The Public Accounts Committee (PAC) has published a new report which forecasts that student debt will treble over the next four years. Due to the number of universities that have decided to charge the maximum possible tuition fees, total student debt could rise from its current level of £24billion to £70billion by 2015-16.
Contrary to predictions made by the Government, the majority of universities will start charging the maximum fee of £9,000 a year from September.
Students could end up owing an average of £50,000, and this could ruin many people’s chances of getting a mortgage or making pension contributions, according to the PAC. This has led shadow ministers and student representatives to voice their dismay at what could be unmanageable levels of debt for many. The PAC report warns that students will be under increased financial pressure, and that universities themselves could be “at serious financial risk” in “the new funding environment.”
The Committee also estimated that 30% of the student debt that has been amassed by 2015-16 will never be repaid to the publicly-funded Student Loans Company. That means British taxpayers will have to foot the bill for a £21billion shortfall. In other European countries, student loans are granted by private sector banks, repayment starts within 6 months, and there is a 10 year deadline for repayment.
The repayment schedules offered to UK students are generous compared with Europe, and compared with other forms of personal debt available here. Graduates don’t have to start paying off their student loans until they start earning £21,000 or more, and if they don’t repay it fully within 30 years, the debt is written off. The high default rate that has been predicted is likely to be impacted heavily by foreign students and women taking career breaks, according to the PAC.
As with other loans, legal action can be taken if repayments aren’t made when they are due. The SLC can pursue borrowers through the civil courts, but if defaults occur on the scale envisaged in the PAC report, they won’t have any chance of recovering all the money owed to them. Ultimately, that’s going to mean more cuts or higher taxes in the future.