Taxpayers to pick up tab as most student loans will be left unpaid

FOUR in five of today’s students will never fully repay their taxpayer-backed 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 the loans while studying – 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 45 per cent of total student debt will never be paid back – up from 28 per cent when the threshold was £21,000.

The report, called Fairer Fees, found the typical graduate will leave university with debts of around £4 ,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. In Scotland, students resident north of the Border and studying here do not pay tuition fees.

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 welloff 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. But they will also increase the long-term costs to the taxpayer by £2.9billion for each annual student intake.

A Department for Education spokesman said: ‘Students from the lowestincome 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.’