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Student loan system needs ‘urgent review’


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.

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