincentive to prospective UK univ students !
Graduated introduction over at leaast 3 years would have allowed for preplanning by students and parents;
+ eased parents / students investment plans
B….prospective burden of + £50k fee & loan; will only atract rich parent students; or poor bright students with exceedingly helpful free grants
1/2/3 … thus repayment is not an issue except for NON-professional univ stiudents: who in their ‘wisdom’ will have no intention of earning enough to repay SLC loans !!!
It is difficult to understand what must be in the minds of people who dream up such suggestions.
They cannot possibly live in the real word and have little notion of how difficult life is for ordinary folk and young people in particular.
The entire system is riddled with unfairness, is designed for the government to make a profit from student loans, or at least to cover up the lack of intellect that made them forget that the higher the tuition fees the more money it would have to find to pay for student loans.
With higher tuition fees, taxation rates to punish success, loans at extortionate interest rates, loss of EMA, and now a loan shark mentality to early repayment, the government should not be surprised that we have a disaffected youth and violence on the streets. You reap what you sow.
NO, NO, NO to all of this.
This idea is bonkers.
Discouraging people from clearing debts, under the guise of an act of fairness, is a gross abuse, and absurdy stupid given the inherant flaws in the SL system.
The new loans regime will mean that many people will not pay off the debts in any case, placing a burden on a generation as yet unborn, and this proposal will only further reduce the amount collected.
This line from the consultation, which describes the disadvantages of the current system is rather telling:
————————-
-Those on higher incomes who are able to afford to pay off their loans early will be able toa void making their full contribution towards the progressive system
——————–
I was under the impression people signed up for a loan of £x, not ‘a contribution to the progressive system’. The outstanding liability on any given day is the outstanding balance.
The mortgage comparison is wrong; fixed rate mortgages often incur repayment charges as otherwise it’s a one-way bet for the borrower; variable rate deals seldom have early redemption fees.
1. No
2. None. The question is phrased to imply that each system is beneficial, when in fact they are all detrimental, in that they all discourage repayment of debt. In addition to the system is unsustainable in any case, since not many people will earn enough to repay the debt in full either. At 4% loan interest(ie CPI of 1.8%), I calculate someone will have to earn an average of circa £36k for 40 years to repay the loan. It ain’t going to happen, on average. It barely needs saying that a decent amount of graduates are women, a significant fraction of whom will give up work to raise a family, or take on jobs which involve reduced hours and pay to fit around. Likewise stay-at-home dads.
3. I would strongly encourage any children I have to study abroad rather than ruin their lives with unsustainable debt which they may be penalised for attempting to deal with in a prudent manner.
1. Yes. I am concerned that less affluent potential students will be deterred by the notion of a large debt, in a way that they wouldn’t be by a tax. The closer this scheme approximates to a tax, the less likely young people are to be deterred by the prospect of debt. Allowing early repayments makes this a much more conventional debt.
2. The more progressive the better. It is crucial that the brightest young people are not all make decisions about their studies in relation to the prospects of repaying debt. We need intelligent and ambitions young people to undertake forms of work that are socially beneficial but not, for various reasons, particularly lucrative. If these subjects are only able to attract those students who cannot find places on courses that will enable them to repay loans quickly, universities will be reluctant to offer these subjects.
3. I would feel considerably more positive toward a student finance system that was supportive of poorer students, less marketable disciplines and socially valuable careers.
No, there should not be early repayment penalties. The technical arguements have been well made by Martin Lewis, Neil Shepheard, Tim Leunig and others.
If there is a social case for subsidising lower earning graduates, this should be via general taxation so that all high earners, including non graduates and overseas graduates contribute to the subsidy.
If there was a penalty for early repayment this would often be avoided by paying fees up front.
Parents will have to make a judgment based on thier student’s expected future earnings. If they have a son going to read science at Cambridge they will pay up front. If they have a daughter going to read Media Studies at London Metropolitan they will take the loan.
As a parent of an MMath graduate and banker by profession and now higher rate tax payer these are my thoughts.
