Four in ten students may default on their loans: Treasury fear funding system is unsustainable

Four out of ten student loans may never be repaid, amid fears that university funding is becoming unsustainable.graduation

The Treasury is said to be concerned that the new system – which sees students borrow up to £9,000 a year for their course fees – will not recoup its costs.

Officials anticipated that 28 per cent of loans would never be repaid. It is now understood that their estimate stands at 40 per cent.

From last September, the maximum amount universities could charge for tuition was nearly trebled from £3,290 to £9,000. This leaves students with the prospect of £36,000 of debt for a four-year course, before living costs are taken into account.

And graduate salaries have fallen dramatically in recent years, impairing their ability to repay the loans when they start work.

Ministers said it was necessary to put higher education ‘on a more sustainable footing’ – but some claim they fear the loans could increase the cost to the taxpayer in the long-term.

A senior source said yesterday: ‘The Treasury are all over this and are extremely worried about the viability of the system. They are taking a very long-term view but their estimate for non-repayment keeps going up.

‘It is not helped by the recession, which means graduate incomes are going to be lower than they hoped.’

An independent schools expert also raised fears that teachers are not giving pupils and parents enough information about the debts they could accumulate by going to university.

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About dbda
dbda is a corporate social responsibility consultancy embracing education and safety in the community. We are privileged to work with a large number of blue chip corporate clients, Government organisations, charitable bodies, Institutes and local authorities. We also have a network of schools, professional bodies, associations, universities and partners, with whom we regularly work in collaboration.

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