I beg to move,
That leave be given to bring in a Bill to require the Secretary of State to review the scheduling of student finance payments to undergraduates; to require the review to consider advance provision of certain student finance payments in certain circumstances; and for connected purposes.
Today, I introduce the Student Finance (Review of Payment Schedules) Bill. A former civil servant—one of the designers of the current student finance system—once told me that the loan system has become a Frankenstein’s monster. Maintenance loan payment dates simply do not line up with the reality of students’ lives. Rent and bills are due monthly but student finance arrives in infrequent, uneven chunks, forcing students to budget against uncertainty or rely on overdrafts simply to get by.
The system assumes a level of financial resilience that many students simply do not have—and even once students graduate, the problems just do not stop. Repayment is needlessly complex and riddled with ludicrous features, such as charging higher interest rates to those who go on to earn more. The result is a system that adds stress during study, confusion after graduation and long-term financial insecurity for an entire generation. As one of the youngest MPs, who is still repaying a plan 2 loan, I recognise many of those challenges.
I work with the University of York students’ union, whose representatives are sat in the Public Gallery, on cost of living issues such as bus fares for students locally. Today’s Bill, however, seeks to make student finance work better for the over 2 million undergraduate students in this country, and it would build on the work of this Labour Government to reintroduce targeted maintenance grants for students from the lowest income households. We need to change the way maintenance loans are distributed. Scotland’s student finance system administers monthly maintenance payments. Long story short, that is the model that needs to be explored for England and Wales. It comes at no extra cost and is a no-brainer.
Many students face financial strain because maintenance loans are paid termly. For a student receiving the maximum £10,200 outside London, that creates three lump-sum payments of approximately £3,400 each. Let us imagine receiving four months of salary all at once; that is the system we expect students to navigate. Many are at the point in their lives when they are still learning those essential budgeting skills. The termly payment schedule fuels cash-flow challenges, leading to students maxing out overdrafts—nearly one in three with an overdraft have maxed out their facilities at some point—and creating problem debt, pushing them to other forms of credit simply to get by.
There is also a particularly acute pressure point as students transition between years at university, when rent deposits are due before their student finance payments arrive. Students should not be pushed into financial worry, especially after a stressful period of sitting their exams, simply because of a payment scheduling mismatch. That is why I believe that we should move to monthly payments. Not only would it give students greater financial stability and reduce stress, but it would better reflect the world of work once students leave uni and start getting their first full-time payslips. For second and third-year students, being able to access finance from July, when rent often begins, would be genuinely transformative.