Abolish student loans, says new Hepi report

Calling the current loan system “unviable” and based on a “fiscal illusion”, the report advocates its replacement by a form of graduate tax

A report published today (21 January) by the Higher Education Policy Institute (Hepi) calls for the scrapping of the student loan system.

Instead, it says, there should be a more transparent graduate contribution scheme – commonly known as a graduate tax – removing the debts currently incurred by students.

Declaring that the alleged benefits of the current student loan scheme are predicated on a “fiscal illusion”, the man behind the report is scathing in his assessment of the system introduced nine years ago.

“The rationale for the 2012 scheme is in tatters,” says Alan Roff, author of ‘Student finance in England from 2012 to 2020: From fiscal illusion to graduate contribution?’

“It is not sustainable to retain a loan and debt repayment system in which loans are not loans, debts are not debts and repayments are not repayments.”

Instead, says the report, a graduate contribution scheme would allow costs to be shared more fairly and, potentially, lower the cost to the treasury.


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The current scheme is unviable, says Roff, citing both the Office for Budget Responsibility and the Office for National Statistics in their concluding that the great majority of graduates will not fully repay their student loans, with most of the total amount loaned to students not returned.

Thus, the claim that the cost of the current system was previously underestimated by circa £15bn per year, and the noting that loan write-offs are now included in the national accounts when the loans are made, rather than 30 years after repayments begin.

“[The current system] has imposed huge unrepayable debts on the millions of students who have graduated in the last six years in order to create savings to the exchequer which are illusory,” says Roff.

Loans made on an individualised basis, says his report, are doubly deleterious: it is impossible to secure more funding from the highest paid graduates, once they have paid down their debt, or to increase repayments in an affordable way for the lower-paid.

The iniquity is compounded by the fact that, as we reported in 2019, wealthy students have been able to avoid £6,000 in loan interest by paying fees upfront.

Roff’s other recommendations include:

  • Allowing undergraduates to study without up-front fees
  • Retaining the principle that graduates should contribute to the cost of their education
  • Basing said contribution on a graduate’s ability to pay, as well as on political decisions about the percentage of pooled costs to be paid by graduate contributions
  • Possibly requiring contributions from those who graduated in the days of grant-funded study

It is not sustainable to retain a loan and debt repayment system in which loans are not loans, debts are not debts and repayments are not repayments – Alan Roff, report author

“The graduate contribution scheme which is outlined in this paper offers a new approach,” says Roff, the former deputy vice-chancellor at the University of Central Lancashire.

“It would ensure students can study without paying up-front fees and without incurring huge debts. In fairness to those who do not gain the benefits of higher education, graduates would make an affordable contribution to the costs of providing higher education, dependent only upon their ability to pay. This could be done in a way which would still reduce the cost to the exchequer.”

“The students who started their undergraduate courses in autumn 2020 had already suffered from school closures and then the chaotic shambles of A-level results. This year, despite the huge efforts of staff at universities and other higher education institutions, they and all other students have had their studies seriously disrupted. We must show our support for these students and those cohorts who will follow them by creating a better, fairer system for funding students and universities.”

“I was one of the lucky generation who got my undergraduate degree without incurring fees or debts. Those graduating now and, in the future, have a right to expect the government to ensure that the older generation of graduates also make an affordable contribution to the costs of higher education. After all that has happened in the last year, surely we owe them that?”

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