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Finance. Student Loans Debts Do Not Go On
Your Credit Record.
Every
time you apply for credit, for example a
credit card or a loan, the lender will
request to see your credit history from a
credit reference agency. The information
they hold is so detailed that there's
really no need for us to fill out that
long application form, because within a
fraction of a second they can see all
they need to know from Experian, Equifax
or Callcredit, the three main credit
reference agencies. You would be very
surprised to see just how much they know
about you
.
Banks, building societies and other
financial institutions providing credit
have been passing on details of your
financial transactions to the credit
agencies. Every time you apply for a
credit card, every time you miss a
mortgage repayment – it gets noted.
They know whether you pay the minimum or
the balance each month, they even know
details of your credit limit on each
credit card. They also look to public
records, the voters' roll and the public
register of court actions because that is
where all county court judgements are
listed. It all happens automatically, and
when your credit history is requested,
the computer will provide a statistical
analysis of your financial habits and
provide an assessment of your
suitability. It enables, the industry
argues, lenders to make an accurate
judgement about whether they should lend
you money or not.
However, there is one piece of
financial information that the credit
agencies are not allowed to access, and
that's the student loans. Despite the
industry's remonstrations to the
government, nothing has changed, and they
are not allowed to access the
information. The reason? Student loans
constitute a debt to the taxpayer, they
were not funded by commercial business.
Before September 1998, the student
loan system worked like this: once
graduates were working and earning the
national average, which was £15,000 at
the time, they had to repay their loan on
a monthly basis by direct debit. 59,000
of those pre-1998 graduates still haven't
started repaying their loan, and each has
on average a debt of £2,750.
In September 1998, the student loan
system changed, and the system remains
the same to this day. Now, repayments are
taken directly at source, straight from
the salary in the same way as national
insurance and income tax. This method has
been a lot more successful.
The lending industry is not happy
about the student loan situation, their
main argument being that they need to
know, when considering an application for
credit, if the applicant has extra
financial responsibilities. The
introduction of top-up fees resulted in
increasingly large student debts, and as
the post-1998 loans have to be paid off
at a rate of 9% of the graduate's income
once it has reached £15,000, it is a
large portion of income to lose.
The Association Consumer Credit
Counselling Service made the following
statement: “Knowing whether a young
person has a student loan and whether it
is being paid back, is useful.” So
they are in agreement with the lenders.
The Citizens Advice Bureau is also
keen to have the information made public,
because they feel that graduates could be
taking on too much debt, and if lenders
could see their student loans, they would
ensure that graduates are not given the
ability to borrow beyond their means.
However, the Department for Education
and Skills is showing no signs of
wavering on its decision to keep
individuals' debts to the Student Loan
Company private.
For the foreseeable future – the
situation will remain the same and
student loans information will be
inaccessible to the credit industry.
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