The government has inaccurately projected the number of people who will not pay their student loan back in the future, according to a recent panel comprised of some the UKís major MPís.
The Public Accounts Committee identified that the current government estimate over the number of people who will never repay their student loans, which stands between 35% and 40%, is overly optimistic, and has called for a change in the recollection procedure in order to address the substantial problem of repayment avoidance.
The committee added that the government have over-forecasted how much they will receive from student loan repay ments by 8% for years now, and that there hasnít been a ëreliable model for forecasting how much will be paid to the Exchequer.
The PAC estimated that at present, there is £46 billion worth of outstanding student loan debt owed to the government, and that under current trajectory this will soar to £200 billion by 2041.
Chairperson Margaret Hodge said: “The Government assumes that 35% to 40% of the total will never be repaid”.
“That is some £16bn to £18bn on the current debt of £46bn, and £70bn to £80bn on the estimated value of student loans by 2042.
“But we don’t have confidence in those figures. We think that the value of student loans never to be repaid could be even higher.”
The Committee put forward a number of recommendations to the Depart for Business, Innovation and Skills, who are tasked with presiding over the recollection process of student loans in the country.
The PAC urged the government to release “clear and easily understood annual forecasts of what it expects to collect in the year ahead, and explain any subsequent variances between forecasts and the amounts actually collected.”
As well as changes in the forecast procedure, the PAC also urged the department to get tough with their recollection endeavour, and put more pressure on students when they learn that they are earning enough to make regular contributions towards their student loan repayment.
“The Student Loans Company has not put enough energy into identifying those borrowers who should be making repayments but have slipped out of contact,” Ms Hodge said.
“It knows very little about British graduates who live abroad or about graduates from the EU who have since left the country. Will they ever pay back their loans? The Student Loans Company simply doesn’t know.”
The Department for Business, Innovation and Skills has rejected the committeeís claims, arguing that its current process of recollection is ëeffectiveí and ëefficientí for its purpose of acquiring loans via the tax system.
They argued that they have consistently exhibited excellent collection rates, and moreover have managed to attain this rate at a relatively low price, but did concede that there is ëroom for improvementí to ensure that the current trajectory remains positive.
“We need to ensure that all borrowers who are earning over the relevant repayment threshold are repaying their loans including those who have moved overseas after leaving their course,” the spokesperson said.
“We are continually improving the collection process for borrowers and we will carefully consider the PAC’s recommendations as part of this programme.
“A new and more accurate forecasting system is also being developed.”
ëUnsustainable funding burdení
The student loans programme has been an issue of great controversy in recent times, and the recent sale of the student loans book to company Erudio has caused widespread anger from student union groups who are unhappy that they are being subjected to new interest rates that they did not sign up for.
Rachel Wenstone, vice-president of the National Union of Students, displayed this stance, arguing that the student loan system has been a ëfailureí, and has placed an ëunsustainable funding burdení on thousands of students.
“Forcing debt on to students as a way of paying for universities is an experiment that has well and truly failed. We now need to see serious thought about moving the system away from this unsustainable funding burden,” she said.
“Graduates now stand to pay back twice, through their student loan repayments and as taxpayers confronting the spiralling costs of this ill-considered scheme.”
The labour party acquiesced with Ms Wenstone, reiterating the sentiment that the current student loan system is ëunsustainableí.
Shadow universities minister Liam Byrne: “It is now clear universities are sitting on flimsy foundations. We now need urgent answers from the government for how they’re going to fix this £80bn mess which our country cannot afford. Ministers have serious questions to answer.