University students, the NUS and academics have spoken out against an email sent by UCAS promoting Future Finance, a loans company which charges high interest rates.
Future Finance’s loans have an interest rates of between 8% and 23.7%. The maximum interest on a government student loan is 5.4%, calculated as the Retail Price Index (RPI) plus 3%.
The email, sent by UCAS Media on 22 August, was branded “disgraceful” by Rob Simkins, the president of the National Union of Students (NUS) Wales, and he urged UCAS to “sort it out and do it quickly”.
It had the subject line “Is your Student Finance going to be enough?”, and promoted a commercial loan as “extra funding”. However, it did not mention alternative sources of funding, including hardship funds, supplementary grants and 0% overdrafts, all of which can be accessed without charge.
Future Finance was set up in 2014 to provide tuition and maintenance loans for students who are no longer eligible for government loans or for whom those loans do not cover their education and living costs.
Students are able to take out loans of between £2,000 and £40,000 with the company.
Unlike a maintenance loan, the Future Finance repayment schedule is predetermined, meaning that borrowers are obligated to make monthly payments however much they are earning.
Our student loan system may be broken but encouraging students to take out private loans, some of which they will end up paying back double on, is beyond disappointing
– Eva Crossan Jory, NUS vice president (Welfare)
Its loans are paid back over a period of 101 months, and it offers the option of monthly repayments of £5 whilst studying. This total rises after the student has left university.
According to the lender’s own example, a loan of £6,000 would result in total repayments of £11,867.33, or 197% of what was originally borrowed. Debt collection and legal measures could ensue if a student defaulted on the loan.
According to this year’s National Student Money Survey, 3% of students take out commercial and payday loans.
Following the email, a petition was set up on change.org entitled “UCAS: Pledge to stop advertising for-profit loans to financially-stricken students”.
Eva Crossan Jory, NUS Vice President (Welfare), tweeted: “Absolutely disgraceful to see [UCAS] promoting private loans to new students. Our student loan system may be broken but encouraging students to take out private loans, some of which they will end up paying back double on, is beyond disappointing.”
Dr Ben Whitham, a senior lecturer at De Montfort University, also took to Twitter, tweeting an image highlighting Future Finance’s interest rates and describing UCAS’ involvement as “appalling”.
Save the Student, an impartial money advice website, has asked UCAS to email their entire student database to signpost other sources of financial support and advice, and to end their partnership with Future Finance.
Any company in a position of trust should not be abusing it by partnering or working with a commercial loan company
– Jack Butler
Their investigation into the email revealed that the NUS, The Student Room and some universities also partner with Future Finance, and that they will be collaborating with the loans company on advice content launching this Autumn.
Save the Student’s money expert Jake Butler said: “Any company in a position of trust should not be abusing it by partnering or working with a commercial loan company. I would hope that UCAS, and other organisations, can learn from this – and at Save the Student we’ll do our best to ensure that this doesn’t happen again.
“Whilst a very small number of students feel they need Future Finance to get through uni, I take real issue with the way in which they market to those in vulnerable positions as well as using trusted organisations to legitimise their loans as a way to boost your bank balance.
“As a final point, the fact that a company with such extortionate interest rates can survive by offering loans to students shows that the government urgently needs to look into the size of the Maintenance Loans on offer to students.”
Speaking to This is Money, UCAS said: “UCAS is an independent charity. All our activities are funded by application fees, by universities and colleges, and through our commercial mailings which keep the cost for students as low as possible.
UCAS Media regularly works with companies that provide products and services which we think will be useful for students, and they can opt-out of receiving these at any time
“UCAS Media regularly works with companies that provide products and services which we think will be useful for students, and they can opt-out of receiving these at any time. UCAS Media does not endorse promotional information from any organisation.
“As stated on the Future Finance website, the best option for students is a government-funded student loan.”
Future Finance told This is Money: “Loans from Future Finance offer reduced repayments with a minimum of just £5 per month during the term of study, three months’ grace period after the graduation and two optional three month repayment holidays.
“An added benefit of the reduced in-study repayments is that they support students to develop a credit history while studying.
“Spreading repayments over the period of seven to 10 years after graduation allows for smaller monthly payments in the future, however students are allowed to repay the loans early without any penalties to reduce the total cost of credit.
“For these reasons, Future Finance are considered a reliable source of funding by Higher Education institutes and partner institutions across the UK.”
Olga Dolchenko, CEO of Future Finance said the company “is a highly valued source of funding for under- and postgraduate students who need extra financial assistance over and above government funded support”.
“Over the past five years we have lent over £100m to 15,000 satisfied students across every university in the UK,” she said.
“Given undergraduate students often have no credit history or a poor rating, they are unable to access traditional forms of finance and either struggle to make ends meet or choose inappropriate options such as pay day lending. We fill this gap, but never encourage students to borrow more than they can afford and actively encourage financial responsibility by engaging with our borrowers from the outset of our relationship. We always advise students to go the Student Loans Company before seeking funding from us.
Ms Dolchenko added: “As the only specialist lender to undergraduates in the UK, we offer fully transparent and flexible loans with features specifically designed for students, such as minimal monthly payments during their studies, repayment holidays and no early repayment fees. Our terms are competitive when compared with other forms of private finance, but also need to reflect the risk we take on by lending to young people with little or no credit history.”