Student contracts mis-sold?

9a. University — Student Contracts

(revised Sept 2016)
 

Read 1
A 60-second summery from Competition & Markets Authority (CMA) March 2015
 
Read 2
Guidance notes to the University staff on legislation relevant to Student Contracts.
 
Look at alternative Universities’ Terms and Conditions to see which are understandable and fair. If all goes wrong the University will always reply “surely you read the terms?”
 
The CMA has put pressure on Universities to comply with all legal requirements. The onus is now on the student to check. Don’t just tick the “I have read the terms” box.
 
Fees are a changing
The government is allowing universities to raise their fees to £9,250 but some are using this figure as a minimum and even applying this increase to current students.
Ask your self, is this fair or legal?
The talk is that fees could rise to £12,000.
Higher fees allowed for current students. Sean Coughlan, BBC Education correspondent.
Universities impose illegal contracts on students Kate Palmer. Telegraph


University - Student contract

70% of contracts have been found to be illegal or considered bad practice
 
Which? Report results found that:
20% contravened Unfair Terms in Consumer Contracts Regulations 1999
31% were considered to be bad practice
37% lacked enough information to be analysed or did not reply
 
70% comes from splitting the 37% between the fist two categories = 7% and 12% then added on to give 27% and 43%

Lawful terms

Students need to understand and be able to foresee prior to signing a contract when the terms of that contract may change. Simply providing advance notice of changes will not guarantee the contract is fair, nor will a right to terminate a contract in the event of a change if that is not practical in the circumstances. Similarly, a term providing a remedy in the event of a variation is more likely to be fair where the remedy is sufficient to ameliorate the impact of the change.

Legal remedy

There are two forms of contract, expresses and implied.
Expressed terms are those which are written or said and Implied terms are those which any reasonable person thinks the contract should mean.
Contracts cannot circumvent current UK laws.
Significant terms cannot be hidden in “small print” or written in such a way as to be unintelligible or misleading.
 
Using the Small Claims Court is not difficult as there are many sources to help. “Pre Action Protocol” sets out how both parties must act in a dispute before submitting a claim. It will force the university to address your claim as it is the process specified by the court. Never be rude or threaten and keep your arguments simple. Take one point at a time as this stops obfuscation.
 
Always keep a record of all your searching, correspondence and expenses.
 
Universities appear not to be supplying adequate information enabling students to make an informed decision on a competitive choice of university. The student has a duty of care in researching the most suitable education provider and must keep records of the search in case they want to make a claim for losses.
 
If your course is shortened, cancelled or moved before or during its specified time then you can seek compensation for your losses.
 
If additional costs are increased or added which were not included in your contract (for what ever reason) then object, saying this is a breach of contract. If forced to pay, say beforehand you will seek to recover the costs through the courts.
 
If you think that the quality of your education is poor then make a complaint sooner than later. Avoid a class witch hunt. I am a teacher and have had my bad days. You will have to substantiate your claim for”poor teaching“ in writing with factual details.
This also applies to the amount of contact time. Remember this is a university not a school where you are spoon feed.
 
You have the right to make a claim against the university for a breach of “implied” contract if something happens which was not in the contract and will or has caused you a loss.
You will have to show that it was not reasonable for you to have known beforehand and you would have made different choice of university or course.
 
A student terminating their education before the end of the specified term could be charged an exit fee as there will be a loss to the university. Similarly, if any rules or regulations are broken the university can claim for losses
 

Source

BBC Radio Four “You and Yours” Student/university contracts mis–sold
Sale of Goods and Services Act 1982.
The Act of Limitation 1980 (remedy up to 6 years after the event).
CMA report
Pre Action Protocol conduct
Pre Action Protocol
Small Claims Court


Student Loan Contract

Revised September 2016

In my opinion the Student Loan Contract is void.
This is based on my experience in using the Small Claims Court and studying the relevant laws which are freely available. Many websites and Forums give detailed advice.
 
“Power is the use of knowledge” one of my major themes.

Letter to Mr S Lames Chief Executive, Student Loan Company, 5 September 2016
 
Could you please confirm that student loans comply with:
1. English Law (for home address in England).
2. Contract Law, expressed and implied.
3. CONC Consumer Credit sourcebook. FCA handbook.
4. Unfair terms in Consumer Contract Regulations 1999. (Contracts made before 2015)
5. Limitation Act 1980.
 
