Public cost of tuition fees and loans is ‘highly uncertain’

The Institute for Fiscal Studies (IFS) has produced a report investigating the public cost of student loans, which focused on a small group of full time English undergraduates.

The students investigated in the report began university in 2012 under the new fee system. The results highlight that the government will not know the true cost of current tuition fees until the first 30 year loan repayment window finishes in 2042.

Wenchao Jin, a research economist at IFS, warned: “The public cost of the student loan system is highly uncertain. It depends on graduates’ earnings and repayment behaviour many years into the future, which we, and the government, can only estimate.”

These concerns follow changes to the tuition fee and student loan system in 2012 when the government increased university tuition fees to £9000.

Under this new system, loan repayments will only begin once a graduate starts earning over £21,000 while the debt will be completely wiped after 30 years. This system was introduced in order to reduce government spending on universities.

The IFS report predicts that only 57 percent of student loans will be repaid, leaving a shortfall of 43 percent to be paid by the taxpayer.

However, Lissie Whittal, a first-year Classical Civilisation and Philosophy student, suggested that students need not be concerned. She urged: “We’ll all be paying the money back via taxes too in the future.”

Additionally, the government currently spends £24,500 per student per year on teaching grants as well as student maintenance grants. This figure is reportedly much lower than under the previous system.

The report also claims that removing the cap on student numbers for students attaining ABB or above, could potentially increase the current number of students by 60,000. The IFS believes this could potentially cost the government a further £1.7 billion.

However, universities are not obliged to to open the floodgates to increased student numbers.

Indeed, Peter Dunn, head of communications at Warwick, insisted that Warwick’s strategy is “to expand the number of postgraduate research students rather than any significant increase in undergraduate numbers”.

Despite the report’s warnings, the IFS has calculated that taxpayer contributions are now five percent lower than under the previous system.

Mr Dunn pointed out: “When the latest fees were introduced they were matched by an equal cut in the teaching grant provided to universities.

“While the balance of funding sources was changed, the overall level of funding was not.”

Mr Dunn warned that if tuition fees were to be cut in the future this would not reduce the amounts the government has to spend in universities.

He argued: “If fee levels were to be reduced in future, then the funding given to universities for teaching would have to be increased to avoid a significant fall in the resources available to teach our students.”