40% of Students Might Never Repay Student Loan
According to new figures, 40% of students may be unable to repay their student loans back due to increased tuition fees leaving them with the prospect of having a £36,000 debt, all before they’ve even taken living costs into consideration.
Students are now borrowing up to £9,000 a year to pay for their tuition fees, which has become a cause for concern for the Treasury. Under this new system many are concerned that costs will not be recuperated, with new estimates believing 4 in 10 students won’t be able to pay their loans back. This amount was previously anticipated to be 28%.
Last September tuition fees trebled at many universities to £9,000 from £3,290, leaving those doing a four-year course with a potential £36,000 before living costs. Combined with a reduction in graduate salaries, many graduates won’t be able to begin paying their loans back once they start working.
Speaking about these fresh concerns, a senior source said: “The Treasury are all over this and are extremely worried about the viability of the system. They are taking a very long-term view but their estimate for non-repayment keeps going up.
“It is not helped by the recession, which means graduate incomes are going to be lower than they hoped.”
Other concerns lie in the amount of information that is given to students and their parents when they’re deciding about whether or not they should go to university. Some suggest that not enough information is being provided which shows them how much debt can be built up whilst they’re at university.
Chairman of the Independent Schools Council, Barnaby Lenon, said that a whopping £80,000 debt could be accumulated by those students who undertake four-year courses. “If you were an adult taking on this size mortgage you would go through a rigorous process which guarantees you understand what you are taking on. That is not happening with 17 and 18-year-olds.”
Former Universities UK president, Sir Steve Smith, who is also vice-chancellor of Exeter University, commented that it would be ‘inconceivable’ for the Government to address the issues surrounding tuition fees before the next election. “The only way you can save money is to cut student numbers going to university or alter payment terms. Either is a political no-go area before an election.”
With the current system, UK and EU students can apply for a loan of £9,000, which will be paid to their college/university for their tuition fees. They can also apply for loans to cover their living expenses, which are around £5,500, rising to £7,675 for those who reside in London.
These loans will then be paid back once they are earning £16,365 or more.
Those graduating in the year 2015-16 will have to pay back their loans at a rate of 9% of their earnings a year, with the threshold being £21,000.