Graduate's open letter about being charged £1600 interest per year goes viral

Student Loan open letter

If you’re a graduate earning slightly above the threshold to start paying back your student loan then you probably know the feeling when your first annual statement from the SLC arrives, and it says the chunk of cash being taken off your payslip hasn’t even covered this year’s interest.

Civil Engineering grad Simon Crowther just experienced this, and shared an open letter about it on Facebook, addressed to his local MP Vernon Coaker. It quickly went viral, and has already racked up almost 40,000 shares by other angry students and graduates. He attached a scan of his annual statement which revealed that he’d been charged a whopping £1,654.38 interest since he graduated last year.

We all heard about the tuition fee price hike affecting students who started their degrees from 2012, but another big change that went under the radar was that the way interest is charged on the loan has gone up. Now, instead of the flat rate of 0.9% that applies to people who started their degrees before 2012, during uni and until the April after graduating interest is charged at 3.9% for 2012 onwards students; after then interest is set on a sliding scale between 0.9% and 3.9% depending on your earnings.

So now, not only are students paying three times as much for tuition, they’re paying four times as much interest while they’re studying and until the first April after they finish their degree.

In the letter Simon blames the high interest rate of 3.9% on existing student debts being sold off to a private company recently, this isn’t the reason, but it does raise an interesting point about what happens to the terms and conditions of our loans after we agree to them. The government recently went back on a 2010 pledge to keep the minimum earning threshold where you start repaying your loan in line with average earnings, and instead from 2017 it will be kept at £21,000. This seems like a fair deal at the moment, but in the future it might mean people struggling to pay their bills will be forced to pay back their loans before they can afford to.

According to moneysavingexpert, this change in Ts & Cs means that two million graduates will end up paying £306 more each year by 2020-21 if they earn over £21,000.

Crowther’s letter explains that when he started his degree at the University of Nottingham he was part of the first year of undergraduates to be charged higher fees of £9,000 a year. He said: “None of us really realised what we were signing up to. The general consensus was that it was the best loan you could ever get – it was the cheapest money you could borrow.”

He goes on in the letter to compare the 3.9% interest applied to his student loan with the 3% interest he’s paying on his mortgage. It’s a good analogy, as the best bank loan interest rates available at the moment are better than what students are being charged on their student loans, is this really fair?

You can sign a petition to stop retrospective changes to the student loans agreement here.

Here's the letter in full if you want to read it:

STUDENT LOAN DEBACLE. I'm sure a lot of you are in the same situation as me. Please read and see if you agree with me...

Below is an Open Letter, written to my MP, Vernon Coaker.

Mr. Vernon Coaker MP,
Arnot Hill House
Arnot Hill Park
Nottingham Rd

Dear Mr Coaker,
This is an open letter to you as my Member of Parliament. I would greatly value your support and I have no doubt, so would the other thousands of young graduates in my position.

I took out a student loan at the age of eighteen to study Civil Engineering at the University of Nottingham. Unfortunately, I was in the first cohort year of undergraduates who were charged the increased fees of £9,000 per year, from £3,000 – a huge hike in student fees. When I took out the student loan, we were told the loan was at a very low interest, and at the time was around 0.5%.

I was still in the Sixth Form at school, when I agreed to the student loan. I had no experience of loans, credit cards or mortgages. Like all the other thousands of students in the UK, we trusted the Government that the interest rate would remain low - at around 0-0.5%.

I graduated with a huge debt of around £41,000.
We have just learned of the underhand way, the Government has sold our loans to a private company which has caused the interest rate to skyrocket. At no point was I consulted about this, and of course I would never have agreed to this enormous increase in fees.

Now graduates, we feel we have been cheated by a government who encouraged many of us to undertake higher education, despite trebling the cost of attending university.
The current interest rate is now around 3.9%. We were told our loans were around 0.5% interest. I am now lucky enough to own a property, and my mortgage is around 3% - less than my student loan.

From the attached image you will see some months the interest on my student loan is over £180.
The student loan repayment is currently 9% of anything over £21,000. The total interest on my debt between March 2015 and March 2016, is £1828. Below is a simple calculation to see how much I would need to earn, just to cover the interest in a year:

£1828. (total interest last year)
£1828/0.09 =£20311 (In order to find out how much money above the threshold)

£21000 + £20311 = £41311 (total amount needed to be earned to cover interest)

Therefore, just to cover the interest, I would need to be earning over *£41,000* a year.
Unless I earn that much, my student loan will increase due to the interest.

I would like to know how many new and recently qualified graduates are earning over £41,000? I am only 22 years old and out of university less than a year.

I have actually set up my own business and have been able to employ two people! As I am employing two people my own salary is lower, which means my student loan will be increasing due to the interest.

I feel we have been mis-sold the loan. A commercial firm would not be allowed to buy loans from another company and then hike the interest rates. This is not what I and thousands of others signed up to. How can it be allowed? How can our loan agreements be altered without our prior knowledge. This is a disgraceful act by a government which encouraged us when at school, to go on to higher education – helped by a government loan with the promise of a low interest repayment scheme. Along with many of my former university colleagues, we have lost our trust in this Government. We have been told that as graduates, we are the future leaders of the country in politics, engineering and commerce.

I trust when our generation reaches parliament, our future government is never so short sighted as to treat their “future leaders” in such an underhand way.

Mr Coaker, I am putting this to you, in the hope you will be able to bring some pressure to bear on the outrageous situation this government has now left me and my generation in, after the hike in interest on our already large student loans and without our prior knowledge. This is not the way to keep our future leaders’ trust……..or votes.

I look forward to hearing from you and I value your support.

Yours Sincerely,

Simon Crowther, BEng (Hons)

The Rt Hon David Cameron MP.
Prime Minister
10 Downing Street