They were introduced to take the financial burden off the taxpayer and put the cost of university funding onto those benefiting from it the most. Now, in the ongoing debate over the debts a modern student acquires, a new report pointed once again to the unsustainability of the loan system. It may force the government to look again at how higher education is funded.
The Key Findings of the Report
There were two key discussion points within the report released last month:
- The majority of students will still be paying off their student debt when in their 50s
- Over ¾ of students will never clear their student debt
This means that taxpayers will have to make up the shortfall in the student loan system – most of who have never gone to university. The system designed to eliminate the taxpayer burden has clearly failed to do that. The changes made in 2012 were designed to make university access easier for students from poorer backgrounds, but the recent changes in an attempt to balance the books are doing the opposite.
How the Figures Add Up Now
How could this all have gone so wrong? Wasn’t it supposed to be a self-sustaining funding system that students from all backgrounds could easily pay off? The problem is the changes to the modern system made since the reform in 2012. The report showed that expected repayments made by the lowest-earning third of recent graduates increased around 30%. In contrast, repayments from the highest-earning third rose by less than 10%.
Today, students in England have some of the highest levels of student debt in the developed world. Interest rates have always traditionally been in line with inflation but are now, in many cases, 3% over inflation. It was recently calculated that a student who borrows £45,000 will pay back an extra £5,800 in interest on top of their initial loan.
Taxpayer Savings
Despite these concerns, the government said that the cost to the taxpayer has been reduced by £3bn per year and reduced government borrowing by £6bn per year. In contrast, taxpayer top ups towards higher education is now less than £1bn per year. Opponents of the student loan system will point to the value of university education as being less about up-front funding. Firstly, higher earners pay higher taxes. Secondly, we all benefit from trained doctors and nurses, health researchers, engineers, technology design and developers and other professionals who will only learn their craft in a university setting.
The report concluded that the reinstatement of the maintenance grants or reducing tuition fees uniformly is a necessary step in permitting the government to stagger funding and encourage students into the most useful degrees. The present system benefits the richest students most of all.