As no reply has been received from the Student Loan Company, it has to be assumed that Student Loans have to comply with the above laws. The areas 2 to 5 are components of English Law

This Student Loan is a credit-related regulated activity and not a Mortgage
 
Definition: Mortgage is a legal agreement by which a creditor lends money to a debtor in exchange for taking a title on the debtor’s property. The exchange of this title becomes void upon repayment of the debt.
The Student Loan has no asset value which could be used to pay off the loan.

1. Contract Law

Perhaps the Student Loan Contract is the student’s (and parent’s) first taste of Contract Law and it is a life skill worth learning as it appears everywhere in life.
 
Student Loan contract is an agreement between the Student Loan Company (SLC) and the Student who must be over 18. Contract law has been defined as a set of promises which the law will enforce.
 
A valid contract requires:

  1. SLC to make an offer, the Student accepts that offer and the contract has a value (called the Consideration).
  2. For the contract to be enforceable it must have clearly expressed strict apparent terms. If terms are missing then the contract is unenforceable.
  3. The contract comes into existent when the student signs the contract or at another time specified in the contract such as when SLC first pays money to the University.
    The contract must contain terms setting out the ending of the contract.
     
    A contract can be considered cancelled, invalid or unreasonable if:
     
  4. One party failed to disclose or misrepresents relevant facts during the offer.
  5. Unforeseen events occur which make the contract impossible to perform.
  6. You were under duress.
  7. Your vulnerability was being exploited at the time of signing.
  8. Contains exclusion clauses.
     
    A breach of contract occurs when:
     
  9. One party does not act in accordance with the terms.
  10. If SLC seriously breaches part or the entire contract, then the student can say to SLC that the contract is terminated due to SLC’s actions.

Sources
10 key facts about english contract law
Contract law explained
Contract law


 

2. Loan Contract (a)

Taken from Student Application Form

Declaration 2014/15 and 2015/16

Students are required to sign this Declaration to obtain the loan,
below is an extract showing the two critical clauses. I confirm I have read and understood the guide to terms and conditions available online at www.gov.uk/studentfinance
 
In my opinion this contract is void as:

  1. “clearly expressed strict apparent terms” are not phyisically attached. [2][4]
  2. No “Terms and Conditions” can be found at the website specified. [2][4]
  3. The Guidance Notes requires accessibility to a PC computer and PDF software to be able to read. This is unreasonable.
  4. Guidance Notes cannot be implied to be the “Term & Conditions” as its content is not specific to the contract and too complex for a Student to understand its implications and risks. [4][7]
  5. Students have no motivation to find and read the T & C’s as they have no alternative means of a loan. It’s a “fait accompli”. They will just tick “I have read the terms”. [6][7]


 

3. Loan Contract terms (b)

I acknowledge and agree that any loan(s) made to me by the Secretary of State for Business, Innovation and Skills, ‘the lender’ (which includes any persons exercising functions on behalf the Secretary of State pursuant to section 23(4) of the Teaching and Higher Education Act 1998 as amended from time to time or successor legislation, ‘the Act’) will be on the terms set out in these declarations and in Regulations which are made under section 22 of the Act as amended from time to time.
See extracts from sections 23(4) and 22
 
In my opinion this contract is void as:

  1. “clearly expressed strict apparent terms” are not physically attached. [2][4]
  2. It is unreasonable to expect any competent person to find, read, let alone understand the terms and conditions set out in the “Teaching and Higher Education Act 1998 sections 22 and 23(4).” [2][4]
  3. The statement could be construed to be threatening by the language used and the lack of words understandable by 18 year old students. [6][7]
  4. In normal English “Section 22 of the Act” means all contract terms can be changed at any time without consent of parliament or the student” [2][4]
  5. “Section 22” contradicts any Terms set out in “Loan Terms Contract (a)” [2][4]
  6. Risks to the contract due to the fact that the loan can be sold to Debt Management Companies [2][4]


 

4. Financial Conduct Authority (FCA)

CONC Consumer Credit sourcebook Terms and Conditions

In my opinion this contract is void as:
The Student Loan Company fails to comply with terms set out by Financial Conduct Authority in their handbook section “CONC Consumer Credit sourcebook” in all or most respects.
 

