Student loans review rejected by the Government
07/11/2014
MPs call for an urgent review of student loans has been rejected by the Government, despite being told the current system is under threat because of a “large potential black hole” in its figures.
The Commons Business, Innovation and Skills (Bis) Committee has predicted that the student finance system will be carrying £330 billion in student loans debt by 2044. Under the current student loan system the government loses around 45p for every £1 it gives out in loans.
The Government has said there is "no immediate pressure" on the system. They believe its finance system is a "long-term investment in the skills of the nation".
Currently students can take out government-funded loans to cover tuition fees, which cost up to £9,000 a year.
Students from England and Wales pay back their tuition fee loans once they earn £21,000 a year; in Northern Ireland, they pay back once they earn £15,795 a year. Scottish students who study in Scotland do not pay tuition fees. If the debt has not been paid back in full in 30 years, it is written off.
The number of graduates failing to pay back student loans is rising dramatically, leading to the Treasry approaching the point in which it will get zero financial reward for tripiling tuition fees to £9,000 a month. The threshold at which experts calculate that the government will lose more money than it would have saved by keeping the old £3,000 tuition fee system is 48.6%.
Chairman of the Bis Committee, MP Adrian Bailey said:
"With the prospect of a large potential black hole in the government's budget figures, it is all the more alarming that the government has refused to conduct a review of the current student loan system.
"A review would offer the opportunity to assess the viability of the existing system before we stumble blindly into an unfunded student loans model which would leave students, universities, and taxpayers with a very raw deal indeed."
Need financial advice?
If you have any personal finance questions related to this news article, then please contact our financial advisers. You can get in touch by asking a question online, calling us on 0800 092 1245, or by arranging a visit.
Share this..
Related stories
UK Banks appeal against overdraft charge investigation
The Appeal Court has today ruled that the Office of Fair Trading has every right to investigate banking overdraft charges in the UK after an appeal by eight of the U.K.'s leading banks. Amid claims that the U.K.'s leading banks are attempting to prolong the agony of paying out literally billions of pounds of potential compensation to those charged "illegal overdraft fees" in the past, this saga co...
Read MoreConsumer debt problems in the UK continue to grow
The Consumer Credit Counselling Service has revealed a 25% increase in calls during 2009 to a record 335,000. However, while it is encouraging to see people making use of various debt advisory services it is concerning that just 25% of those who called the Consumer Credit Counselling Service were in a position to repay their debts. This leaves a massive 75% drowning under increasing debt and the p...
Read MoreIVAs set to surge this year
Hundreds of thousands of Britons could be forced to turn to drastic debt management measures this year as lenders cut the number of refinancing options available to them, a debt management company has warned. TDX Group calculates that around 800,000 people who have built substantial debts on credit cards and through personal loans will opt for an individual voluntary arrangement (IVA) this year. L...
Read MoreJapanese authorities considering Japan Airlines loan
Despite only yesterday suggesting that further loans for troubled Japan Airlines were out of the question, the Japanese authorities have done an about turn today and are said to be in talks about further support for the company. In a move which is backed by the Development Bank of Japan it would appear there is the possibility of significant funding being made available in the short term to see th...
Read MoreFCA warns they will “take out” payday lenders
01/04/2014 The Financial Conduct Authority (FCA) is to take over regulation of credit providers for debt management firms, credit cards, hire purchase, debt management firms and debt advisers. Until now the Office of Fair trading was the regulatory body for these industries. However the FCA has tougher powers such as unlimited fines, ordering refunds and banning misleading advertisements....
Read More