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Division 2 Protection for borrowers

United Kingdom

Original text. Later amendments are not shown.

The following safeguards are the minimum terms which must be provided by financial intermediaries wishing to provide student loans guaranteed by the Student Loan Guarantee Facility:

  1. (a)

    no collateral or parental guarantee shall be requested;

  2. (b)

    loans shall be granted on a non-discriminatory basis;

  3. (c)

    as part of the assessment process, the financial intermediary shall consider the student's risk of over-indebtedness, taking into account levels of accrued debt and any judicial decision relating to an unpaid debt; and

  4. (d)

    repayment shall be based upon a hybrid model combining 'mortgage-based' standardised payments with social safeguards, in particular:

    1. (i)

      an interest rate that is significantly lower than the market rate;

    2. (ii)

      an initial grace period before the commencement of repayments, lasting a minimum of 12 months after the end of the study programme or, where national law does not provide for such delays, a provision whereby nominal repayments are to be made during that 12-month period;

    3. (iii)

      a provision for a 'repayment holiday' of a minimum duration of 12 months over the lifetime of the loan, which can be invoked at the graduate's request, or, where national law does not provide for such delays, a provision whereby nominal repayments are to be made during that 12-month period;

    4. (iv)

      an option to defer the payment of interest during the study period;

    5. (v)

      insurance against death or disability; and

    6. (vi)

      no penalties for early total or partial repayment.

Financial intermediaries may offer income-contingent repayments, as well as improved terms such as longer grace periods, longer 'repayment holidays' or later maturity, to take into account specific needs of graduates, such as those who subsequently pursue doctoral studies, or to allow graduates more time in which to find employment. The provision of such improved terms shall be taken into consideration in the procedure for the selection of financial intermediaries.