Billions of pounds in student loans will be written off by the taxpayer after 30 years under the current system, research shows
- Figures show 47% of the debt racked up by students will be wiped after 30 years
- Under the current system, graduates repay 9% of their earnings above £25,725
- It means 70 per cent of current students will never earn enough to fully repay their loans, with the public purse picking up the rest of the bill
Almost half of student loans worth billions of pounds will be written off by the taxpayer.
Official figures released by the Department for Education (DfE) yesterday show 47 per cent of the total debt racked up by current students will be wiped after 30 years.
The analysis is based on projected lifetime earnings for those studying in the 2018/19 academic year.
Official figures released by the Department for Education (DfE) yesterday show 47 per cent of the total debt racked up by current students will be wiped after 30 years (stock image)
However, the debt cancellation will vary between individuals, with some paying back much more than others depending on earnings. Under the current system, graduates repay 9 per cent of their earnings above a threshold of £25,725, and anything left unpaid is wiped after 30 years.
It means 70 per cent of current students will never earn enough to fully repay their loans, with the public purse picking up the rest of the bill. The 47 per cent projection is a rise on the 45 per cent projected last year, and 30 per cent the year before. In raw numbers, the new taxpayer bill after 30 years has increased by nearly £1billion – from £6.6billion last year to £7.4billion this year.
The rise is due to a change in repayment policy announced by Theresa May in 2017 which effectively allows low- and middle-earning graduates to pay back less.
The terms, which were aimed at placating students, meant the repayment threshold rose from its original £21,000. Graduates who do not earn above the £25,725 in their lifetimes will never have to pay back a penny. The figures are for all full-time students in England enrolled on undergraduate courses.
Yesterday Education Secretary Damian Hinds said: ‘It is often overlooked just how much the Government, and therefore the taxpayer, contributes to student loans being taken out in England. Student loans are unlike commercial loans in a number of different ways, but fundamentally because you don’t have to pay unless you’re earning over the income threshold, and after 30 years it is written off.
‘A subsidy of around 45 per cent is a substantial amount but a deliberate design of the system intended to make sure our world-class education is open to anyone who can benefit from it.’ He added: ‘Today’s figures highlight just how progressive our system is, but also reiterates the need for universities to deliver value for money on courses – not just for students, but the taxpayer as well.’
The figures are part of the Government’s Resource Accounting and Budgeting (RAB) charge, which outlines the value of student loans written off by the Government.
The data also indicates that the master’s degree loan system does not require any subsidy from the Government, with the majority of students at this level going on to repay back their loans in full.
Full-time undergraduate entrants eligible for tuition fee loans are expected to grow 1.8 per cent in the next academic year 2019/20 to 391,000.
Due to a projected decline in the 18 to 20-year-old population, these entrants are then forecast to fall 1.4 per cent to 385,000 in 2020/21.
Growth is then expected to resume, increasing by 2.9 per cent to 397,000 in 2023/24.