Personally I advise people to repay loans before saving unless a greater return can be made on the savings than paid on the loan. A low cost loan should be retained if there are no surplus funds to provide liquidity to meet every day expenditure and unexpected bills. The ability to repay student loans early should therefore be retained.
To force individuals to retain debt they do not need gives the wrong impression, we should encourage people to repay debt.
The student loan rate is also not the cheapest form of borrowing with many mortgage deals less than the student rate. Ex-students will also be keen to reduce outstanding debt so they can take on further debt inthe form of mortgage and loans to set up home and having the ball and chain of student debt albeit supposedly cheaper could impact on the amounts they could borrow.
Early repatyments are actually benefiting the Government by reducing the need to borrow larger sums for future students. If a charge is to be made then this should be aimed at keeping the administration simple and hence costs down rather than penalising students further. An administration fee of 3% would in effect give the Government a year’s interest for free on the money repaid and would be more in line with terms one would expect from a commercial low cost loan.
R.egards
Summing up my previous comments my answers are
1. No.
2. Early repayment fee same for everyone only.
3. Not applicable but wish to defend future students from double taxation.
R.egards
There shouldn’t be a levy or penlty imposed on any student who decides to repay early unless their income is eligible for the 50p maximum tax rate!
I graduated this year and will be returning to my alma mater to do a PhD in October. I have no idea when I’ll be earning enough to be forced to repay my loans, so it is a relief that I will be able to use some of my spare money to repay my debts.
The very idea that anyone would be put into a position of having rising debt that they are forbidden to repay sickens me. Being punished for being able to repay debt is insane.
There is a substantial confusion at the centre of government’s thinking around this topic.
Higher education is both a private benefit, for which it is right that the student should pay directly and not be subsidised by other tax-payers, and also a public good. The country needs an educated population. It is right that all tax payers should contribute to the public good in a fair way. General taxation is by far the best and fairest way of doing this.
The policy of penalizing early repayment deeply confuses the two aspects. It sends a very mixed message to students and potential students. Is this a loan for which they are rightly liable and should in principle pay off as soon as they reasonably can, or is it a graduate tax based on somewhat arbitrary considerations of educational choices and their parents’ wealth which it is wrong to avoid? If mismanaged, it runs the further risk of reducing the supply of educated graduates to the country if people either choose not to go to university, go abroad to university, or emigrate after completion of their studies.
In answer to the specific questions:
Should BIS introduce a more progressive mechanism for early repayment of student loans?
1) No. It is entirely reasonable, wise, and should be the aim of government policy to encourage everyone, not just students, to repay loans as soon as is practical. Repaying debt is responsible behaviour that government should be encouraging.
It is not “unfair” to pay off a loan. The government’s premise is based on the confusion in this policy between public and private goods and how they should be funded. Elsewhere the “loan” is presented as a funding mechanism for the “private good” of higher education for which the student is individually responsible.
As matter of practicality a penalty on early repayment would not address the perceived issue of rich people escaping the costs of a loan – they would simply not take one out in the first place.
If BIS should introduce a more progressive mechanism, which model best delivers BIS’ stated aims of ensuring the progressiveness and sustainability of the student finance system?
2) The idea that a penalty on early repayment is needed to ensure “sustainability” of the loan mechanism is counter-intuitive. Early repayment helps government’s cash flow substantially and minimises its long term liabilities. These are both benefits to the government. Perhaps you should look at ways of encouraging early repayment.
If the case for the “sustainability” of the loan scheme depends on interest payments 25 years or more into the future on unsecured loans, then the case is flawed.
How would a more progressive early repayment mechanism affect you or your organisation’s perception of and relationship with the student finance system?
3) An early repayment penalty would give me the impression that the government sees the “loan” as generating a stream of tax income for the future that it is trying to secure. The “loan” would lose much of its character as a loan for which the student is individually responsible. I would therefore perceive it as an unfair and somewhat arbitrary tax bearing non-uniformly on people depending on their parents’ wealth rather than their own wealth, and on what educational choices they made.
In my opinion the right way to fund the element of higher education that is for the public good is from general taxation. That bears on all in known, progressive, fair, and uniform ways. The element that is for the private good should be funded by the student. The government should ensure access to suitable loans to fund the private element. The two aspects should not be confused.
