Young Women and Student Loan Repayments

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2019 National Women's Conference
2 October 2018

Going to University, gaining an education should be a positive experience for our young members. However, student loans are the burden that our young educated women members carry through a significant period of their working life. In fact the only way to escape complete repayment of any student loan is if a young woman never earns more than £25,000 per year. The only other circumstances when you can stop repaying your student loan back are if you die before you pay the loan off or if you become disabled and permanently unfit for work.

If you never earn more that £25,000 in a year, then your debt remains and is only written off after 25 or 30 years (depending on when you took out the loan).

Taking out a student loan means that there is a contract between the student and the Secretary of State for the Department for Education in England. The Student Loans Company (SLC), which is a non-profit government organisation, is acting as an agent on behalf of the Department of Education. Her Majesties Revenue and Customs (HMRC) collects student loan repayments from employers through the UK PAYE tax system.

By law, you must repay your loan in line with the loan contract and the regulations, even though government make changes to the contract and regulations from time to time, the burden of keeping up to date falls on the student for example:

• If you don’t give SLC accurate and up-to-date information, you can be penalised and may have to pay a penalty charge or repay the loan and any interest and penalties in one lump sum.

• If you don’t keep in touch with SLC, or fail to advise them of changes to any of your personal details, an interest rate of RPI plus 3% can be applied to your repayments, whatever your income.

There are currently three different student loan repayment plans, with different terms and interest rates, depending on when you started studying, what you are or were studying and your annual income before tax.

For example on Plan two you will be paying back at 9% of your income before tax – which means if you are earning £29,500 a year before tax – you will be paying back £33.00per month. If you are earning more than £33,000 a year before tax – you will be paying back £60 per month.

Students are charged interest on the loan from the day the first payment is made until it’s been repaid in full or cancelled. The interest is calculated daily and applied to the amount you owe each month – this is known as ‘compound interest’. Currently, this is set as Retail Price Index rate + 3%.

The problem for our young women is that they often, because they have pregnancies, breaks in their working lives to raise their children they incur greater interest on their student loans.

Being pregnant and mothering are life changing events which we always hope is a positive experience for women.

Many young women choose to have a family; to take maternity leave up to 52 weeks. But throughout, this time, the student loan continues to hang over the head of the young woman.

The consequences for a young woman becoming a mother and taking maternity leave is that while she may not be repaying her student loan because her income drops below £25,000 per year while on maternity leave, interest still accrues on the outstanding loan. So she ends up having to pay back for more years and at greater cost than a comparable young man who does not take a year off work.

So if a young woman leaves university at the same time as a comparable young man, they both commence employment in a similarly paid job, repaying their student loans at the same rate, they would complete their repayments at the same time. However, as soon as the young woman takes a maternity leave, she stops repayments because her earnings fall below the £25,000 threshold, she gets behind with her repayments, the duration of her loan grows and the outstanding debt continues to mount up due to the interest rates applied.

Conference we are concerned that this may be a government imposed provision, criteria or practice that indirectly discriminates against young women.

Conference, the only fair way to deal with this (apart from the complete repeal of student loans) is to freeze the student loan and interest accrual for the young woman going on maternity leave, until such time as she returns to work and is again earning more than £25,000 per year.

Conference calls upon the national women’s committee to:

1)Work in collaboration with the Young Members to raise awareness of this potentially indirectly discriminatory situation for young women members

2. Reach out to our young women members to find real life examples of where this provision, criteria or practice has disadvantaged young women

3. Investigate the potential adverse impact on women who take maternity leave and the impact of the increased duration of the loan repayment schedule and the additional interest accrued on the loan – quantify the disadvantage.

4. Work with Labour Link to lobby the UK Government to address this matter in parliament.

5. Work with our Women’s TUC Committee to raise awareness of the inequitable impact on young women throughout the trades union congress