Following the publication of a new report, the Committee of Public Accounts has revealed that the government has dramatically underestimated the cost to the public of unpaid student loans.
While the government has predicted that 35-40% of student loads will never be repaid, the committee has now stated these figures are up to 8% lower than expected.
Following the rise of university fees to £9,000 a year, it has been predicted that there will be £200 billion worth of outstanding loans by 2042 compared to the current student debt of £46 billion.
Since student loans were introduced in 1990, there have been no reliable models to help forecast how much will be paid to the Exchequer from student loan repayments.
The committee also criticised the government’s current lack of information concerning the debts of British and EU students who have moved abroad following graduation. It was revealed that the Students Loans Company have lost contact with over 350, 000 graduates who are not repaying their loan despite being classified in the ‘repayment’ category.
This loss of communication has been partly attributed to the inadequate IT services and premium-rate phone lines used by these companies discouraging students from further contact.
As a result of these issues, the Committee of Public Accounts has proposed a set of recommendations to improve the situation. These include setting more meaningful targets for debt expected to be collected and improving transparency.
Furthermore, it has been suggested that the department and student loans companies should work together in order to share data about borrowers’ whereabouts and earnings to help identify previously undetected fraud.
In a response to the report, the Department for Business, Innovation and Skills has stated that it is ‘improving the collection process for borrowers’ and ‘will carefully consider the PAC’s recommendations as part of this programme.’
The department has also stated that they are developing “a new and more accurate forecasting system” in the hope that they will have a more reliable service in the future.