1. No. Either students pay off their own loans early and have no interest to pay or they are cross-subsidising other students. Government should not be using students to cross-subsidise other students. It is plainly not fair and not economically efficient.
It will lead to a distortion, greater administrative cost and such policies should be left to the general tax system. It would also be a financial drag on those firms which wish to recruit good students and attract them by offering to pay some of their degree, therefore it would act to reduce the alignment of the HE system with what business wants and needs.
2. I do not agree that students should be penalised for repaying early.
3. It would be economically inefficient, put off students from taking out loans/going to university in the first place. It would also act as an incentive against students working hard, saving hard and paying off loans early. At a time when the government needs to reduce its budget deficit it should be encouraging early repayment!
Early payment should be encouraged by all to ensure debt culture does not build in peoples minds and be seen as a money making activity from government.
1. Moral problem: Students whose parents are rich will be able to pay their tuition fees without needing the loan, and “buy their way out of the system”. Why differentiate between students with rich parents and students who make themselves rich?
2. BIG practical problem: If a graduate leaves the country, the debt becomes a normal “commercial” debt, no different from a loan from a high-street bank. The government (who has become a creditor) cannot charge a “levy” on repayments, nor can they raise the interest rates to compensate for this. Thus, any levy would be UK-only and hence a disincentive for high-earners (the “best” graduates) to stay in the country.
These anti-early-repayment plans are misguided. The interest rates accrued already mean that graduates will pay off close to double the initial loan of £30,000, so there is no need to penalise them further.
I have calulated my 3 children (now between 11 and 6) will have to pay around £80k to go through uni for tuition fees alone. If I saved half of my wage (ie £500 pm) for 16 years ubtil the youngest finishes uni at 21, then I can pay their tuition fees for them. This is what I plan to do and will mean I will go without in order to help them. Why on earth should me and my children be penalised for paying these fees early?
As a parent of a student due to be in the first year of the new 2012 arrangements I am very concerned about repayments.
I don’t think BIS should introduce a more progressive mechanism. Debt is bad, and we shouldn’t encourage our youngsters to owe money. If they want to pay it off there should be no disincentive to do so. As there isn’t with most mortgages and other loans.
Anything other than the existing system is too complex and punitive so we shouldn’t do it.
Any more progressive early repayment smacks of penalising middle earners and is almost spiteful in its intent. It would be an even bigger betrayal of our youngsters than this iniquitous charge is in the first place.
The case against the current mechanism is false. If you see the rough repayment estimates you will see that those on £50k and above will actually pay LESS than those on middle incomes earning £26k-£40k who will actually pay up to 3 times the actual cost of their degrees because they can never catch up with the repayments, whereas higher earners will only pay around 175% of their university degree cost or less.
You must allow people the freedom to pay off this amount freely as and when they feel able, otherwise you will condemn a generation of middle earners to punitive costs at the very times they will need that money for mortgages and to support the next generation of children.
Thsi entire system is based on the premise that only the individual benefits from higher education; but many people, including myself do not agree with this. University contributes a great deal to the social fabric of a country, just as other skills based tuition, schools and other educational institutions. They are part of society.
It is therefore wrong to penalise high earners for paying their debts off early; they will already pay extra tax and the government will find that people either do not take out a student loan or just don’t bother to repay it. Repaying debt, as the recent economic problems have shown, should be encouraged. Surely the best progressive system is the income tax system.
BIS should not introduce such a system.
I am currently going through university. If there was a penalty for early repayment, or higher interest fees, I would not be striving to pay off my debts as quickly as I can once I am earning (as is my current position, which seems quite common sensical) but would sit on the debt, or might even have sought to pay some of it upfront – which is hardly progressive is it?
High earners already contribute more through the tax system. Once only tuition fees are funding university places, this might change, but this would be a major change that neither coalition party proposed during the election. The government needs to make a decision on this issue – does the state or the indvidual pay; and be upfront about it – otherwise I will lose respect for the Higher Education system as a whole. It seems the policy is that the individual pays, in which case it is not the government’s business to say that individual should pay more just because they get the money quicker.
