A recent review of student loans has proposed extending payback time from 30 years to 50 years and scrapping interest on loans.
Earlier this month, Theresa May announced that she would freeze tuition fees at £9,250, increase the repayment threshold from £21,000 to £25,000 and initiate a review of the whole student finance system.
That review has now been published. It proposes that interest on student loans, currently at 6%, should be scrapped in order to reduce unpaid student debt by an average of 10%. It also proposes that this measure should be combined with extending the 30-year payback limit to retirement age. It is thought that these reforms would increase the number of loans recovered from 25% to 80%.
“Uncertainty over the future of higher education is opening up a wealth of opportunities for positive change. The current funding system risks turning into a mess that is landing the younger generation with excessive debts and future taxpayers with multi-billion pound write-offs. Reform has become urgent. The fair deal we are proposing reduces the burden on students and graduates and creates a more stable system that benefits taxpayers as well as borrowers.”
The authors of the report claim that the current system risks a student loan debt crisis in the mid-2020s. Indeed, 2017 graduates, according to the Institute for Fiscal Studies, left university with an average debt of £50,000.
Lord Adonis, former education minister and the architect of tuition fees, welcomed the “innovative contribution” to ideas on student funding. Lord Adonis wrote:
“For too long, universities have had free rein to grab as much as they can from students, graduates and the taxpayer – with precious little regard for the value they provide.”
According to the UK 2020 report, the proposed reforms can help break this so-called university cartel. A government spokesperson has said further steps will be set out to ensure the system remains fair. No doubt students will be watching anxiously for this action.