OBR urged to investigate value for money of student loans

30 Jul 15

An independent commission set up to monitor the impact of higher tuition fees in England has called on the Office for Budget Responsibility to investigate whether the current student loan system provides value for money for taxpayers.

The Independent Commission on Fees (ICF), which was founded by the Sutton Trust to analyse the impact of the fee hike to £9,000 in 2012, said any initial savings through higher fees would be wiped out by higher rates of non-payment of loans.

The group therefore called on the OBR to investigate the value for money of the current system, under which government loans are used to pay fees. Repayments begin once a graduate is earning over £21,000, but unpaid loans are written off after 30 years.

A previous examination by the Institute for Fiscal Studies think-tank concluded the controversial fee increase was unlikely to substantially reduce the total taxpayer contribution to the sector.

Commission chair Will Hutton, the principal of Hertford College, Oxford said that it was good that the number of young people taking up places at university did not appear to have been affected by higher payments for tuition. There has also been an increase in the proportion of disadvantaged students going to university since 2012.

“But that should not blind us to some of the problems apparent in the new system,” he stated.

“Debt is likely to become a bigger issue. Under the current system, nearly three-quarters of students will fail to clear their student loans before they are written off after 30 years, and the large majority will still be paying off their loans well into their forties, figures that will increase with the abolition of grants and increase in fees. It is not clear that students will continue to disregard debt.

“At the same time, it looks increasingly likely that any anticipated gains to the Treasury will be largely wiped out by these non-payments. 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.”

The ICF also highlighted there had been a fall in the number of mature and part-time students under the new fee regime. The number of part-time students is down by 48.4% between 2009/10 and 2013/14, while there has also been a 10% drop in full-time mature students.

Hutton said he was very concerned about the trends from these groups.

“Since many of this group come from less advantaged backgrounds, the fees hike is potentially having a serious and detrimental impact on their social mobility,” he stated.

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