Loan given to student aged under 18 - do I have to repay it?

[merc48]

Dear All,

 

This is my first post on the forum, so please excuse me if my post isn't quite clear, it is an unusual situation and I will do my best to explain it. It is a long post, but I wanted to include as much detail as possible. Hopefully someone will be able to offer advice

 

At the age of 15 years I was offered a place at university, and began my degree at 16 years of age (in 1998 ).

 

During this point in time, my finances were entirely managed by my father, as well as all maintenance related issues. He requested that I take out a Student Loan with the Student Loans Company, and I had no say in this matter - as a child under his guardianship I could not go against his word. So at the age of 16 (or perhaps just before turning 16), I was granted a loan by the Student Loan company, for the duration of my studies. This was also the case for my younger brother (who entered University aged 12) - a loan from the Students Loan company was also taken out in his name when he was 12 years old.

 

Neither of us were over 18 at the time of 'signing the contracts for the loan'.

 

We now both have debts with the Student Loan company of over £15,000 each - yet we were basically 'compelled' to sign for the loans when we were children. My father is no longer in contact with the family, and since all the documentation was handled by him nearly ten years ago, it is proving very difficult for my brother and I to resolve this situation - what is especially concerning is that these loans are increasing with interest every year. My father was in charge of our bank accounts and paperwork, so essentially, I am having to 'chase everything up from the beginning, which was nearly ten years ago'.

 

After some research on this issue, I came across the following legal notes:

 

http://www.occamsystems.co.uk/partners/legal_tips/under_18s_are_their_contracts_binding.pdf

 

My understanding is that I entered into a contract when I was under the age of 18, so could this contract could be considered as a 'prejudicial contract', as was outlined in the above article.

 

As children, we were not expected to question any 'money matters' whilst studying at university, but we now have debts totaling £30,000. I doubt the two of us could have spent that amount of money on our university education - we stayed at home during our university days!

 

Given the above situation, do you feel that our Student Loans could be considered prejudicial contracts?

 

Secondly, if this is a prejudicial contract, do I have the right to argue that the loan should be written-off, given that I was under 18 at the time of being given the loan?

 

I have been researching this issue online and contacted various companies/law advisers (Citizen's Advice Bureau, Local Education Authorities, etc.) but they are either confused, or say that I should take this issue up elsewhere.

 

However, my main concern is that the loans will simply increase whilst nothing is resolved. The Student Loan Company have been particularly unhelpful. Here is my correspondence with them so far:

 

(1) I called them on December the 5th, they asked me to call the LEA to discuss the issue, who said the loan was nothing to do with them. The same day, I again phoned the SLC. After speaking to his manager, the adviser asked me to write a letter to the Bothwell House address, explaining "The reasons why I felt I shouldn't have to pay the loan". I sent a letter on the same day.

 

(2) By early January, I had heard nothing from them. I again called the SLC - this adviser spoke to her manager and then said "You have to pay the loan regardless of your situation". When I mentioned that under 18's could not take out loans with banks, she said "Our student loans are different" and many people take out student loans when they are under 18. She was very rude. I asked whether there was a possibility of having a guarantor, as we were much younger than 18 at the time of loans, but she said "There are no guarantors with student loans". When I asked whether or not they were going to reply to my letter, she said it would take about two weeks from the date that it was received (10th of Dec.)

 

(3) At this point, I did my own research, to find the information mentioned earlier - loans are not legally binding for under 18's, as they are prejudicial contracts. They only way for a loan to be upheld is if (a) I had a guarantor, or (b) I ratified the agreement at 18. The SLC said there were no guarantors, and my brother graduated before he was 18 years old - the SLC certainly didn't ask him to ratify the loan agreement after graduation!

 

(4) With this information I again called the SLC last week. After speaking to an adviser (who again spoke to his manager for a long time), he said the loan is binding, because I would have either had a guarantor, or ratified it. When I pointed out that this was highly unlikely, he said he would look into it, and get back to me within a week.

 

Up until today, they have still sent nothing to me, and it has been over a week now. They have not even replied to my original letter that was sent a month ago. So, what should I do now?

 

I believe they are doing nothing, because they really do not have a valid reason for asking me to repay the loan. Which is why they have changed their arguments every time I've called them, and not responded to any of my requests for information regarding the nature of the contract that was signed when I was under-age.

 

The problem is that the loans are building interest, and secondly, once I start work soon (I'm currently a PHD student) they can just take the money from my salary.

 

How should I:

 

(a) Get the SLC to cancel the loan - so far they haven't even responded to my letters, so should I write a more 'legal' request for information?

 

(b) Is there any way to stop them from taking money directly from my salary once I start work, since the loan is under dispute?

 

I would be very very grateful for any advice that could be given, as the SLC are both unresponsive and unhelpful... I have contacted CAB etc. but they just say "It is unusual case, you need specialist help".