1. No. If you wish to follow the mortgage repayment model, the limit might be 10% of loan balance fixed at the start of repayment, without penalty, allowing complete payment in 10 years, not 30.
2. Of the options B) is the most targetted penalisation of a successful career
3. Any early repayment penalty will encourage students and parents to try to limit the loan actually taken. It is not clear yet whether people can opt to pay fees upfront, but these proposals would encourage that. At RPI plus 3% the loans outprices a number of other finance options, including mortgages, so it is logical to try to limit the value taken. An extra penalty, especially at the ridiculous levels quoted, will merely exacerbate this.
It makes little sense to discourage people from repaying debt. If someone can afford to pay down debt, why would the government want to encourage them not to? That may be progressive, but it is also foolish. As a parent of one of the first year who will pay the higher fees, I do not understand why you are looking to penalise them for good financial management. The government will presumably tax higher earners more anyway; the loan system should not be an additional tax system, beyond the naturally progressive nature of the basic system. Do not add complexity for poorly thought out “progressive” reasons.
I would support the same early repayment mechanisms as existing student loans because:
1)Lower waste & administration costs than more complex early repayment models.
2) Encourages debit adverse attitudes & self reliance.
3) Government has earlier access to and certain payment of repaid money (to reduce government debt).
4) Progressive mechanisms are already incorporated in the allocation of student finances by the use of maintenance grants.
No. BIS should not introduce a ‘progressive mechanism for early repayment of student loans’. It should reward people, wealthy or otherwise, who wish to erradicate their debt early. The system is not progressive, it only refelcts commercial practice designed to claw back interest lost people who pay loans back early. The student loans system should not be commercial.
1. Early repayment penalites are not progressive, they are regressive and complex to administer. Commercial lenders today want early repayment so that money can be lent out again and borrowers of all incomes want to reduce debt. The sooner any lender has his money back the sooner he knows that it is not a bad debt that has to be covered by some other means – the government should look at the history of Northern Rock if a reminder of bad debt is needed. The aim of the system should be simplicity at all points with encouragement to repay early so that the money saved by the borrowers can be put into pension savings or spent elsewhere and stimulate the economy (as ministers are forever encouraging us to do).
2 To sustain the student loan system it must be simple so that money is spent on loans and not adminstering the system. If you want a model of how not to do this just look at the Rural Payments Agency which has been a disaster for UK farming due to its over complex and inflexible systems.
3. This question is nonsense since the government’s idea of a progressive early repayment system is the opposite of the truth; it is no more than a penalty scheme or another example of hidden taxation.
As the father of a 4 year old boy who is just about to start primary school, I am extremely concerned that any attempts that I make to save between now and when he reaches the graduation age of 21 will be penalised, while parents who will make no attempt to save towards early repayment of their childrens fees will not be penalised at all.
The idea that it will only be high earners who pay off loans early is nonsense; there will be plenty of careful savers on moderate incomes like myself who will want to give their children the best chance in life, and not have them start employment with a debt and repayment plan large enough to affect their chances of buying a house, and enjoying the basic luxuries of modern life such as a holiday or a car.
It seems that the millions of people who will be careful with their savings and aim to do the best for their children will be penalised, to match the perverse world that we live in.
I want my son to have a university education. I plan to pay off as much of his loan early as possible, and I find it illogical, insulting, immoral and crazy that I will be bracketed with the high earners who would treat this mechanism as a simple buy-out.
Please please consider those who are and will be careful with their money in order to provide their children with a strong starting point in life.
Many thanks
Mr Paul Ward
The only fair way to handle student loans is to treat them like a mortgage i.e interest is added and payments deducted each year until all the principal has been repaid OR the conditions for write-off are met.Commercial lenders allege that they charge early redemption fees to recoup their expected profit, which does not seem particularly fair as they presumably lend or invest the money elsewhere and will presumably therefore still generate profit from the resources.
It’s bad enough that private businesses do this, but at least their customers had a choice whether to borrow and from whom.
Student loans should not be treated as a source of profit for either the lender or the government -so early redemption penalties are iniquitous and inappropriate.
