Concerns over private firm’s ‘student loans’
Interest alone could mount up to £6,000 through scheme targeting those ineligible for official aid
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STUDENTS have been warned not to take up offers of loans from a private finance company after claims of high interest rates and misleading advertising.
Academics and student advice services urged students to steer clear of Future Finance, saying there were serious questions about the deals it offered.
Future Finance provides tuition and maintenance loans for those no longer eligible for government loans or for whom such loans do not cover their education costs. It offers students repayments as low as £5 a month while studying and nothing for the first three months after graduating.
But a student finance advice service at Birmingham University will not endorse Future Finance, claiming the interest rates are almost double those charged by the Government’s Student Loans Company. Future Finance advertises a representative interest rate of 13.41 per cent while the highest rate for a government student loan is 6.1 per cent. Its loans appear to offer less competitive terms than high street banks: Clydesdale Bank charges total interest of £508.98 whereas a comparable loan with Future Finance would attract total interest of £5,867.33. Alex Roberts, 27, a student in Manchester, was offered 15.9 per cent APR by Future Finance. He said: “The repayments are crazy. They’re targeted toward people who don’t know how much income they’ll be making after they qualify. Their entire business model is selling a product that is only marketable to people who’ll be under great financial strain by using it.”
Dr Emily Rozier, head of funding at Birmingham University, said: “I have had emails from such loan providers asking us to promote them, which we have adamantly declined to do. That repayment is not linked to future earnings is cause for concern. The fact that the government loan only becomes repayable once you are earning a certain amount is really important.” The Advertising Standards Authority has forwarded some promotions to the Financial Conduct Authority after complaints that the words “student loan” by Future Finance might mislead students into thinking the products were official government loans.
Future Finance defended its loans service, saying it always advised students to approach the Student Loans Company before seeking additional funding. It stated: “Future Finance encourages responsible borrowing by assessing individual affordability. Future Finance believe strongly that they are backing the next generation and enabling high potential students to gain access to the education that they deserve and will continue to build on their product offering to support student and graduate needs due to the rising costs of education in the UK.”
Ucas, the clearing processor for UK universities, said: “The best option for students is a government-funded student loan. Services available through Future Finance are intended for students who have used all available financial support from the Government, or are not eligible.” The FCA refused to comment and has yet to adjudicate.