Student loan system 'doomed' and should be replaced by graduate tax, ex-regulator says
Former Office for Students director John Blake claims that reforms to the system are "inevitable"
The current student loans system is "doomed" and could be replaced by a tax to protect taxpayers, a former Office for Students director has said.
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The Chancellor defended the current system of loans when speaking to LBC last week, following an outcry by some graduates about the amount of interest that is being accrued.
Some graduates paying off their loans are seeing the amount they owe grow despite payments being made monthly from their salary.
John Blake, who stood down last month as a director of fair access at the Office for Students, says that the system being reformed is "inevitable".
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Mr Blake criticised the Government for ignoring graduates speaking out about their mounting debts, and influencers who have compared the system to predatory "payday loans".
Calls to reform the system have intensified in recent weeks, including from personal finance expert Martin Lewis, who has called student loans "misunderstood".
Mr Lewis has also criticised both the Labour and Conservative governments' decisions to freeze the salary threshold for repayments, calling them a "deliberate fiscal drag".
Mr Blake told The Times: “The English student loan system is doomed. Not because it’s a bad deal — on paper, it’s remarkably generous. But those who built it did not factor in what it would feel like once the repayments started ramping up.
“To a generation of graduates now entering their early thirties, watching 9 per cent of every paycheque disappear while their debt total somehow keeps growing, it feels oppressive.
"It feels like an incomprehensibly unfair deal they did not understand and now cannot escape. And a system that feels so suffocating to so many is fundamentally broken, no matter how many graphs about average graduate salaries we make.”
Those who took out student loans between 2012 and 2023 are charged the RPI rate of interest and up to an additional three per cent from the beginning of their studies.
The loan is written off after 30 years, with repayments beginning once graduates begin earning more than £28,470 annually.
Mr Blake suggested that a graduate tax is the only way to solve the problem, with him admitting that there are "popular options here".
He added that the system, as it is, “did not deserve to survive”, particularly the Plan 2 version.
The Department for Education told The Times: “The fiscal situation this government inherited means we’ve had to make tough choices. Threshold freezes are part of the hard but fair decisions needed to protect taxpayers and students now and for future generations of students and workers.
“The student finance system is heavily subsidised by the government, and lower-earning graduates will always be protected, with any outstanding loan and interest cancelled after 30 years.
“Under this system, graduates earning some of the highest salaries in the country contribute more towards the repayment of their student loans than workers who did not attend university or graduates on the lowest salaries.”