Almost 45% graduates will never repay student loans

Universities Minister David Willetts

Universities Minister David Willetts

In a governmental reassessment of U.K. student finance, it has been estimated around 45 per cent of graduates will not earn enough to repay their loans.

The shortfall could cancel out the profits made by the disputed tripling of tuition fees in 2012.

An ex-adviser to the Universities Minister, Nick Hillman has told that the government have done wrong calculations by overestimating the amount of money that it will recover from students taking out loans to pay new higher tuition fees.

Mr Hillman has indicated that ministers require addressing the “big funding gap” that is evolving in the system.

Mr Hillman, who worked for David Willetts when the Government was making modifications to the tuition fee structure, has said that the £21,000 repayment threshold – the point at which graduates must start paying back their loan – had turned out to be much higher than expected.

A major reform in the higher education funding which replaced government funding by student loan system led to tuition fees at English universities increased to a maximum of £9,000 in 2012.

Commons committee chairman Adrian Bailey has said the Treasury is required to resolve the issue, after universities minister David Willetts has disclosed the rate of non-repayment of student loans is near the point at which experts believe increasing tuition fees will not be beneficial to Treasury coffers. The additional amount is risked to be consequently cancelled out by the written-off loans.

Mr Bailey had said: “There is a huge potential black hole in the government’s budget figures. You’ve got all these confident predications about budget deficit falling and right in the middle of that is a potential fiscal time bomb that doesn’t seem to have been addressed.”

Bailey has told regarding the consideration to recall Mr Willetts in front of the committee next month to explain himself over the rising student-default estimates.

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