Four fifths of graduates will never pay back loans

ALMOST eight in 10 graduates will never pay back their full student loan under the new tuition fees system, a report has found.

The Institute for Fiscal Studies (IFS) has warned that there are “major issues” with the current system, as its research showed that most graduates will still be paying off student loans into their 50s.

The number of graduates who fail to clear their debt before it is written off has almost doubled since 2011, when the coalition government ended the old maintenance grants in favour of a loan system.

Under the new system, 77.4 per cent of graduates will never fully repay their debts, compared with 41.5 per cent of graduates under the previous system, according to the IFS.

The IFS concluded that the cost a degree is now “considerably greater” which it said carries a long-term risk of putting off prospective students from applying.

Shortly before the general election, the Government agreed legislation to allow for elite universities that meet higher

standards to raise their tuition fees above the £9,000 maximum to £9,250.

The report found that the rise in tuition fees and high interest rates – up to three per cent above inflation – means that higher earners could end up paying £40,000 in interest payments alone.

“The average student accrues £5,800 of interest while studying, meaning that they borrow £45,000 but find on the day of graduation they have a debt of £50,800,” the report found.

The IFS report calculated that in the long term the Government would foot the bill for £5.9billion per year of unpaid student loans, which are written off after 30 years.

“The combination of high fees and large maintenance loans contributes to English graduates having the highest student debts in the developed world,” the report states.

Laura van der Erve, a research economist at the IFS, said: “Universities are undoubtedly better off under the current system than they were before the 2012 reforms. However, their incentives have shifted towards providing low-cost subjects.”

Anna Vignoles, a professor of higher education at Cambridge University, said the Government should take a more “strategic” approach about which courses it funds.

Damian Green, the First Secretary of State and minister for the Cabinet Office, said over the weekend that Britain should have a “national debate” about university tuition fees. However, No 10 later denied there was any plan to rethink the policy.