 

Hopefully someone here can help me...

[treechocred]

To be honest, I think you should just pay the loan.

 

You have said that you were 'under his Guardianship' and as he arranged the loans on your behalf. Even though you were under 18 at the time, your father acted as guarantor for you by arranging this.

 

If you had not taken out the loan would you have still been able to go to university?

 

In addition, paying the loan back is not really a problem. I pay £20 a month. They will not take a huge sum out of your salary as it works on a percentage of your earnings. £20 a month is not really a big deal for me.

[rory32]

Were the loans taken out in England or Scotland?

[merc48]

Thanks for your replies - the loans were taken out in England, and I went to University in England.

 

As for for going to university without the loans, I really don't know. We lived with our parents whilst at university (who were in charge of all the finances etc.).

 

When I contacted my local LEA, they said that most under 18's will receive some kind of support for their education, and they wondered why we didn't get any help at the time.

 

But my 12-year old brother and I ended up with loans instead - just because we we happened to be 'ahead' of our peers. It seems that there are financial penalties if you are able to cover university material at a young age, unfortunately....

 

I would certainly pay the loans back if I had made the choice to take them out myself, as an adult. All my current studies have been paid for/sponsored, and I have no other debt.

 

But it is just the principle of the matter that is ridiculous. It means that any child could get a loan from the SLC on instruction from their guardian, who is in completely in charge of their interests.

 

However, according to the SLC, it is the child who will then have to repay the loan, even though they had no choice over the situation. My brother wasn't even legally allowed to work full-time when he graduated university, but the SLC holds him responsible for repayments, not my father.

[Guest vortex]

This seems interesting as the CCA states that you cannot give credit to those under the age of 18, who signed the paperwork? and did they do so as a guarantor?

[rory32]

My understanding is that a credit contract is not significantly different to any other contract as a minor, and is voidable in common law by the minor at his/her option unless it is a contract of employment OR a contract for necessities. Such a decion would be subject to equitable law.

 

The consumer credit act 1974, as amended, includes provision (s113) for the creditor to seek to recover money from a guarantor if the minor does this.

 

 

The Minor's Contract Act 1987 sets out the rules relating to the contractual capacity of minors. Basically two kinds of contract negotiated by a minor are valid

1) contracts for the supply of goods and services which are necessaries i.e. Nash v Inman 1908 and

2) a service or educational contract which is for the benefit of the minor.

 

The problem however is that you are no longer minors.

[Guest vortex]

i thought the minors contract act also dealt with ratifying an agreement on majority or have i misread the act?

The question I can see is necessity, is it a necessity that it was taken out in the first place?

[rory32]

There may be a time limit for bringing an action on majority, unfortunately I don't know which English Act identifies this (I know the Scottish one but I'll need to ask about the English one - usually the two legal systems are similar in such respects).

[rory32]

I found this on a solicitors website

Contracts where the minor may avoid the affect of the contract are for the acquisition of a legal or equitable interest in property of a permanent nature, such as shares, land, marriage and partnerships. Other contracts require positive ratification in order to be enforceable, which includes contracts for debts and the sale of goods that are not for necessaries. The ratification must take the form of an acknowledgement that the debt is binding after attaining the age of 18. Fresh consideration is not required for the ratification to be complete.

[merc48]

Thanks for the information. I also understood that in order for a contract of debt to hold, it needed to be ratified - I don't think this happened in our case. Certainly, apart from the original contract in 1998, I can't remember signing anything.

 

My brother graduated when he was a minor, and has never received any further paperwork from the SLC apart from repayment details, so I have a strong suspicion that we did not ratify our contracts.

 

Furthermore, when I inquired about our original contracts, and who would have signed the, the adviser said, "Student loans do not have guarantors".

 

At the same time, when I asked whether it would be possible to locate the original contracts, in order to see the signatures and terms and conditions, she said they probably no longer had them...

 

It looks like:

 

(1) We did not have guarantors

 

(2) We did not ratify our contracts

 

The problem is that now the SLC is claiming that one (or both) of the above did occur (i.e. someone acted as a guarantor/agreement was ratified). Yet they will not provide any evidence of this, and have not even responded to my initial written inquiry regarding the situation.

 

So how can I request evidence of the above?

[Pen]

Hmmm. At the time you were at Uni your SL would not have been expected to cover your university fees. They would have been down to your parents depending on their income scale if their income was below a certain level the LEA would have paid them. although new rules came into force last year with regards to fee's.

 

With regards to maintenance the way I see it is your parent's had a duty to support you since you were under their care and living at home.

