Tuition fees policy 'is a debt timebomb': Scheme could become more expensive than old system

  • Writing off unpaid loans becoming pricier than under £3,000-a-year system
  • Universities minister David Willetts admits 'we got maths wrong'
  • Government currently writing off around 45 per cent of loans

By Laura Clark

Universities Minister David Willetts has admitted that they government 'got the maths wrong' on tuition fees

Universities Minister David Willetts has admitted that they government 'got the maths wrong' on tuition fees

The controversial £9,000-a-year tuition fees policy risks costing taxpayers more than the old system, new figures reveal.

Writing off unpaid student loans is becoming more expensive than under the £3,000-a-year fees regime.

The prospect is highly embarrassing for the Coalition, which claimed the higher fees would save at least £1billion a year.

It would be particularly devastating for the Lib Dems if it emerged their U-turn on tuition fees was in vain. They reneged on an election pledge to resist higher fees to get the reforms through Parliament.

Opposition politicians yesterday said the policy was fast becoming a ‘money pit’ and descending into ‘chaos’.

Since autumn 2012, universities have been able to charge fees of up to £9,000 a year – up from £3,375.

Students can take out Government-backed loans to cover the fees but must start repaying once they are earning £21,000 a year.

Ministers initially estimated loan write-off costs would be  28 per cent of the £10billion lent to students each year.

But with earnings forecasts now bleaker due to the economic climate, Universities Minister David Willetts has revealed the figure is 45 per cent.

The figure ‘reflects our current estimate of the costs of Government of the higher education subsidy to students’, he added in response to a Parliamentary written question.

When write-off costs reach 48.6 per cent the new system will become dearer than the old one, say experts at the consultancy London Economics.

Last night a former political adviser to Mr Willetts told the Guardian there should be a rethink of the system and admitted the Government ‘got its maths wrong’ by overestimating the amount of student debt that will be repaid.

The spiralling cost of writing off unpaid student debt is becoming worse than under the old £3,000-a-year system

The spiralling cost of writing off unpaid student debt is becoming worse than under the old £3,000-a-year system

Nick Hillman, who worked for Mr Willetts during the introduction of the policy, called for action to address the ‘big funding gap’.

The former adviser, now director of the Higher Education Policy Institute, said: ‘The thing that hasn’t really entered the debate yet … is now we know how big the shortfall is, what do you do about it?

'How much would you need to change the loan system to actually solve the problem?

‘I’m not defending the Government. The Government has got the maths wrong, plus the economy has changed. The £21,000 repayment threshold is in real terms much higher than the Government expected.’

 

Shadow Education Minister Liam Byrne said: ‘This is fresh evidence that our university system is turning into a money pit.

'The system is haemorrhaging cash that will never be repaid and reinvested in the next generation. It’s time to call a halt to this descent into chaos.’

The figures raise the spectre of measures to recoup cash, such as higher interest rates for graduates paying back loans or further cuts to university budgets.

The comments below have not been moderated.

I bet David Willetts and others who got the maths wrong are university educated. I mean, how is it joe average like me could see 9K fees on top of living costs and book fees will end in disaster? My friends daughter has just gone to a very good university last September. Before she went, he told me he could not afford all the fees and she will take out maximum student loan and he will support living costs as much as he can. He told me "if she finishes uni, but does not earn enough, she will never pay it all back anyway". I wonder how many parents and students think the same, never planning to repay the debt?. The ministers did not see this coming, as a Conservative supporter I feel slightly ashamed this was not thought through properly and common sense did not take hold.

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Tertiary education should be free but selective - the top 15%, perhaps, should do degrees at Uni full time. Other options should be available in addition to the OU - perhaps Poly's offering evening study for degrees - sounds familiar

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I agree. Degrees for all is not a good policy as it dilutes their value. A degree should be reserved for academic not vocational subjects. Vocational qualifications are better earned whilst in work and actually doing the job. We need more work-centred training and fewer degrees.

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I am no economic expert, but I could see these uni fees are ludicrous. Many students will have debts of more than my total mortgage borrowing and attracting higher interest rates on them. To be honest in most cases the average non university educated worker will be lower paid (but not in all cases) and be better off financially. The uni student will be faced with debts higher than my mortgage and growing in size quicker than can be repaid. Then they will be faced with buying a house taking on two large financial commitments. OUCH, the defaults on student loans will become a massive problem in 30 yrs when the tax payer picks up the bill.

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I can only assume the real reason colleges and places of learning were granted University status.was to enable them to increase the fees.

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Why am i paying for student loan each month when I am earning under 21k?!

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Because you incurred it under the older £3000 per year system where pay-back starts at around £17K - didn't you read the small print?

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University fees in Ireland are €2750 per year & many students get grants to pay for this..why charge so much in the UK?

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It should have been as clear as a pikestaff that there would be huge default on tuition fee repayments. It was (just) reasonable when it was £3000 a year but the increase was savage and punitive and imposed by thosewho got it free! When will our politicians (all sides) stop punishing the ordinary British man and woman and find other ways to get money from those who are here and robbing us blind?i

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Absolutely - politicians demonstrating what idiots they are and how we are "all in it together"

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My Uni has just put my fees up again nearly hitting the £9000 max. AND to add insult to injury they have merge 2nd year and 3rd year students into the same modules for the next school term 2014/15. So now we are facing over subscribed modules in cramped lecture rooms that already some people have no seats in AND even longer essay feedback times.

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This is a money pit, my daughter goes to uni, the lectures are given by intelligent people who have certificates in the relevant subjects but they shouldn't be teachers or lecturers as they're crap at communicating and explaining their subjects and that's why so many students have to spend much more time on research because they're NOT getting what they're paying for.

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Then complain and say as a customer that arrangement is unacceptable and violates your understanding of the agreement - unless of course the small print said they could do wat they wanted - if they do nothing go elsewhere

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One day underwater basket weavers will be well paid for their degrees. Have faith in government!

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---------Have faith in government!------ Ahahahahahahahahahaha................erm, you were kidding, right?

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Tuition fees of £9,000 a year is extortionate. It prices out many talented people with potential who could have got a good degree but couldn't afford it.

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