80% of students won’t repay loan
Taxpayer facing massive bill to cover graduate debt
Eight in ten of today’s students will never fully repay their tuition fee loans, a study has claimed.
Research by educational charity the Sutton trust suggests that an increase in the repayment threshold means 81 per cent of graduates will not pay back what they owe the government.
the decision to raise the minimum earnings level at which loan repayments kick in – from £21,000 to £25,000 – means a much larger pool of low earners will never make any repayments.
graduates – including students from EU nations who can claim taxpayer-backed loans while studying here – repay 9 per cent of their earnings when their salary goes above the threshold, but after 30 years any remaining debt is wiped out and paid for by the British taxpayer.
Before the threshold change, 72 per cent of students did not repay the full amount loaned. But the new report also shows that 45 per cent of total student debt will never be paid back – up from 28 per cent when the threshold was set at £21,000.
the report, called Fairer Fees, found the typical graduate will leave university with debts of around £46,000. But for those from households in the lowest 40 per cent of earners, the debts rise to £52,000 because they are also entitled to take out maintenance loans to cover living costs. this is almost double the level of debt with which American graduates leave university.
Sutton trust chairman Sir Peter Lampl said: ‘it’s shocking that four in five graduates won’t repay their loans and that the treasury won’t get back nearly half of what’s lent. At the same time, poorer students are graduating with higher debt than well- off students. We need reform so the system is fairer for both students and taxpayers.’
the analysis found that the reforms announced by Prime Minister theresa May last month will save graduates an average of £8,000 over their lifetime.
however, they will also increase the long-term costs to the taxpayer by £ 2.9billion for each annual student intake.
Mrs May’s announcement was aimed at winning support from young people who voted Labour in the general election because of its pledge to scrap tuition fees. however, some in the tory Party were disgruntled at the move because of the higher burden it would put on the public purse. Nick hillman, director of the higher Education Policy institute, said: ‘there is a very large cost attached to the policy. it would have been much better to have had a proper consultation on alternative uses of the money.’
A Department for Education spokesman said: ‘Students from the lowest-income households who started their courses this year have access to the largest ever amounts of cash-in-hand support for their living costs.
the level of taxpayer subsidy in student funding is a conscious and important investment in the long-term skills capacity of the economy.’ Currently, students from EU countries are entitled to the same taxpayer-backed tuition fee loans as British students. it is unclear whether this situation will be allowed to continue after Brexit.
Figures released last year showed around 8,600 – or 11 per cent – of former EU students were in arrears after graduation.