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Over 80% of student loans never repaid in full

Cherry Reynard
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Cherry Reynard

The current student loan system is untenable for students and universities, argues centre-right think-tank Onward, with 83% of student loans never paid back in full.

At the same time, those graduates that are paying back their loans can face a marginal tax rate of up to 51 pence in the pound, even in excess of those earning £150,000 per year.

The group argues that for many, university will not be worth it economically – either for students saddled with debt they cannot pay off, or taxpayers who end up paying instead. It says nearly one in five graduates are no better off after five years than if they had chosen to do an apprenticeship.

“A tenth of current undergraduates will earn less than £25,000 a decade after they graduate. They will not be paying off any of their loans, even ten years after leaving This is an uncomfortable truth for policymakers who argue that current student loans are justified by the benefit to graduates’ earnings potential.”

Abolishing loans?

The group said that abolishing student loans entirely would just help a privileged few because only high earning graduates repay their loans, creating ‘striking unfairness’ between current and recent students at vast cost to the taxpayer, estimated at £100 billion.

The paper said that while the interest rate for student loans or the threshold at which they start to be repaid are arguably set at the wrong level, reform would not restore confidence in the system. It added: “For different reasons, the proposal that student loans should be replaced entirely with a graduate tax is also flawed. The current system already operates much like a graduate tax, albeit one that ends 30 years after graduation. A fiscally neutral move to a graduate tax would create some winners and losers, but leave most people paying pretty much what they were before. It would also worsen the UK’s “brain drain”, because people could avoid the tax by moving overseas.”


It argues that the government needs to address excessive graduate marginal tax rates, the earnings trap of low value courses, and the failure to provide school leavers with a meaningful technical alternative to university.

Onward’s analysis of the Department for Education’s recent data showed that over 40% of courses delivered median earnings of less than £25,000 after five years (so paying nothing back). Notably, the majority of graduates from creative arts courses will on average still earn less than the £25,000 repayment threshold a full decade after graduation.

It believes that post-18 technical education should be expanded, providing a better option for many young people than low value high-cost university courses. As such, the Government should reduce the number of places in low value university courses and divert students to higher value university courses or a dramatically expanded graduate level technical education sector.