The sub-prime state of the student loan book reflects an increasingly dysfunctional system
Around a decade has passed since David Cameron’s coalition government tripled the cap on university tuition fees to £9,000, while drastically reducing direct grants to higher education institutions in England. Conveniently for a government that made cutting the deficit its raison d’etre, this manoeuvre took public spending on higher education off the books, and an accounting assumption was made that the government-backed loans would be repaid. Ten years on, there are clear signs that this funding model, and the marketised campus culture it created, is becoming dysfunctional.
In Whitehall, alarm bells are ringing over the distinctly sub-prime state of the student loan book, which the Office for National Statistics now insists is included in national accounts. Ten years ago, it was assumed that 30% of fee loans would be written off. The current estimate is well over 50%, costing the public purse about £1tn by 2040. Over 80% of students will never repay their loans in full. For students, the job market has not offered the earning opportunities anticipated by the architects of the loans system. Many graduates never come close to the £27,295 threshold at which repayments start.