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Government is Likely to Lose More Money in the Form of Outstanding Student Loans

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The percentage of unpaid student loans is about to touch the point at which the government will begin to drop the income gained from having increased tuition fees. Ministers in the government are of the view that 45 percent of university graduates may not earn enough to reimburse their education loans. The unpaid student loans are drawing near 48.6 percent at which experts believe that government will lose more money.

According to David Willetts, the universities minister, government has reviewed its student loans structure and about 45 percent of debt would be given up for lost. He was replying to a question asked in a parliamentary session.

Percentage of student loans soaring high

In just six months, the estimated debt figure increased by 5 percent from 40 percent. However, officials say that estimates may change, as they were based on long-term calculation.

While calculating the student loans, officials took account of the modification in the higher education funding in the academic session of 2012-13, when universities in England and Wales tripled their yearly tuition fees to £9,000.

Into the present system, students need to repay their loans after they start earning above £21,000. They have to repay the loans at 9 percent of their salary exceeding £15,000.

Ministers explain that an estimated 28 percent of loans may never be repaid in full, as the current repayment system has dropped the repayment levels so low that government is likely to retrieve less money than it could have under the old system.

On the current student debt issue, London Economics said that if 48.6 percent of student loans are not repaid, the tipping point would be reached, whereas Liam Byrne, the shadow universities minister of Labour party termed the current student finance system as vulnerable and indefensible.

Experts’ views on current student finance system

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Liam Byrne said, “What today’s figures show is that the government tripled fees, put students in thousands of pounds of new debt but the system now costs practically the same as the old system because so few students can afford to ever pay their debts back,” He further says that the figures will keep getting worse unless there is an improvement in economic outlook and graduate salaries.

Mr. Byrne adds, “It is clear we have built the student finance system on top of a money pit. I am afraid it can’t go on and we now need a debate about how we are going to pay for higher education and the nation’s universities in the decade ahead.”

A spokesman from government says, “Our universities are now well-funded and this is driving up the quality of the student experience and helping to stimulate economic growth. We are also protecting those on lower incomes and those from poorer backgrounds are applying in record numbers.”

Anticipating huge loss, the universities minister has not completely ruled out increase in the tuition fees for students post next parliamentary election. The Labour party has already warned the current system as a financial time-bomb that may create a big hole in the university education funding.

Hence, overseas students moving to England and Wales for higher education may have to pay more tuition fees in the next couple of years. So, students from relatively poor economic background can find an alternative in the form of online education. Some eminent universities from UK offer highly popular online courses to the students at relatively affordable tuition fees.

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