 

So since you did not see any of the Loan You were not liable for uni fee's as you were not classed as a independent student and your parents had a duty to provide for you, you have not said whether or not you are still in contact with you father. If you are I think I would be suing him for the balance of the loan and make him repay it. If he's not around maybe you could seek the assistance of the CAB or a solicitor you may be entitled to legal aid??? I would definitely not leave it as it is as your right it will not go away the SL company are horrid to deal with and they will use every resource to track you down these loans do not become time barred after 6 years.

 

A lot of parents would have taken out the loan only to put it in to a higher interest account so that you would be earning from it not spending it then expect you to foot the bill.

 

I do hope you get it sorted. Good Luck!!

[reallymadwoman]

At the same time, when I asked whether it would be possible to locate the original contracts, in order to see the signatures and terms and conditions, she said they probably no longer had them...

 

 

Exactly which type of student loan are these? Are they the old (I think pre 1998) type where you make a fixed monthly repayment or the new type where money is deducted from your wages?

 

This point is actually quite important as if they are the old type and the original contracts are no longer available, it's game over as the debts would then be unenforceable against anybody.

 

If however they are the new type, then a S.A.R - (Subject Access Request) request will get copies of absolutely everything they have at which point it should be obvious if you and your brother are liable to repay them. You will have to do a request each, at £10 each, and you will find a template letter which you can adapt in the bank charges forum.

[noomill060]

Hang on-

 

1) Loans were taken out in merc48's name when a child and living at home

 

2) merc48 never even saw the money

 

3) merc48 now apparently owes SLC £30K

 

4) merc48's dad did all the paperwork and is no longer on the scene

 

 

This begs the question as to where all the money went...

 

 

Do I smell something piscine?

[merc48]

Thanks for all the replies, I will try to address them one-by-one.

 

I don't think we paid the fees for the university itself, as my parents were probably classified as low income. So the money received from the SLC was maintenance money. We lived in a rented house with our parents and siblings close to university (one of the university conditions was that we had to remain living with our family, since we weren't allowed to stay on campus).

 

My father was in control of the money received from the SLC, since we obviously did not deal with the accommodation costs etc. I could guess that the money may have gone to pay for the house rental? But I don't know, because we were really kept unaware of the finances.

 

I don't own £30k to the SLC, that is the total amount owned by my brother and I. Individually, we own about £15k each (as we graduated a while ago, the interest has unfortunately built up over the years).

 

I believe the loans are the 'new type' as I began my degree in the autumn of 1998. So we just missed out on the old loans.

 

I would really like to see the original contracts, just to see the truth of the situation. I've actually made a formal complaint to the SLC because, despite my frequent requests, they have not come back to me with any updates, apart from contradictory information from the advisers over the telephone.

 

If the original contracts prove that one of my parents was a guarantor, I will probably pay the money back myself, as I did end up with a degree, whatever the conditions were in which the loan was taken out.

 

But if there is no-one liable apart from myself, with no ratification as an adult, then I believe the SLC has acted irresponsibly.

 

I guess I will await the results of the complaint, and also prepare to request my documents back using S.A.R if I hear nothing.

[noomill060]

A s.77 request for a true copy of the original agreement under the Consumer Credit Act 1974 would probably be your best bet.

 

They have to supply you with it or the debt is unenforceable.

 

 

 

 

x your address x

 

x your name x

 

x Date x

 

xxxaccount-numbersxx

 

 

s.77 Consumer Credit Act 1974

 

 

Dear Sir/Madam,

 

Under s.77 of the CCA1974 you are ordered to supply a true copy of my original credit agreement and any other document referered to in it.

 

I enclose Postal Order to value £1.

 

Yours Sincerely,

 

DO NOT SIGN IT! (ok, your Dad signed for you, but they have been known to get busy with photoscanners and cut and paste- you dig?) ;-)

 

merc48

[noomill060]

Send it Special Delivery and keep the receipt for it, as well as the Postal Order receipt.

 

Use a postal order because:

 

1) Its as good as cash

 

and

 

2) it is proof that you paid

 

3) the receipt will have SLC printed on it as the payee

 

4) it is unarguable in court

[noomill060]

By the way, I got my credit agreement from them this way and mine dates from 1994.

 

ie: they do keep them!

[noomill060]

A maintenance award would have been for YOUR benefit, not for paying the rent on your parent's house.

 

That is what Housing Benefit is for.

 

I find it incredible that you were given a student loan at the age you were. Student loans replaced student grants, which were only available to people over 18.

[Goldlady]

I am interested to know what happens with this one. IMO they will struggle to enforce it however as soon as you start earning the Inland Revenue will automatically tell your employer to make deductions. I suspect you will have to get a court to declare it unenforceable.

 

Or go self-employed - then you have a bit more control over things:p at least until the situation is resolved.

 

I can understand your reluctance to repay money that you never actually got your hands on. If you had blown the lot on wild parties and booze then that would be a different matter.

