£100 billion: the cost of writing off student debt?

£100 billion: the price of writing off student debt?

12 July 2017

What was claimed

Writing off present student loans would value £100 billion.

Our verdict

This is roughly the worth of present student loans within the UK, together with upkeep loans. But the true ‘additional’ value of a coverage to write down off present student loans, in comparison with the quantity the federal government already ‘writes off’ from unpaid loans, can be decrease than this.

“…her own party’s education spokesman has admitted that the tuition fees policy has a £100 billion…She has admitted that there is a £100 billion black hole in Labour’s student fees policy.”

Damian Green MP, 12 July 2017

In its 2017 manifesto, the Labour celebration pledged to abolish college tuition charges.

There are two prices probably related to this. The first is the price of scrapping the schooling charges (and related loans) of future students—that is the coverage in Labour’s manifesto. The second is the potential of wiping off the quantities owed by present graduates—which Labour has individually stated it want to attempt to do.

It was the latter that Angela Rayner, Labour’s Shadow Education Secretary, was speaking about when she referred to a £100 billion value. When requested on Sunday’s BBC’s Andrew Marr Show how a lot wiping out present student debt would value, Angela Rayner stated “it’s £100 billion which they estimate currently, which will increase”.

The Student Loans Company has put the excellent stability due from student loans in England at £89.3 billion (which incorporates English students finding out within the UK, and EU students finding out in England). This isn’t nearly tuition payment loans—it additionally contains the price of upkeep loans. It goes as much as £100.5 billion UK vast.

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But there are a number of causes to suppose the price wouldn’t be as excessive as this—at the very least when speaking in regards to the present quantity of student debt (the full quantity of debt is growing annually as extra students go to school).

The authorities already writes off some student loan debt

First, as Ms Rayner stated on the programme, the federal government already ‘writes off’ a certain quantity of this anyway because of the approach the system is designed.

Graduates solely begin to repay their money owed once they attain a sure earnings threshold (at present £21,000 for students taking out a loan since 2012) and have their money owed written off in the event that they’re not repaid after 30 years (or after 25 years for students who began programs between 2006 and 2012).

So a certain quantity is all the time anticipated to not be paid again.

The value would depend upon which loans had been written off

Second, this £89 billion contains the price of upkeep loans and tuition payment loans earlier than the upper £9,000 charges got here in again in 2012. When discussing the thought, Jeremy Corbyn was speaking about assuaging these “that had the historical misfortune to be at university during the £9,000 period”. Some have interpreted this to imply the coverage would concentrate on these graduates.

So if the main target is on wiping off solely tuition payment money owed for students finding out within the £9,000 interval, the price can be decrease. The Institute for Fiscal Studies has estimated the excellent inventory of loans for these graduates is roughly £30 billion (however this nonetheless excludes the quantity of those which are already anticipated to not be repaid).

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Other long-running prices

These prices are separate to the prices of eradicating future tuition charges, which the IFS has regarded into right here.

Correction 1 August 2017

We up to date the textual content within the declare in order that it didn’t consult with writing off the £100 billion value as “Labour’s policy”. We additionally added in additional element within the textual content about what Labour has stated about writing off the prices.