George Trefgarne

Students are right to vote Labour

Almost everything which is said officially about student finances is obfuscatory and contradictory, starting with Damian Green’s assertion at the weekend that we need ‘a national debate’ on tuition fees, only for former education secretary Michael Gove to say the opposite the following day.

A week before the General Election was called, the Student Loan Company announced that it was increasing interest rates from 4.9 percent to 6.1 percent, according to its formula of inflation plus 3 percent. Due to the effects of compound interest, that potentially takes the lifetime cost of a typical student’s debts from around £51,000 to £70,000, according to the calculator on the Money Saving Expert website. However, try finding accurate repayment numbers on an official site and you will be disappointed. Indeed, the internet is full of somewhat dubious calculators, many of them giving different answers.

The Student Loan Company has to charge such usurious interest rates because the levels of default rates and special deals – for example for the disabled and those earning below £21,000 – are so high.

Incredibly, the student loan system is apparently largely exempt from regulation from the Financial Conduct Authority, which is one reason why politicians make false and contradictory statements the whole time.

The most frequent of these is that students earn more than other taxpayers and consequently should not be subsidised by them. It is certainly true that graduates from top universities earn hundreds of thousands of pounds more, but if you compare non-Russell Group graduates (ie the majority) to, say, those with grade 4 apprenticeships, the difference is on average only £1,700 a year, according to Boston Consulting Group.

Furthermore, the level of default rates and payment holidays in the system is so high, that large parts of the £100bn loan book, rising at £13bn a year will be written off and the bill footed by the taxpayer.

Already a subscriber? Log in

Keep reading with a free trial

Subscribe and get your first month of online and app access for free. After that it’s just £1 a week.

There’s no commitment, you can cancel any time.

Or

Unlock more articles

REGISTER

Comments

Don't miss out

Join the conversation with other Spectator readers. Subscribe to leave a comment.

Already a subscriber? Log in