[merc48]

Thank you for the replies, I will definitely follow the S.A.R. route if I hear nothing from the S.L.C. by the middle of this week, your list was very helpful noomill060

 

On another note, I also find it strange that we were given loans when we were under 18. I pointed this out to the student adviser at the S.L.C, saying "Is it even ethical to give loans to children as young as twelve?", as this was my brother's age when given the loan in 1998. She was very rude, and said "I have nothing to say on this issue and I am going to stop the call, as we are going in circles with this conversation".

 

I guess it is not surprising really, after reading all the complaints about the S.L.C on this forum.

 

Goldlady - LOL, my brother and I were actually banned from bars and most SU areas at university. Legally, we weren't supposed to be any areas where drinking took place so I guess we spent a lot less money than the average student. On the other hand, we did do other things, just those that were generally 'free'. I was involved in sports/charity work/drama whilst my brother was fascinated by the development of the Internet!

 

Our parents didn't supervise us at university, so we sometimes spent more time then necessary on these extra-curricula activities. But we learned to spend our time more wisely as we grew up, my brother did very well at uni and I've gone on to become a researcher. However, hopefully I'll be completing my research soon, and although self-employment does sound attractive, I would like to gain experience in other areas before setting up anything by myself.

 

My worry is the same as you mentioned though, that as soon as I begin work, the SLC would just take the money from my salary, whether or not the loan is enforceable. And I don't want to have the hassle of going to court to get my money back, although this could have the benefit of ensuring the S.L.C. is more vigilant about handing out loans to children.

 

I'll keep everyone updated as to the outcome, and thanks for your support!

[Pen]

Hi Merc.

I keep replying to this but for some reason it never appears:confused: anyway, I have had a lot of dealings with the SLC in the past and making a complaint to them is not the way forward. All you get in response to your emails/letters is a automated response/standard letter.

The new loans you are talking about are now old loans as they have changed yet again.! you would not have needed to have a guarantor for the one you got but! you would have had to supply the names of 2 referees as you do now and one of them could be your father.

 

The best way forward with this is send the S.A.R - (Subject Access Request) request and the CCA request for your agreement you have to pay £1.00 for that one.

At the same time send a email to your MP and ask him/her to write to them on your behalf.you will find their email address on the web and by the way not labour:) when complaining always use the opposition. SLC and other government agency's have to reply to an MP with an outcome of their investigation within a certain time scale also it is the head of the complaints department who responds and that way you will have the name of the person who should by then know of the problem and you can deal direct. If the MP does not come up with the solution

 

Most of the people at SLC do not know what they are talking about they will give any answer just to fob you off and different staff will give you different conflicting answers.

 

That seems to be the simple and most straightforward way to deal with it. If after that you have not got the response you want there is always the independent ombudsman but you do have to go through the complaints procedure to get that far.

 

Good Luck. oh and if you are any good at research I could do with some help if you have the time:D :D

[rory32]

I believe the loans are the 'new type' as I began my degree in the autumn of 1998.

Yes they would be, so the CCA request is irrelevant as the loan is not covered by the Act.

[Pen]

Hi Rory. wow you have made so many posts but I don't think I have come across you before, I obviously don't get around enough so Hello it's always nice getting to know other members. I hope we bumb in to each other again so time soon!!

 

I was under the impression that Merc only wants his CCA to check the sig and to see if his father was guarantor not for any other reason however I could be wrong!

[rory32]

Well he can ask for a copy of the agreement as part of the SAR - in fact he specifically should, but if he sends the CCA request he's just waisted his time and money as if the agreement isn't covered by the Act they can just ignore it.

[Pen]

I have some vague memory of my own children. my children were also classed as gifted children and went to the saturday schools and summer school. They summer school was a taster and to prepare my children for University at a very young age. In the end I felt that mixing with much older students/adults on a daily basis was not the right environment for them however If I remember right there was special funding arrangements in place, I think it was because student loans were only meant to cover maintenance and living expenses but under the education act the local authority had to provide this funding as far as education went and parents were responsible for a child's matinace so parents of gifted children were able to apply for education grants unless of course it was private education. that is why they need to see their S.A.R - (Subject Access Request) and agreements.

 

As to employers deducting the SL out of their wagers read below.

 

Collection of Student Loans

New regulations have changed the nature of higher education funding. These involve the introduction of a new Student Loan scheme.

You will be affected only if you have an employee who is liable to repay their student loan while working for you. And it's only for loans taken out after August 1998.

So no way can they de deducted from earnings, that is my understanding anyway.

 

i think these 2 lads have lots of issues to consider and really need to seek professional help. They could get a 1 hour free consultation with a solicitor which would be a start and who might guild them in the right direct.

 

I hope this helps and does not confuse the issue to much