Stu­dent debt write-off could cost just £10bn

The Guardian - - NATIONAL - Richard Adams Ed­u­ca­tion ed­i­tor

Writ­ing off ex­ist­ing stu­dent loans could cost the gov­ern­ment as lit­tle as £10bn, well be­low the £100bn fig­ure quoted by politi­cians, ac­cord­ing to new anal­y­sis by the In­sti­tute for Fis­cal Stud­ies.

The IFS cal­cu­lated that im­me­di­ately scrap­ping the debt for univer­sity tu­ition would cost just £20bn but that the ad­di­tion to gov­ern­ment debt would to­tal £60bn if the pol­icy was de­layed un­til the end of the cur­rent par­lia­ment in 2022.

One cheaper al­ter­na­tive would be to write off tu­ition fee debt above the £3,465 level of un­der­grad­u­ate fees charged be­fore 2012 – a move that would add just £10bn to gov­ern­ment debt.

The fig­ures fall well be­low the £100bn quoted by Jo John­son, the higher ed­u­ca­tion min­is­ter, and other mem­bers of the gov­ern­ment ear­lier this year, as they sought to push back against sug­ges­tions by Jeremy Cor­byn, the Labour leader, that his party would end tu­ition fees and “deal with” ex­ist­ing stu­dent debts.

The £100bn fig­ure was also quoted by An­gela Rayner, the shadow ed­u­ca­tion sec­re­tary, in July, when she said: “It is a huge amount, it’s £100bn, which they es­ti­mate cur­rently, which will in­crease. It’s a huge amount of money but of course we also know that a third of that is never re­paid.”

But as the IFS points out, the £100bn is the to­tal for all stu­dent loans, in­clud­ing those for main­te­nance, for stu­dents from out­side Eng­land, and for those in­curred af­ter fees were in­tro­duced in 1998 but be­fore they were raised to £9,000 a year in 2012.

If only post-2012 debt for tu­ition fees for stu­dents from Eng­land was scrapped, the pol­icy would in­crease gov­ern­ment debt by around 1% of na­tional in­come by 2050, or around £20bn in to­day’s terms.

“Sug­ges­tions that debt would rise by £100bn are wrong. £100bn is the out­stand­ing value of all tu­ition fee and main­te­nance debt since 1998 – it is not the an­swer to the ques­tion: what would be the im­pact on public debt of writ­ing off fee loans ac­cu­mu­lated un­der the £9,000 tu­ition fee regime?” the IFS said, in a re­search note pub­lished yes­ter­day.

The cur­rent level of £9,000-era tu­ition fee loans held by the gov­ern­ment – through the Stu­dent Loans Com­pany – stands at £34bn. How­ever, the loan re­pay­ment cal­cu­la­tions as­sume that £14bn will never be paid back.

The anal­y­sis also warned that the main ben­e­fi­cia­ries of wip­ing out the debts would be high-earn­ing grad­u­ates, who pay back a higher per­cent­age of their loans than other grad­u­ates. Un­der the cur­rent sys­tem, stu­dent loan debt that is not re­paid af­ter 30 years is writ­ten off.

The gov­ern­ment could pay for the ad­di­tional debt with a “mod­est in­crease” in the top rate of in­come tax, the IFS sug­gested.

“This would do some­thing to al­le­vi­ate con­cerns that the pol­icy is re­gres­sive, although high earn­ers without stu­dent debt – peo­ple who didn’t go to univer­sity as well as those who went but do not have out­stand­ing debt – would lose out,” it said.

The cal­cu­la­tions come as par­lia­ment’s ed­u­ca­tion se­lect com­mit­tee an­nounced it is to hold a hear­ing next month on value for money in higher ed­u­ca­tion, in­clud­ing the con­tro­ver­sial is­sue of high pay among vice-chan­cel­lors and se­nior aca­demics.

“We want to ex­am­ine to what ex­tent the in­di­vid­ual stu­dent and the tax­payer re­ceives value for money for this con­sid­er­able fi­nan­cial in­vest­ment,” said Robert Hal­fon, the com­mit­tee chair.

“We want to ex­plore how far our univer­si­ties are de­liv­er­ing a good qual­ity ser­vice for their stu­dents and the ex­tent to which the high salaries of vice-chan­cel­lors are linked to pos­i­tive stu­dent out­comes.”

A re­cent sur­vey found that just a third of stu­dents said they had re­ceived good or very good value for money. Ear­lier this year the IFS cal­cu­lated that young peo­ple from the poor­est 40% of fam­i­lies en­ter­ing univer­sity in Eng­land for the first time this year will emerge with av­er­age debts of around £57,000.

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