Cancelling all student loan debt would have a significant fiscal impact on the economy, and on taxpayers, many of whom may not have benefited directly from higher education (HE), but who would be required to fund this additional public spending.
The latest statistical release, published in December 2020, shows that the value of outstanding loans at the end of March 2020 reached £140 billion: https://commonslibrary.parliament.uk/research-briefings/sn01079/.
The government’s approach to student finance ensures that costs are split fairly between borrowers and the taxpayer. This approach has helped more young people from disadvantaged backgrounds go to university than ever before. Taxpayers currently subsidise around 50% of the cost of HE, which is a conscious investment in the skills capacity of the economy.
We believe that it is right that students should contribute to the cost of their HE and that this contribution should be linked to their income. Monthly repayments are linked to income and not to interest rates or the amount borrowed. Repayments are made at 9% of amounts earned over the relevant repayment threshold. The repayment threshold is currently equivalent to £26,575 a year for borrowers with a post-2012 loan, rising to £27,295 from 6 April 2021. Borrowers are protected, as their repayments decrease if their income decreases, and stop where income falls below the relevant repayment threshold. Any outstanding debt is written off after 30 years or in line with the terms of the borrower’s specific loan type, with no detriment to the borrower.