3rd April 2014 9:00
By Blue Tutors
New financial analysis shows that the government is likely to receive no financial reward from tripling tuition fees to 9,000 a year. It has emerged that the proportion of graduates who are unable to pay back their student loans is growing at such a rate that the government has failed to make any savings from increasing the fees. Financial analysis shows that debt write-off has reached 45% of the £10bn in student loans, an amount which means a huge loss for the treasury. According to universities minister David Willetts, the write-off figure is approaching 48.6%, the threshold at which the government actually begins to lose more money that would have been saved had they kept the old system of £3,000 a year in tuition fees.
Financial forecasts indicate that young adults will continue to struggle to pay back the loans over their working lives. The write-off rate currently stands at 48% and rising, in stark contrast to the figure of 28% that was predicted at the time of the government’s increase in tuition fees. The forecast presented to the commons suggests that by 2042 £90bn of the £200bn in student loans will be unpaid. The new figures are causing deep concern for universities, who fear that more cuts to higher education funding will be required in order to deal with the shortfall.
The government’s higher education funding scheme has been characterised as falling into chaos, with particular concerns over the fact that the money that has been lost will not be recovered for investment in the education of the next generation. The government is now under pressure to be more open about its plans for student finance and the funding difficulties it is experiencing. Currently students are only required to start paying back their loans when they are earning over £21,000, a prospect which is unrealistic against a backdrop of poor economic recovery in which many graduates are out of work. If the trend of non-repayment of loans continues, it is likely that the new system of tuition fees will prove to be considerably more expensive than the system it replaced.