The rate of graduates unable to pay back their student loans is on the rise at an alarming pace that the Treasury is approaching the point of receiving zero financial gain from the government’s decision to triple tuition fees to £9,000 annually. Newly released official forecasts reveal that write-off costs have reached 45% of the £10bn granted to students every year, nearly annulling any savings to the public purse made following the implementation of the new fee system. Universities Minister David Willetts confirmed that the write-off figure- the resource accounting and budgeting (RAB) charge- is rapidly approaching the 48.6% mark, wherein experts calculate that the government would lose more money than saved by keeping the old £3,000 tuition fee system.
This decision to introduce higher fees shortly after the coalition formed led to rioting on the streets and was the root cause behind the Liberal Democrats’ decline in ratings from which the party has never fully recovered. A host of reasons such as lower pay for young adults, an over-supply of degree holders, and the deteriorating economic outlook have contributed to the updated civil service forecasts that conclude that far fewer graduates will be earning enough to pay back their loans over their professional lives. Four months ago, Willetts informed Parliament that the rate had escalated from 35% to 40%, while in 2010 the estimate was 28%.
The rapid revision of forecasts means that by 2042, approximately £90bn out of the overall £200bn in student loans will be unpaid. Universities will now fear that further budget cuts will be necessary to fill gaps in the Department for Business, Innovation, and Skills (BIS) budget. National Union of Students higher education vice-president, Rachel Wenstone, said that the numbers indicate a critical junction in the debate over student funding and that it has become a failed experiment.
According to Pam Tatlow, the leader of the university think-tank million+, the costs of higher education are predicted to rise even further. This raise in cost brings to question whether or not the changes implemented in the system have been worth the chaos they have caused.
Andrew McGettigan, author of The Great University Gamble: Money, Markets and the Future of Higher Education, is calling for an immediate investigation. In 2010 when MPs voted to increase the maximum tuition fee, it was estimated that the related student loan losses would be roughly 30p per pound issued.
The fact that this estimate has now been revised up to 45p is astonishing. With £10 billion worth of loans issued each year, this unforeseen additional loss amounts to £1.5 billion annually. Any claims made about the savings from the new regime have vanished into thin air. This situation calls for an urgent inquiry into the whole scheme. Something is seriously wrong, and we need clarification on how this will impact other aspects of higher and further education budgets.