I oppose this plan. Everyone should be encouraged to get out of debt as soon aa they can.
This must be the most ridiculous proposal yet put forward on student funding. To give those who are fortunate enough to be able to repay early a disincentive from doing so, which speeds up the return of funds to the public purse is beyond belief.
Quite apart from the further waste of scarce public resources in administering this fundamentally foolish and misconcieved proposal, it will mainly hit those from modest backgrounds who have early career success. Those from more priviledged backgrounds will increasingly be funded by thier parents who will not wish their children to be caught up in the nightmare that is the student funding system, so will not be caught by this silly idea.
As an employer, I am appalled that the money I pay as a taxpayer is wasted upon such crassly stupid policy proposals. Please save public funds from being frittered away on paying people to come up with such obviously idiotic ideas and carrying out consultation exercises based on them. Instead the funds would be much better spent on direct financial support of Higher Education by reducing the fee burden on bright people from poorer backgrounds who increasingly are being discouraged from taking up educational opportunities by the potential cost, thereby reducing the potential pool of well educated peolpe from whom we can draw our workforce.
I think this proposal is shameful. It cannot be uncommon for those in their 20s to inherit money from the estates of elderly relatives; most commonly grandparents. Surely any responsible person would use any such funds to clear debt. As a responsible parent I started putting money aside (£100 a month) for each of my daughters when they were at primary school. My intent being to repay a good proportion of their loans when the graduate, so that they are not saddled with debt for 1o-30 years. Has the government forgotten the purpose of student finance? – it is to encourage and facilitate a better qualified work force and that is all. Skewing it to try to penalise particular income groups damages that objective. My eldest child is already in the early repayable system. If this goes through and I am to protect my 2nd child from having to commit to 30 years of debt to get a degree, I now face the prospect of cutting family expenditure to the minimum so that I can save money to pay for her to go without the government loan, perhaps taking a commercial loan that can be repaid early. I am sure other parents who can will try to do the same. What will that do to retail sales and the growth of the economy?
Please focus on the primary objective – encouraging young people to be better qualified by making the scheme attractive and not a guaranteed long term debt.
The answers to your questions are:
1. No.
2. Not applicable – see 1
3. My perception will change from a scheme that encourages further education to one that should be avoided if at all possible as it is as a long term debt trap.
The very principle of students paying for higher education undermines the dissemination of culture throughout society, reducing the attraction of studying “cultural” subjects, such as English or Classics, compared to economically-attractive subjects, such as Engineering or Law.
Since students typically have no resources or income, the availability of loans and grants is related to parental means, irrespective of their willingness to share their means with their children. Children may be penalised by the behaviour of the parents as much as rewarded by it.
It is not obvious to my student children that there is a significant financial reward to being a graduate under the existing system, and had they started the process with fees at £9,000 pa is it possible that they would have avoided university and sought employment after school – as it is, my Maths graduate son is already struggling to find employment and holds significant debt.
The policy of charging fees to graduates represents a massive transfer of incomes away from graduates, and can be expected to lower the price of houses over the next five years or so, or require an increase in salaries in areas dependant upon graduate recruits, including medicine and (now) nursing, for example.
The desire to repay loans is not closely related to earnings – those with lower incomes may wish to pay off their loans when they are able, and those with higher incomes may be happy to make the minimum-required repayments. Those seeking mortgages for example may wish to reduce their debt burden before entering the housing market, and those with no need for a mortgage may feel less pressure to do so. Graduates on higher incomes may repay less than newer graduates because they have higher financial commitments, and lower “surplus” income to use for repayments or other forms of “savings”. The premises on which the proposed progressive repayment system is based seem deeply flawed.
I do not believe that a progressive system affecting loan repayments is a desirable or helpful policy. It is hard enough for students to plot a rational path through the uncertainties of their likely financial positions over the first ten or twenty years of their lives with rising student debt, without the added complexities of taxes on their repayment pattern varying with annual incomes. The impact of the current system on graduates abilities to buy houses or afford family holidays is already uncertain, and further complexity will simply represent a further tax burden that would be impossible to deal with in a predictable manner. The impact on incentives, uptake of degree courses, emigration, total tax take, house prices, government salaries for graduates in the public sector all seem difficult to forecast, but must be negative.
