The Commons Business Committee, comprised of MPs charged with scrutinising university policy, has released a disparaging report on the student loan system, which states it is reaching its ëtipping pointí.
The contents of the report urge the government to launch a thorough, internal review of the system due to mass sums of money being forsaken in the matter of university funding.
Reforms to the student loan system in recent years have proven vastly unpopular with the majority of prospective graduants, most notably the increase of annual tuition fees by threefold in 2011. In its findings, the commons committee identified governmental plans to life the cap on the maximum number of students which would be subsidised by the selling of the student loan book. Yet there is a growing unease amongst the public surrounding this particular issue.
Earlier this week, the Business Secretary, Vince Cable, delayed the planned selling of the student loan book due to its lack of financial reward. Despite shelving this move until after the general election, there exists a consensus within Westminster, that George Osborne will be unwavering in his pursuit to lift the cap on student numbers and if money needs to be found from elsewhere to fund it then so be it. As such, fears of where this extra money is going to be generated have been exacerbated by the commons committeeís report.
Despite the governmentís initial prediction of a 28p loss for each £1 paid, the reality paints a far more sever picture. Under current conditions, the government loses out on 45p per every £1 loaned. Factors which go some way to explaining this gross miscalculation include a lack of thoroughness in debt collection, poor organisation of debt payments from graduants based abroad and the generally unreliable collection goals specified by the Student Loan Company.
Following an inquiry into the whole system, Adrian Bailey, chairman of the Commons committee, said: “The financial funding system for higher education is looking increasingly fragile, coming under the strain of unfunded commitments and poor debt collection. The student loans system needs urgent attention and it’s vital that BIS doesn’t further undermine the viability of the system by selling off the income-contingent loan book at a knock-down price.
“With the prospect of a large potential black hole in the government’s budget figures, the government need 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.”
A source at the BIS told of how gravely the organisation would be taking the criticism. However, he/she also spoke of the monetary fluctuations as trifling short term concerns, whilst the bigger picture and longer term goals remain firmly in the governmentís sights:
ìThe costs of the loan system are based on projections of graduate repayments over the next 35 years,” he said. “These projections will continue to fluctuate due to numerous macroeconomic variables and present no immediate pressure on the system.
“This report draws heavily on an NAO report from November 2013. The department has since updated the model for student loan repayments in line with their recommendations and the new model has been reviewed both internally and by the NAO as part of the process for producing the BIS accounts.
“The government is committed to ensuring that the taxpayer is receiving value for money and that is why we are continuing to work with the Student Loans Company on improving best practice and have already dramatically tightened the regime for recouping repayments from graduates both domestically and overseas.”