  1. Information must be clear, fair, not misleading and uses plain and intelligible language.
  2. SLC must take reasonable care to ensure the suitability of its advice and discretionary decisions for any (student) who is entitled to rely upon its judgment.
    [CONC 1.1.4] [CONC 3.3.2 R]
  3. Contract offer is clearly identifiable, accurate, balanced emphasising potential benefits and giving a fair and prominent indication of any relevant risks. Does not disguise, omit, diminish or obscure important information, statements or warnings.
  4. Presented in a way that is likely to be understood by, the average member of the group to which it is directed.
  5. SLC should consider whether omission of any relevant fact will result in information given to the student being insufficient, unclear, unfair or misleading.
    [CONC 3.3.1 R] [CONC 3.3.7 G]
  6. must not state or imply that credit is available regardless of the student’s financial circumstances or status
    [CONC 3.3.3 R]
  7. SLC must highlight the features of the agreement which may operate in a manner which would have a significant adverse effect on the student in a way which the student is unlikely to foresee; assess whether the agreement is adapted to the student’s needs and financial situation;
    [CONC 4.2.5 R] 2 c, a
  8. SLC should assess the Students creditworthiness which could include the amount and cost of the credit, student’s credit history, any future financial commitments and changes which could be reasonably expected to have a significant financial adverse impact.
    The students existing financial commitments including any repayments due in respect of other credit agreements, regulated mortgage contracts, payments for rent, water and other major outgoings known to SLC
    [CONC 5.2.3 G]
  9. Any assumptions regarding (student’s) future income should be reasonable and capable of substantiation in the individual case and the products should be designed in a way to minimise the risks to the student.
  10. 10. An example of where it may be reasonable to take into account expected future income would be, in the case of loans to fund the provision of further or higher education. The repayments under the regulated credit agreement should be made by the customer out of income and savings without having to realise security or assets, without undue difficulties and without having to borrow to meet the repayments
    [CONC 5.3.1 G]


 

Unpayable Loan

The Student Loan Company historically knows that a significant number of students will never be able to repay their loan yet it still proceeded.
 

This was the root cause of the “Sub Prime” mortgage scandal.
 
[CONC 3.3.3 R] [CONC 4.2.5 R] 2 c, a [CONC 5.2.3 G] [CONC 5.3.1 G]


 

Loan Examples 2017/20

The student only has two decisions to make:
    1. Tuition fee, dependent on choice of university.
    2. Maintenance loan, dependent on renting, at home, London or elsewhere.

Example A B C
Loan start date Sept 2017
Loan end date Sept 2047
Tuition duration 3 years
Maintenance loan £ pa 9,250 9,000 9,000
Tuition fees £ pd 11,002 6,000 0
Tuition fees £ pd 60,756 45,000 27,000
RPI % 3.01
Earnings increase % 1.72
Repayment % 9.0 & 12.03
Threshold £ 21,0004
Upper rate £ 41,0004
Loan rate4
Sept 17 to April 2021 3 + 3 = 6%
May 2021 to Sept 2034
Less than thresholdThreshold to upper rate
Upper rate 		 
3.0%
3.0 to 6.0&
6.0%

 
Starting salary £k 15 20 25 30 35
Examples A B C A B C A B C A B C A B C
Total loan repaid £k
9%
12%		 44
59 		44
59		 44
50		 47
99 		74
82		 46
39		 99
132		99
85		 43
43		 119
132		99
81		 43
41 		139
127		95
80		 45
43
Total interest accumulated £k
9%
12%		 80
56		56
52		29
24		 87
73		54
40		19
15		 112
79		57
36		16
13		 114
74		54
36		16
13		 107
67		49
34		16
13
Total loan remaining £k
9%
12%		 97
78		57
37		11
0 		73
35		24
0 		0
0 		77
11		6
0 		0
0 		39
0 		0
0 		0
0 		33
0 		0
0 		0
0
Years loan remaining
9%
12%		 30
30		30
30		30
28		 30
30		30
27		23
18		 30
30		30
23		18
15		 30
27		27
20		16
13		 30
24		24
18		15
12
Monthly repayments £
9%
12%		 280
380		280
380		280
350		 370
500		390
450		305
330		 470
630		470
490		310
370		 560
680		510
530		340
410		 660
710		530
570		390
460

