£80bn: Rising cost of student loans that they will never be able to repay

At present, Department for Business, Innovation and Skills (BIS) estimates the unrecoverable outstanding debt to be up to £18 billion

Education Editor

The Government is seriously underestimating the cost of student loans that will never be paid back, a committee of MPs warns on Friday.

A report by the influential Public Accounts Committee (PAC) warns that ministers have consistently underestimated by about eight per cent the amount of debt that will be recovered from students.

At present, the Department for Business, Innovation and Skills (BIS) is estimating the unrecoverable outstanding debt at between 35 and 40 per cent, or up to £18 billion. By 2042, this will have grown to between £70 billion-£80 billion as growing numbers of students take out loans to cover tuition fees of up to £9,000 a year.

However, the report says: “Despite investments to improve the forecasts in recent years, the Department’s model for estimating future loan repayments still consistently over-estimates annual repayments by about eight per cent compared with the amounts actually collected.”

Margaret Hodge, who chairs the committee, said: “We don’t have confidence in [their] figures. We think that the value of student loans never to be repaid could be even higher.”

The committee also wants the Student Loans Company to get tougher in its approach to debt collecting, after it was unable to provide evidence on the whereabouts of more than 368,000 UK and foreign students who were still classed as owing money.

Martin Freedman, of the Association of Teachers and Lecturers, said the PAC report was “alarming”, and “paints a picture of a student loan system that is not only in a complete mess but is likely to get much worse”.

“With the Government freezing public sector pay increases, many graduates who go into teaching and social work and other public sector jobs will struggle to repay their loans month-to-month and will still never pay off the loan,” he added.

Liam Byrne, Labour’s Shadow Minister for Universities, said it was now “crystal clear that the system ministers have put in place is unsustainable and is going bust”.

A spokesman for BIS said: “The Government has an effective and efficient process for collecting student loans through the tax system resulting in high collection rates at low cost which we believe demonstrates value for money. We acknowledge that there is room for improvement in certain areas.”

Have you tried new the Independent Digital Edition apps?
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
iJobs Job Widget
iJobs Student

SThree: Recruitment Consultant (Trainee / Experienced)

£18000 - £27000 per annum + doe OTE £45K: SThree: SThree are always looking fo...

Recruitment Genius: Project Assistant

£18000 per annum: Recruitment Genius: If you are a recent psychology graduate ...

Recruitment Genius: Junior / Graduate Graphic Designer

£17000 - £20000 per annum: Recruitment Genius: The Largest Independent Motor D...

Ashdown Group: Training Programme Manager - City, London

£40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...

Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

Day In a Page

NHS struggling to monitor the safety and efficacy of its services outsourced to private providers

Who's monitoring the outsourced NHS services?

A report finds that private firms are not being properly assessed for their quality of care
Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

The Tory MP said he did not want to stand again unless his party's manifesto ruled out a third runway. But he's doing so. Watch this space
How do Greek voters feel about Syriza's backtracking on its anti-austerity pledge?

How do Greeks feel about Syriza?

Five voters from different backgrounds tell us what they expect from Syriza's charismatic leader Alexis Tsipras
From Iraq to Libya and Syria: The wars that come back to haunt us

The wars that come back to haunt us

David Cameron should not escape blame for his role in conflicts that are still raging, argues Patrick Cockburn
Sam Baker and Lauren Laverne: Too busy to surf? Head to The Pool

Too busy to surf? Head to The Pool

A new website is trying to declutter the internet to help busy women. Holly Williams meets the founders
Heston Blumenthal to cook up a spice odyssey for British astronaut manning the International Space Station

UK's Major Tum to blast off on a spice odyssey

Nothing but the best for British astronaut as chef Heston Blumenthal cooks up his rations
John Harrison's 'longitude' clock sets new record - 300 years on

‘Longitude’ clock sets new record - 300 years on

Greenwich horologists celebrate as it keeps to within a second of real time over a 100-day test
Fears in the US of being outgunned in the vital propaganda wars by Russia, China - and even Isis - have prompted a rethink on overseas broadcasters

Let the propaganda wars begin - again

'Accurate, objective, comprehensive': that was Voice of America's creed, but now its masters want it to promote US policy, reports Rupert Cornwell
Why Japan's incredible long-distance runners will never win the London Marathon

Japan's incredible long-distance runners

Every year, Japanese long-distance runners post some of the world's fastest times – yet, come next weekend, not a single elite competitor from the country will be at the London Marathon
Why does Tom Drury remain the greatest writer you've never heard of?

Tom Drury: The quiet American

His debut was considered one of the finest novels of the past 50 years, and he is every bit the equal of his contemporaries, Jonathan Franzen, Dave Eggers and David Foster Wallace
You should judge a person by how they peel a potato

You should judge a person by how they peel a potato

Dave Hax's domestic tips are reminiscent of George Orwell's tea routine. The world might need revolution, but we like to sweat the small stuff, says DJ Taylor
Beige is back: The drab car colours of the 1970s are proving popular again

Beige to the future

Flares and flounce are back on catwalks but a revival in ’70s car paintjobs was a stack-heeled step too far – until now
Bill Granger recipes: Our chef's dishes highlight the delicate essence of fresh cheeses

Bill Granger cooks with fresh cheeses

More delicate on the palate, milder, fresh cheeses can also be kinder to the waistline
Aston Villa vs Liverpool: 'This FA Cup run has been wonderful,' says veteran Shay Given

Shay Given: 'This FA Cup run has been wonderful'

The Villa keeper has been overlooked for a long time and has unhappy memories of the national stadium – but he is savouring his chance to play at Wembley
Timeless drama of Championship race in league of its own - Michael Calvin

Michael Calvin's Last Word

Timeless drama of Championship race in league of its own