OBR should examine student loans system, says panel

Independent Commission on Fees concerned by high write-off rate and impact on ‘squeezed middle’

July 30, 2015
Loan, money, savings

The Office for Budget Responsibility should launch an investigation into whether the student loan system provides learners and taxpayers with value for money, a report says.

The Independent Commission on Fees, which monitors the impact of charging up to £9,000 annually for tuition at English universities, says that the high predicted write-off rate of loans raises questions about the sustainability of the finance regime.

In a report published on 30 July, the commission says that the system also results in significant variation in the amount actually paid by graduates for their education. For example, middle- to high-earning individuals effectively subsidise those who earn less, as well as those who are wealthy enough to pay off the loans early and therefore avoid paying too much interest. There is a risk “that it is the hard-working ‘grafter’ in the middle who is shouldering much of the cost”.

The commission also argues that the widespread charging of £9,000 must involve significant cross-subsidy from arts degrees to science, engineering and medical degrees because of the difference in course delivery costs. It asks whether this is fair, especially when the earnings prospects of graduates are also different.

Will Hutton, the commission’s chair and principal of Hertford College, Oxford, said that three-quarters of students were unlikely to clear their student loans before they are written off after 30 years and that this figure was likely to increase with the abolition of maintenance grants and possible rises in tuition fees.

“It’s absolutely vital that the OBR establishes what the knock-on effects of the student loan system will be in the future on both students and the national finances, so we know whether the current system is offering us value for money and economic security,” Mr Hutton said.

The report raises concerns about the “significant amount of duplication” between individual universities’ widening participation programmes and calls for an independent body to be set up to ensure that activities are coordinated and effective.

A poll of 1,017, 16- to 18-year-olds conducted for the report found 77 per cent were concerned about the cost of living as a student, and 68 per cent were worried about high tuition fees.


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