Student Loan Calculator – still down for ‘root and branch’ overhaul

Last year, I wrote about how the official Student Loan repayment calculator hosted by the Student Loans Company suffered from a fundamental flaw: it used male graduate median earnings to calculate all graduate salary pathways.

That meant it assumed all graduates were male and that all graduates would benefit from large percentage increases to their annual pay regardless of starting salary. As a result,  the official repayment calculator was overstating likely repayments for the majority and therefore making student loans look much more expensive than they are likely to be.

A few weeks later, the SLC took it down and provided the following statement: “The Repayment Calculator has been removed temporarily from the Student Loans Repayments website and gov.uk for maintenance and enhancement.” (11 May 2016)

Eight months on and the calculator is still down. The link is still broken.

http://www.studentloanrepayment.co.uk/scheme/rep/repayment-calculator/sfe/

In reply to my queries this week, an SLC spokesperson stated

“We are working with DfE to replace the calculator and are taking the time to ensure that the most effective solution is provided to meet the needs of borrowers. We are carrying out a root and branch review of how repayment information is made available to our customers online.“

They provided no timescale for the implementation of the solution.

Why does this matter?

Taking out a student loan is an important financial decision, you need reliable indicators of likely repayments. And Income Contingent Repayment Loans are complex and unfamiliar – they do not behave like other loans. (Where normal loans have monthly repayments determined by initial debt, interest and a fixed period for the balance to be cleared, student loan monthly repayments are determined by income.)

The onus is on government – the SLC is owned by DfE (17 shares) and the devolved administrations  (1 share each) – to provide reliable information for prospective borrowers. The calculator needs replacing. It is not that difficult to do, the one on MoneySavingExpert provides a good stab, but an official one needs to provide more information on salary pathways underpining repayment projections and offer cash and Net Present Value figures (along with explainers).

A neglected, but serious, problem is that other third party sites have been using the old, discredited SLC calculator to model salary pathways too! In particular, those peddling alternative finance products have been using those SLC figures to present their own products as a cheaper option.

The government subsidises its student loans; private companies don’t subsidise theirs. Repayment terms on the latter are much more onerous as you can see by comparing repayment thresholds and rates (new SLC loans are repaid at 9% of gross earnings over £21,000). If you are enticed by the idea of paying off your loan more quickly (and you probably shouldn’t be), you always have the option to make additional repayments; that’s much more flexible than signing up to alternative loans that take much higher repayments early on.