UCAS has been criticised for promoting high interest loans to prospective students. Future Finance says it offers its loans to students who are either ineligible for government-backed loans, or for whom these loans are insufficient.
In an email sent out in August with the subject “[First name], is your Student Finance going to be enough?”, UCAS advertised Future Finance as the solution to inadequate government loans.
The company has received poor reviews for its long-term loans to students which charge interest rates of up to 23.7% in contrast to the 5.4% interest on government-backed loans. This can result in students repaying more than three times the original amount of their loan over a decade.
Unlike government-backed loans, Future Finance loan repayment is not conditional on graduate earnings and the debt does not automatically clear after thirty years.
A spokesperson for Future Finance told Cherwell: “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 U.K.”
Personal finance expert Martin Lewis has called on UCAS to stop advertising such companies and has warned students that commercial loans are “inappropriate for the huge majority of recipients”.
He wrote: “Official student loans currently have a maximum interest rate of 5.4%, while these commercial loans have rates of up to 23.7% – worse than most high street credit cards, and far worse than the interest-free overdrafts most students have access to.”
Online discussions show that many desperate customers see Future Finance as the last resort after being rejected for a loan by government and bank lenders. In their email to students, Future Finance wrote: “We are backing the next generation with smart and simple finance designed around your potential, not your current situation.”
Unlike conventional loans, repayments start during study at around £5 per month. However, within months of graduating repayments rise to several hundred pounds per month – regardless of the student’s ability to pay.
Future Finance also charge an ‘origination fee’ of 6.5% of the total loan amount, which is highly unusual for the industry, and have been criticised for costly and frequent fees.
Cherwell spoke to the mother of one Future Finance customer, Rebecca, who took out a loan in order to pursue a two-year Master’s degree. Rebecca was told by Future Finance that they would only give her one year’s money at first. “They insisted that there would be no problem with the second years loan,” her mum Joanne told Cherwell.
“But when it came to the second year they turned her down and said she no longer fitted their criteria. My daughter was heartbroken and confused and so I contacted them and asked what the problem was and they just said Rebecca no longer fitted their criteria.
“I asked them how the criteria had changed and they told me they did not have to give me that information. I pointed out that Rebecca had never missed a payment and that all her payments were made on time. I also pointed out that her guarantor was happy and trusted Rebecca to make her payments. All we got was that Rebecca no longer fitted their criteria.
“I had the intention of going to the Ombudsman but Rebecca was in London, I lived in Milton Keynes but was in Liverpool most of the time looking after my mum with Dementia.
Rebecca had done 9 out of the 10 modules for her Masters. She wrote to her local MP for help and the Minister for Education but got no replies.
“Rebecca is still paying back Future Finance for a wasted year and no Masters and I am beyond angry. Rebecca was broken hearted when this happened as she had worked so hard. I will never forgive Future Finance for this.”
In an open letter to the UCAS board of trustees, Martin Lewis writes: “In allowing inclusion of this advert, we believe your charity breached an ethical line, and failed in its duty of care to the people it communicates with, which includes a high proportion of school leavers.
“UCAS has privileged, monopoly access to this young and impressionable audience. It is also seen as an institutional authority and therefore adverts contained in your email are effectively being legitimised by inclusion, and some may even mistake it for a direct recommendation.”
CEO of Future Finance Olga Dolchenko told Cherwell: “Future finance 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. 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. We always advise students to go the Student Loans Company before seeking funding from us. “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 and we actively encourage financial responsibility by engaging with our borrowers from the outset of our relationship.”