Spending on student loans to hit £13bn by 2026, OBR predicts

The Office for Budget Responsibility ‘modestly’ revised its latest prediction upwards as student numbers grow

Public spending on student loans is predicted to reach £13 billion by 2025-26, according to the government finance watchdog.

The figures come from a review of UK public finances published to coincide with the launch of the March budget by the Office for Budget Responsibility (OBR), which calculated that Treasury spending on student loans would grow from £10.2 billion in 2019/20 to £13 billion in 2025-26.

The figure represents the proportion of student debt that the OBR expects to be written off and picked up by the taxpayer. The OBR said this was due to growing student numbers, higher tuition fees and the size of loans rising in line with the retail price index (RPI) measure of inflation.

The figure is slightly higher than the figure given by the OBR at the March 2020 budget – the watchdog said spending would reach £12.8bn by 2024-25, which it subsequently revised down to £12.6bn in November.

With European Union students no longer eligible for tuition fee loans following Brexit, the OBR said it expects lower numbers of loans ever year. The cap on fees for UK-domiciled students remains frozen at £9,250 for another year, which the watchdog said would reduce “the amount of lending and write-offs relative to our pre-measures forecast”.

Earlier this year government suggested it would announce changes to the graduate loan repayment thresholds in its forthcoming response to the Augar review. A separate document published by the government yesterday confirmed that its detailed response to Augar would be published in 12 months, rather than in six as previously stated by the Department for Education.

Read more: Government’s teacher assessment plan risks “extremely high grade inflation”, warn experts

Image via Flickr.

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