WRITING off loans for students who started university after tuition fees were trebled to £9,000 a year could cost £20 billion by 2050 — far lower than the £100bn figure often suggested.
The analysis by the Institute of Fiscal Studies think tank (IFS) comes in the same week that the Tories refused to allow a parliamentary vote against another tuition fee hike to £9,250 a year.
The IFS report debunked reports that writing off £9,000 tuition fee loans would mean a £100bn rise in debt.
This figure was widely reported after Labour leader Jeremy Corbyn said in an interview with music magazine NME that he would “deal with” the debt burden of students in England who attended university between 2012 and 2016.
However the IFS claims that if the fees for these students were written off now, it would increase debt gradually by around £20bn by 2050.
“The £100bn figure is the total value of all outstanding tuition fee and maintenance debt right back to 1998,” the IFS says.
“The outstanding fee debt of graduates who entered university after 2012 stands at £34bn. If that were written off in its entirety it would have almost no effect on government debt in the short run, but due to reduced future repayments from graduates, would increase debt by around £20bn by 2050 [in current day terms].”
The extra £14bn accounts for loans that the government never expects will be repaid as debts which have not been paid back after 30 years are written off.
Debt would increase gradually because to begin with, students may not be paying anything back as they are still studying, or not be earning enough to meet the £21,000 repayment threshold, the IFS suggested.
If tuition fee loans were written off after an election in 2022, the cost of doing so would be higher — adding around £60bn to government debt by 2050, it added.
Mr Corbyn later said that the party did not have plans to completely abolish the debt but that it would aim to try and reduce the burden.