More than half of the £19.1 billion paid out in student loans last year will be written off, with the taxpayer picking up the tab.
Official Department for Education figures estimate only 47 per cent of the money lent to university students in 2020-21 to meet their yearly £9.250 tuition fees and living costs will be repaid, leaving a shortfall of approximately £10 billion.
Graduates need to make at least £27,295 a year before they’re eligible to start repaying their debt, with some never reaching it.
Any outstanding loans are written off after 30 years and only a quarter of students who started full-time degrees last year are expected to repay their loans in full.
The huge taxpayer subsidy has raised questions about the number of youngsters heading to university, the value of courses where graduates end up in low paid ‘McJobs’ and the shortage of skilled workers in key sectors of the economy, such as IT and engineering.
Chris McGovern, chairman of the Campaign for Real Education, said that student loans have become a fiscal black hole, absorbing more and more of taxpayers’ money and offering too many young people no more than underemployment, disappointment and a mountain of debt in return.
The level of student debt write off is driving a Government rethink, and options include decreasing tuition expenses to £7,500 or the salary threshold so more graduates can begin paying back sooner and increasing the repayment period from 30 to 35 years would also save an extra £1 billion.
Graduate Sorcha Ingram, who has a degree in publishing with English from Kingston University, said she’d applied for more than 25 publishing and media jobs or internships within the past three months but in most cases hadn’t even got a rejection letter.
She said that tuition fees were brutally steep, particularly given how difficult it was to get a job right now.
A Department for Education spokesperson said that recent changes to the system were at the heart of their plans to build back better, ensuring it was financially sustainable for the taxpayer, while also driving quality and standards so students could be confident that their course would help improve their life outcomes, and that they’re geared to actual jobs and employers’ requirements.
And the interest rate is so high on these loans that mist repayments hardly cover the interest, so the amount owed grows and grows, and no doubt the student loan company is doing very nicely on the interest it gets but the government isn’t getting its capital back.
But it’s a lot worse than that. The government for years has been writing off the capital, which is taxpayers money and selling the debt at a huge loss to recovery companies.
The Student Loan Company has repeatedly been described as a ticking time bomb.
Currently, more than 17 billion is loaned to about 1.3 million students in England each year, and the value of outstanding loans at the end of March 2021 reached 141 billion.
The Government calculates the value of outstanding loans to be about 560 billion (2019-20) by the middle of this century, and if there’s even a 10 per cent failure on the debts it will be massive.
But why should English students have to pay a penny back, when Scottish students don’t pay a thing. Maybe it’s because Scotland values education for all, and England believes that education should only be given to the vested.
University is free in Scotland, but only if you’ve been a student from Scotland or the EU, and started in the 2020-21 academic year or earlier. And if that’s you, then you won’t pay a penny towards tuition fees at Scottish universities – the Student Awards Agency Scotland (SAAS) will cover the £1,820 a year for you.