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| - “But in reality, the actual debts that have totalled up for those graduates, and to get them, is impossible. More than that, many of them are not paying it and won't pay it, so you’ve really got to ask yourselves, was it worthwhile?”
John Prescott, 22 February 2018
“It's approximately 15% of people will pay back their entire student loan.”
BBC Question Time audience member, 22 February 2018
These claims are correct—the Institute for Fiscal Studies estimates that around 83% of graduates will have some debt written off under the current system. So around 17% are expected to repay in full.
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Tuition fee policies
The government announced this week it is going to conduct a major review into post-16 education, including university funding.
In 2012 the Coalition government raised the cap on tuition fees for undergraduate courses from around £3,500 to £6,000 for all universities, and to £9,000 in "exceptional circumstances". This increased to £9,250 in 2017/18, which now the majority of universities are charging at or near.
The 2012 reforms were broadly intended to shift more of the burden of payment away from public funding and onto graduates, improve student choice, and to set up a more progressive loan structure so that lower earning graduates would pay less.
A raft of changes have taken place since then which have both pushed up and down the amounts that graduates end up re-paying. These include the replacement of maintenance grants with loans—policies which have increased the debts of the lowest income students—and more recently the raising of the earnings level at which graduates have to start repaying their debts from £21,000 to £25,000.
Graduate debt repayments and the cost to the taxpayer
The average debt for students starting their degree is now just under £50,000, according to the Institute for Fiscal Studies. This is more than double the average debt under the 2011 system.
It’s correct that many students won’t pay off this debt—the IFS estimates that around 83% of graduates will have some debt written off under the current system. So around 17% are expected to repay in full.
The latest estimate from the IFS is that the taxpayer may end up paying for around 45% of the loans of students starting in 2017. The increase in the earnings threshold pushed this up from about 31%.
Both of these estimates are uncertain and affected by things like future interest rates and changes in the jobs market.
So was the 2012 fee increase worthwhile? There are lots of different elements to consider and we’re not going to go into all of them here.
When it comes to the cost to the taxpayer, the 2012 system always expected that a certain amount of debt wouldn’t be repaid, but not as much as is currently forecast (though we're checking if the forecasts are comparable).
When the 2012 reforms were proposed, the government estimated that it would bear the cost of around 30% of student debt, which it said would “maintain progressive elements of the scheme”.
The IFS has said “the main beneficiaries from reducing fees would be high-earning graduates, as they are the ones making the highest repayments under the current system”.
Check out the House of Commons Library briefings and the Institute for Fiscal Studies if you want to find out more.
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