I have skimmed through the early repayment document and cannot find any reference to payment of student fees prior to commencing University, or during each academic year. I presume that this will be an option? It would be most irregular to sell a product and compel the purchaser to take out a loan to pay for it. This restriction of payment choice is the sort of thing that consumer organisations rightly object to, when applied to other purchasing decisions made by private citizens.
1. NO – will not work.
2. None of them are ‘fair’
3. Proposals add unnecessary bureaucracy/costs and will not achieve stated goals. Those who want to pay off early will just borrow the money from other sources and this system will just penalise those who at some point are lucky enough to be in a position to rid themselves of debt.
We should be encouraging people to pay off their debts – is this what the Government is trying to do?
1). Yes, but I have little confidence that this government knows what that means. To me it means the poor who get in go for free and this cost is met by the rich who pay more.
2). The best mechanism would simply be allowing Universities to charge whatever they wish, and to provide government funding for full scholarships and living expenses for the top needs-based students. Government back loans could be made available to others, but they would be market rate loans, which must be sustainable as that’s the point of the market!
3). Early repayment charges discourage fiscal responsibility and penalize the middle class. They do not penalize the rich, because the rich simply pay out-right the fees. They do not penalize the poor, because the poor cannot repay early. They only penalize the people who start off poor or middle class and then become successful through the education they receive. This is a very very bad idea that only penalizes economic mobility. But perhaps that is the goal?
This is a graduate tax, so why keep calling it a loan scheme? If it is a loan, then early repayment should be encouraged. The majority of graduates will never repay the loan, so will simply be paying back at the tax rate set. What guarantees are there that the repayment rate will stay at 9% over £21,000. If this were to be increased by some government in the future, then the cost to graduates would escalate. The elephant in the room is the 30 year break point. As most people will need to have their loans written off after 30 years, what guarantee is there that this will not be moved to say 35 years or 40 years or until retirement?
If early repayments are penalised then it is definitely an incentive for those who can to pay up front, even if this means taking out a real commercial loan, since the long term risk for their children is impossible to quantify.
The aim of a loan scheme is to get more people into education for their improvement. What madness penalizes success in this endeavor under a false banner of being “Progressive”. This is putting political dogma before the education needs of our children and is poor policy. Get the money back early and recycle it to more students.
Penalising students for eapying early is unethical and promotes a “never save” culture. How can you charge people for paying upfront!!! It makes the way banks charge look moderate.And if you look forward I can see a time when more families save up for feess to avoid the repayment mechanism -perhaps even being left specific legacies by grandparents.
Another idea not thought through, under the guise of progressive repayment when it is really another tax. It is nothing like the mortgage system referred to. Maybe the people coming up with these bonkers ideas don’t have mortgages. There is only a repayment charge if you are on a fixed rate. Wealthy parents will just add the cost of sending their children to university to their existing mortgages at very low rates and pay it off whenever they want to. People with money have these options. People without money don’t. Richer people will always find a way around bucking the system. The idea that everyone will contribute to the progressive mechanism is naive. As always, poorer students and their families will lose out.
I think the trebling of student fees is an absolute disgrace and to add insult to injury by penalising students who would want to repay early is appalling.
In answer to the specific questions:
1. No.
2. The present system should not be changed. i.e. It should be possible for students to free themselves from debt by early repayment without penalty
3. A penalty charge for early repayment of student loans would condemn my daughter to a lifetime of debt and repayments. She would be in her 50s before any remaining balance would be written off. This is so wrong.
1) No. The paper itself points out that early repayment is already popular (over 1/3 of repayments in 2008-2009 were voluntary early repayments). It can be assumed that this will increase with the advent of higher fees and real interest rates. It is nonsensical to discourage this behaviour. Further, it is evident that either of the progressive mechanism will be costlier to manage than the existing regime.
