Nine universities start legal action over student loan error row

Nine universities have begun legal action against the government in a row over students being asked to repay loans as soon as possible.

About 22,000 students in England are caught up in the dispute, after being sent letters saying they were given maintenance loans and childcare grants in error and must immediately pay the money back.

The students are all studying weekend courses, which have been suddenly classified as distance learning.

The universities in the legal case described the decision as "abrupt" while the National Union of Students urged the government to halt the "immediate clawback" of loans.

The government said students had been let down by "incompetence or abuse of the system".

The students affected received tuition fee and maintenance loans, and in some cases childcare grants, approved by the Student Loans Company.

Some students are just weeks from completing three-year degree courses and were shocked to receive letters from their universities in recent weeks informing them the Student Loans Company had decided their courses had never been eligible for funding.

While universities have reassured students that repayment plans will take into account their circumstances, it still means repaying on what some letters have described as an "accelerated" timeframe.

This is different from normal repayment, which for Plan 5 loans issued in England since 2023 is at a rate of 9% of graduate earnings over a threshold of £25,000 for up to 40 years.

Now nine of the more than 20 institutions involved have begun legal action against the government to challenge that decision.

In a statement they said the decision was taken with "minimal notice" and "has caused serious financial distress for affected students" with some considering leaving their courses.

Just three universities are putting their name publicly to the legal action - Bath Spa, Southampton Solent and London Metropolitan.

The vice-chancellor of Bath Spa University, Prof Georgina Andrews, said the universities had acted in "good faith" and the sudden decision "punished those who are the most vulnerable in our society who are trying to better their lives through education".

The universities said they "strongly reject" that in-person, timetabled weekend teaching is classified as "distance learning", arguing it "defies common sense".

Prof Julie Hall, the vice-chancellor of London Metropolitan University, added the decision "hits students from underrepresented and lower income backgrounds the hardest".

The National Union of Students vice president Alex Stanley said students' trust had been "broken" as a result of the mistakes made.

The NUS said "regardless of where the blame lies" it was within the power of the Education Secretary Bridget Phillipson to stop the "immediate clawback".

It has collected a petition of 13,000 signatures and said hundreds of students will gather in Westminster on Thursday, before a small group delivers their requests to the Department for Education.

The government has made clear it expects universities to ensure students and graduates are not caused any financial distress as a result of the decision.

While it declined to comment on the legal action, the government has argued that universities have either failed to pay attention to the regulations or that there were "abuses" of the system.

Among the courses involved are some delivered by smaller private colleges under a franchise agreement with universities who award the degree.

The government plans to introduce stricter rules for these colleges, requiring any with more than 300 students to come under the scrutiny of the regulator the Office for Students (OFS) before being eligible for access to student finance.

The OFS will publish draft plans later on Thursday which would require all regulated institutions to publish clear information for students on key issues such as complaints, refunds and compensation as well as agents working to their behalf in recruitment.

In response to the dispute over weekend courses, the OFS said it expected universities to prevent students facing extra costs they weren't expecting, "including the payment of hardship support where maintenance loan payments have been blocked."

"Where institutions can't agree a way forward with students, they should stand ready to offer appropriate redress, which could include financial compensation. Students must be treated fairly and in line with consumer law."

The Student Loans Company said the regulations had been in place since 2011 and universities, including their franchised colleges, were responsible for ensuring courses were classified correctly.

It added it would work with students to put in place "affordable repayment plans".

In a statement it said: "In this case, we have acted urgently as requested by government in order that public funds were not paid out in respect of courses that were incorrectly designated by certain providers."