A government think tank has released recommendations that interest rates on student loans should be done away with, saving money for students and tax payers.
UK 2020, a centre right think tank, has advised ministers that interest on student loans shouldn’t just be cut, but removed completely. This would mean all current interest owed would be cancelled and all future rates of interest set to zero.
The think tank’s report claims interest charged on these loans is stacking up far quicker than any student is able to repay it, leaving a large amount of debt unpaid at the end of students repayment periods.
Interest alone amounts to an average of £5,800 of debt on graduation, with the poorest 40 per cent of students racking up the most at £6,500.
In his forward for the report Lord Adonis wrote that:
“It has become increasingly clear that the university merry-go-round of cartel fees and ever-increasing vice-chancellors’ pay is doomed.”
He challenged universities who he claimed have been taking as much as possible from students and tax payers with little regard for providing value.
Dan Seamarks, the Vice President of Harrow for the University of Westminster’s Student Union, spoke to Westminster World. He said that it was time for the government to review tuition fees and that interest rates on student loans need to be scrapped.
“It’s essentially adding money, to money thats never going to be paid back, so its just adding to an invisible debt.”
When asked if he thought we should go further than just getting rid of the interest rate on students loans, Seamarks had this to say:
Amatey Doku, the Vice President for Higher Education at the National Union of Students told Westminster World:
“I am glad that the severe flaws in the current education funding system are finally being recognised, but UK 2020’s report does not go nearly far enough.”
Doku went on to say that students would still be living in debt under these plans and that the poorest students would still be the hardest hit by the cost of living and a lack of maintenance grants.
Meanwhile Alex Hawley, a commercial litigator, took to Twitter to question the government’s commitment to following through with scrapping interest rates on the student’s loans.
— Alex Hawley (@alexhawley10) 30 October 2017
The Institute for Fiscal Studies claims that only 22.6 per cent of graduates are ever likely to repay their loans, before their thirty-year repayment period is up. The current repayment period spans thirty years, but this would be extended to retirement age if UK 2020’s recommendations were followed.
At the end of March 2017, the face value of student loans stood at £89 billion, but UK 2020 claim that by cancelling accrued interest this could be bought down to £78 billion.
This may not be the last we hear from the Conservatives on student issues with Theresa May’s government still looking to regain ground after their poor performance in June’s general election.