Student loan calculator overhauled amid criticism

A government loan repayment calculator, used by millions of students, is to be overhauled amid criticism of its sums.

The calculator, used to work out university borrowing, was withdrawn a few weeks after a critic said it was operating with flawed assumptions.

Female students particularly may have been given an overly optimistic view of earnings potential.

The Student Loans Company said a revised calculator was now being built to accurately reflect earnings.

The calculator forecasts the repayments graduates would be expected to make after students or would-be students are asked to insert their maintenance and tuition costs, their graduation date, course length and their own estimate of their expected earnings on graduation.

Questions

Andrew McGettigan said there were flaws in the calculator

Andrew McGettigan, a lecturer and education blogger, outlined his criticisms on 6 April.

He identified two flaws in the calculator. The first is that graduate salary projections are based only on average male earnings data.

Male graduates tend to earn more than their female counterparts on leaving university, and there are more women graduates than men.

The second flaw is that the calculator assumes increments of 4.4% per year in salary in the first years after graduation.

The Office for Budget Responsibility, which offers independent assessments to the Treasury, also said in its Economic and Fiscal Outlook report published in March that: "On an annual basis, headline average weekly earnings growth slowed from a recent peak of 3% in September to just 1.9%."

Under this system, many students may have been given an overly optimistic forecast of their earning potential following graduation, possibly leading them to borrow more than they might have done otherwise.

The long-standing critic of education policy and the student loan system told BBC Radio 4's Money Box: "The calculators are giving people back very large cash totals, accumulated over 30 years.

"It is important to take a step back and question how much you would have to earn to generate cash repayments of that level."

Estimate

The calculator has been taken off the Student Loans Company's website

The Students Loans Company - a non-profit, government-owned organisation - had featured the calculator on its website but removed it at the start of May.

It said that a revised repayment calculator was "being worked on" that would be based on the OBR projections of average earnings growth. It would also be based on a "more general reflection of earnings", rather than solely on male earnings.

It said the calculator was intended as an indication of potential repayments only, and it could not be used as a personal quotation tool.

Other calculators on consumer sites do ask for more detailed information, although they too have to make assumptions about likely earnings.

You can hear the full story on Money Box on BBC Radio 4 at 12:00 BST on Saturday 14 May, and repeated at 21:00 on Sunday 15 May