2. Hybrid System – though the associated complexity may outweigh any perceived benefits.
3. The student finance system should be viewed by students as a necessary evil, to be avoided if at all possible. As this is not a realistic alternative for most students then everything should be done to encourage students to repay loans early such that the student finance system becomes an irrelevance. A progressive early repayment mechanism has exactly the opposite effect and it will be viewed as a millstone around students’ necks for decades. It is very simply, a very bad idea.
Consultation response
Question 1 – No.
Question 2 – None of them do.
Question 3 – There won’t be a relationship with the student finance system if these proposals go ahead.
The proposed system is already sufficiently progressive: graduates who earn more pay a higher interest rate on their loan (and more in income tax). High achieving graduates from middle income backgrounds would bear the brunt of early repayment penalties – those from wealthy backgrounds will bypass the loans system anyway. Furthermore, if graduates choose to repay early then this reduces the costs to the Government. An early repayment system would be complex and costly to administer – as an employer I would not welcome the additional administrative burden this would entail.
No, there should be no penalties for early repayment. This is an unfair and regressive proposal which, along with the enormous increase in tuition fees , is likely to discourage more young people from considering a university education. Graduates should not be penalised for wanting to repay their debt if they are in a position to do so. I suspect that many of those who devised this scheme benefited years ago from an entirely free university education,and would not relish facing the future of rising debt and graduate unemployment that they are mapping out for our young people.
Banning early repayment is fundamentally illiberal. I say that as a father of 4 teenagers and an activist and member of the Lib Dems. My one support for it would be that should a lower income student repay it may well be that their financial well being is unnecessarily hit by a repayment that may turn out to be unecessary (i.e. debt forgiven after 30 years). This is trumped by the state blocking students and their families of the ability to reduce the (at very least psycologiocal) worry of the debt early and the relief that would give. Some form of modest sliding scale fee may be appropriate but this part of the legislation must be adjusted in my vbiew. Thanks.
Question 1- Should BIS introduce a more progressive mechanism for early repayment of student loans?
No. Any system designed to prevent graduates from repaying their student loan early, thus saving them unnecessary interest repayments in the future, can only be described as regressive. In fact, if the intention of the reforms to the student finance system is to reduce the burden on the taxpayer, early repayment ought to be encouraged as a valid and effective way of reducing the overall cost of Higher Education on the public purse.
Question 2- If BIS should introduce a more progressive mechanism, which model best delivers BIS’ stated aims of ensuring the progressiveness and sustainability of the student finance system?
All three models set out in the consultation document appear to be aimed at penalising graduates for early repayment rather than recovering the costs involved in providing the loan finance to the student.
It is absolutely correct to expect graduates to repay all interest accrued on the loan (or the element of the loan being repaid in the case of a part payment) up to the point of the repayment. Thereafter any charge payable by the graduate in addition to this should be limited to any real additional costs incurred by the student finance system in terminating the loan and processing the payment offset by the savings made in not processing monthly repayments for what would otherwise be the remaining life of the loan.
Question 3- How would a more progressive early repayment mechanism affect you or your organisation’s perception of, and relationship with, the student finance system?
As a Higher Education institution our relationship with the student finance system begins and ends with the loan payments from the Student Loan Company to us for our current eligible students. While the mechanism for repayment will have an effect on our graduates- and therefore may, by extension, impact on their appetite for taking on debt to fund their education- it is not likely to change our relation with the Student Loan Company in any way.
If the government wants to put the student at the heart of Higher Education, it needs to recognise the value of choice. Students should have the choice to take out as much or as little of the student loan as they are permitted and pay back as much as they wish above the minimum.
So in answer to question 1: No, there should be No early redemption penalties. The fees are onerous enough and the loans should simply be regarded as a facility to make students’ lives easier. Once it becomes an instrument of social engineering as the questions suggest it is, I would cease to trust it and would not risk taking out a 30 year loan on that basis – especially if you’re already worried about it’s sustainabilty as in question 2.
In answer to no. 3. if there is an Early redemption penalty, as a parent, we would view it as a risky trap and choose to pay the fees upfront for our children, re-mortgaging our house if we have to. If there is no early redemption penalty, we may well take out the loan for part or all of the fees, knowing that our children will try to pay it back as quickly as possible or at the least have to choice to do so.
I hope this answers your questions.