Student loan system needs ‘urgent review’
22/07/2014
The student loan system is at its “tipping point” and is in need of an “urgent review”, according to a report from a group of MPs.
The report, which was produced by the Business, Innovation and Select Skills Committee, claimed that the situation is so bad that the “continued existence” of the student loans system may be under threat.
The figures claimed that because of rising tuition fees of up to £9,000 a year, there will be an estimated total student debt of around £330bn in 30 years time, raising questions about how much of it will actually be paid back.
However, a spokesman from the business department refuted the claims, saying there was “no immediate pressure on the system” and that claims of a “black hole” were in accurate. He said that the claims in the report didn’t take into account that the student loans budget is based on long-term projections, which could “fluctuate” in the short term.
Student loans may never be repaid
As students do not have to start paying their loans back until they’re earning a minimum of £21,000 and all debts are written off after 30 years, some MPs have warned that a huge proportion of the loans will never be repaid.
They said there is a “worrying record of miscalculation” by the government when it comes to student loans, leading to fears that the original forecast of losing 28p of every £1 lent to students is a gross underestimation.
In fact, if the figures in the report are correct, then the government could be set to lose 45p on every £1 it loans to students.
Adrian Bailey, chairman of the select committee said: “The government needs to get its act together and properly calculate how much of these student debts are ever likely to be paid back”.
He then continued to say that the government need to review the overall system in the near future because “the alternative is an unfunded model which would leave students, universities and taxpayers with a very raw deal indeed.”
No plans to sell student loans
There have been suggestions that the government could sell the student loans company to private investors, so that they can fund plans to lift the cap on the maximum number of university students.
However, it now appears that business secretary, Vince Cable, has blocked any sale of the loans. A statement from his offices said: "There are no plans to conduct a sale during this parliament."
However, this has led to concerns from Wendy Piatt, chief executive of the Russell Group of Universities. She said that if the government isn’t going to fund plans to lift the cap on the number of university students by selling the student loans company, then they should look at abandoning the plans altogether, as university budgets would be overstretched.
Need financial advice?
If you need to ask a financial question then please contact our financial advisers online or over the phone to get help with your query.
Share this..
Related stories
Is Germany about to cut Greece adrift?
Amid signs that the German economy is coming under intense pressure with zero growth in the final quarter of 2009, against growth of 0.7% in the third quarter, there are concerns that the German authorities are unwilling or unable to commit to a rescue package for the Greek government. After apparently doing all they could to calm nerves in the region the German authorities led Euro leaders in iss...
Read MoreWhy is the Scottish economy lagging the rest of the UK?
Over the last few months it has become obvious that the Scottish economy is currently the weakest in the UK and the situation could get worse before it gets better. Despite the fact that the UK as a whole, including England, Ireland, Wales and Scotland has pulled away from the recession the situation is still very difficult north of the border. There has been constant friction between the SNP g...
Read MoreDid the worldwide recession actually start in the UK?
As the dust settles on significant financial troubles with the likes of AIG it has been revealed that up to £310 billion worth of toxic debt may have been racked up in a small Mayfair office in London. As the AIG situation starts to become a little clearer it is believed that a dozen or so members of AIG Financial Products may have been heavily involved in the substantial toxic debt which was tak...
Read MoreMatalan announces impressive Christmas trade
January 2010 Matalan, the out-of-town discount retailer, has today issued a statement regarding Christmas trade showing an increase of 13.7% in sales. This comes at a time when founder John Hargreaves is looking to offload the business for £1.5 billion and would appear to be in the final throes of agreeing a sale. While Matalan has often attracted controversial headlines it is worth rememberin...
Read MoreEasyJet pulls back on growth numbers
Budget airline EasyJet has today announced a halving of its forecast growth rate from 15% to 7.5% with founder Sir Stelios Haji-loannou said to have been a prominent figure behind the scenes. It seems as though the founder, who still controls 38% of the airline shares, had become very concerned about over expansion in a recessionary period.
While there is no doubt that the original...