By Vivienne Russell | 22 July 2014
The government persistently miscalculates how much it will lose when it makes students loans, a problem that threatens the long-term viability of the model, MPs have warned.
The Business, Innovation and Skills committee said the student loans system should be reviewed urgently and cautioned that the removal of the cap on overall student numbers could lead to a multi-billion budget gap.
According to today’s report, the government loses around 45p for every £1 it loans out yet this is persistently miscalculated. As a result, £111m less was collected than expected in 2011/12.
Committee chair Adrian Bailey said: ‘The government’s estimates indicate the size of outstanding student debt will increase to more than £330bn by 2044.
‘With the prospect of a large potential black hole in the government’s budget figures, government needs to get its act together and properly calculate how much of these student debts are ever likely to be paid back.
‘The government needs to set out a clear timescale for pushing ahead with a review of the overall student loans system because the alternative is an unfunded model, which would leave students, universities and taxpayers with a very raw deal indeed.’
The committee also highlighted a lack of rigour in debt collection, noting that graduates working abroad find it easy to avoid repayments.
It backed a National Audit Office recommendation to set the Student Loan Company an annual collection target and require it to explain any shortfall.
