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Taxpayers to foot student loan bill as half won’t be paid back

Paloma Kubiak
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Paloma Kubiak

Nearly half the value of student loans won’t be repaid by graduates, meaning taxpayers will be left to pick up the tab, according to analysis from a leading think tank.

It is expected that about 40-45% of the financial value of student loans will not be repaid by students in England, a report by the Organisation for Economic Co-operation (OECD) revealed.

The OECD’s ‘Education at a glance 2018’ report found that tuition fees in England (UK) are higher than in all member countries, apart from those faced by students in the United States.

However, the high cost is offset by a “well-developed system of financial support for students”. It gives the example that 92% of UK-domiciled full-time students in the UK benefit from public loans or grants.

Under the current repayment system, loans are written off 30 years after graduation, and graduates only start repaying the amount once they earn above the £25,000 threshold (9% of anything above this amount). See YourMoney.com’s Essential guide to student finance, university fees and loans for more information.

But the OECD stated that England has the largest share of students benefitting from remission and/or forgiveness across countries (at 70%).

The report wrote: “It is expected that about 40-45% of the loan volume to full-time higher education borrowers will not be repaid, representing an additional cost for the public sector, which extends and guarantees the loans.”

However, it noted that more education not only benefits individuals, but the general public too.

“In the United Kingdom, male tertiary graduates generate USD 154 000 (£118,000) and female graduates USD 127 000 (£97,000) in total benefits through income tax and social contributions – far outweighing the public cost of their education.”