Viability of student loans system under threat
5 November 2014
Adrian Bailey, Chair of the Business, Innovation and Skills (BIS) Committee, has expressed disappointment at the Government's decision to rule out an urgent review of the sustainability of the student loans system. While accepting a series of recommendations from the BIS Committee's report on student loans, the Government rejects the Committee's recommendation to initiate a review of student finance, despite concerns over a gap in the government's budget figures.
- Student Loans: Government Response to the Committee's Third Report of Session 2014-15
- Student Loans: Government Response to the Committee's Third Report of Session 2014-15 (PDF 675KB)
- Report: Student Loans (PDF 1.92MB)
- Inquiry: Student Loans
- Business, Innovation and Skills Select Committee
Adrian Bailey MP, Chair BIS, said
Under the current student loan system for students residing in England, the Government loses around 45p on every £1 it loans out. The Government's own estimates indicate the size of outstanding student debt will increase to more than £330bn by 2044. With the prospect of a large potential black hole in the government's budget figures, it is all the more alarming that the Government has refused to conduct a review of the current student loan system. A review would offer the opportunity to assess the viability of the existing system before we stumble blindly into an unfunded student loans model which would leave students, universities, and taxpayers with a very raw deal indeed.
In their response to the BIS Committee's report on Student Loans, the Government accepts a number of the Committee's recommendations, promising to introduce a number of policy changes relating to student loans. The Committee welcomes the Government's moves to improve debt forecasting and set new debt collection targets for the Student Loans Company (SLC). The Committee also welcomes Government changes to financial modelling around the ‘Resource Accounting and Budgeting' (RAB) charge and the move to assess this new model independently by the NAO and IFS .
Students deserve clarity about the terms and conditions of their loans. While there is no indication of any imminent changes to the terms of student loans, Ministers still retain the power to change ‘T&Cs' without any scrutiny or approval from MPs.
Adrian Bailey MP, Chair, said
It's disappointing the Government has rejected our recommendations that changes to student loan terms and conditions be subject to parliamentary approval. It will also come as a shock to students that the Government apparently believes it could hike up the interest rate of their loans without this constituting a change in the ‘T&Cs'. The experience of student fee election pledge cards provides a salutary reminder of the perils of promising one thing on student finance, and then doing another. The Government should reconsider its opposition to this recommendation for parliamentary approval, which would give a degree of reassurance and clarity to students taking on significant debt. The future of student finance deserves further consideration and I shall be approaching the Backbench Business Committee for a House of Commons debate on the issue.