1. UK RPI rates 30 yrs 3.7% — 60yrs 5.5% — Lowest -1.4% Sept 2009. Highest 26.6% Sept 1975 — 15.5% 1974 to 1981
2. Earnings increase
3. Repayment Rate (Student Finance England)
Average earnings of top 350 professions


 

Risks

Student loan is a PRIMARY loan which will be paid off before all other loans including mortgages. It’s automatically recovered by the Taxman. This contravenes:[CONC 4.2.5 R] 2 c, a [CONC 5.2.3 G] [CONC 5.3.1 G]
 
This loan will have to be considered by other credit suppliers before giving further credit.
[CONC 5.2.3 G] [CONC 5.3.1 G]
 
All the figures in this calculation can be varied by the government without consultation.
This is an unfair contract term such that the student has the right to terminate the contract. [2][4]


 

Solution

The 2017/20 student intake should take a Gap Year causing the collapse of universities.
 
The government has designed the student loan scheme to avoid them paying for university’s other functions such as research and buildings. Only 50% goes on tuition.


 

Other Consequences

1. Debit Management Companies

Loan Contract terms (b)
 
I acknowledge and agree that any loan(s) made to me by the Secretary of State for Business, Innovation and Skills, ‘the lender’ (which includes any persons exercising functions on behalf the Secretary of State pursuant to section 23(4) of the Teaching and Higher Education Act 1998
In plain English, it means that the loan can be sold to Debt Management Companies. [2][4]
 
This is a certainty as the Government has already done this with previous student loans.
What are the Government’s motives?
The student loans do not appear in the UK debt figures and need to be completely removed from any government accounts at sometime. They will be sold at a considerable discount, perhaps 20p in the pound as it is known that over 40% of the loans will never be paid off.
 
What effect will this have on students?
In the US, universities arrange student loans and sell them to Debit Management Companies. The Attorney General of the State of Minnesota had to take theses DMC’s to court for using illegal and threatening behaviour.
Minnesota Attorney General takes legal action against student loan firms in US
 
Should UK students be put in the same situation?
 
Money cannot just disappear, what happens to the 80% of the loan written off?
 
Think of the positive effect if tuition & maintenance loans were lowered by 80%.
 
Definative article on student loans – Andrew McGettigan
Sale of £12billion student loans to DMC’s – Andrew McGettigan


 

2. Compulsory Loan


 

Further Data

2014/15 student intake
 
1,027,900 students,
£9,380,500,000 student loans.
Average student loan £27,390, final 3 year loan.
 
50% students will never pay off their loan John Denham MP
513,950 undergraduates not paying off loan.
 
£4.69 billion at 2014/15 will not be paid off.
If interest on loan nearly equals depreciation then
 
£5 billion terminal debt for 2014 written off in 2044
 
HESA Student numbers
Graduate earnings
Student Loan Company


 

The Cost of Higher Education RSA Lecture

On the government’s figures, by 2015-16
Of the £6.7bn of tax funded spending, just £700m will be spent directly on teaching grant.
Of the rest £4.2bn is spent on debt cancellation (RAB charges)
£330m goes on supporting more disadvantaged students to successfully complete their courses, and £1.5bn goes on maintenance grants to low income students.
Taxpayers now spend £6 on debt cancellation for every £1 they spend on teaching students anything.
Defenders of the current system will say I just don’t understand the system.
Its fees that pay for teaching costs, they say. And that’s made possible by RAB charges which are a progressive policy which protects graduates from degrees which turn out to be of limited economic value.
According to David Willetts, perhaps 50% of this September’s students will not repay their loans in full.

Additional material

About 85 per cent of students in England will never repay their loans,
Graduate Salary premium
Student fees are an invitation for graduates to emigrate
Graduates should pay back fees to universities
My £39,000 debt will never get repaid: Debt time-bomb
Parents lose their car paying price of university


 

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