I have three children, all of whom went through university under different student loan regimes; the last one started university in 2012, just as the fees went up to £9,000. I was a supporter of the student loan system, as I figured it was not like a real debt, being written off after 30 years and only payable on a sliding scale of earnings. In this respect, I was out of line with most of the rest of my family and friends, who all seemed obsessed with the idea that Nick Clegg and the Lib Dems had done a U-turn on this. I thought I agreed with Vince Cable, who defended the move as a sensible way to fund a massively expanded higher education system.
Then, after my daughter had already clocked up a term’s worth of loan, I was alerted to the high interest rate payable on the £9,000. She’d be paying RPI plus 3% while she was studying and at least RPI thereafter, more if she earned more. I was appalled by this, and since we have the resources, we paid off her loan and thereafter funded her studies ourselves.
(It interested me not a little, too, to hear that my pension, one of the public sector ones sometimes jealously referred to as “gold plated” because it was linked to inflation, would be switching from RPI to CPI because it was a truer measure of inflation – or so the pension scheme people told me!)
I did a thorough search of a newspaper database which included all UK newspapers at the time, just to see how much publicity was given to the interest rate hike: 99% of the media coverage had focused on the hike to £9,000, completely overwhelming the occasional mention of a higher interest rate.
Around the same time, as a university professor, I was asked to talk to sixth-formers in a local London school about applying to university. Before my talk, I heard the school’s co-ordinator of sixth-form studies tell a group of about 60 to 70 students that they needn’t worry about taking out a loan, since the interest rate on it was so low, and anyway you didn’t have to pay it back if you couldn’t afford it. Her main aim was obviously to get her students to go on to higher education: what teacher would not want this?
At the end of the afternoon I informed her that she was incorrect about the interest rate, and she was duly shocked to realise that she had not known about it. I don’t know if she then disabused her pupils of the false information she had just given them. I hope so .
At the time, I was involved in teaching simple statistics to university students studying sociology. While their competence with basic number work varied, it became clear to me that some of them, sadly, were incapable of calculating a simple percentage, let alone estimating the compounded impact over many years of an interest rate of 3% or more on a loan of perhaps £30,000.
In my view, the loans after the hike to £9,000 were indeed mis-sold. Normally, financial institutions are obliged to provide customers with illustrative quotations indicating the impact of interest payments, presented in ways that are easy for people to understand. Not only was this not done, but the publicity given to the interest rate was clearly inadequate to reach people who ought to have known about it, and were advising school students.
I therefore believe that some kind of compensation scheme for the victims of this scam is needed.
• Professor Clive Seale is now retired but previously taught at Goldsmiths, Queen Mary, and Brunel University.
