The Students Loans Company has revealed that as many as one in three graduates are not paying back their loans since the introduction of University fees in 1998.
The main reason for this predicament is that graduate incomes are not meeting the repayment threshold of £15,000′
This statistic accounts for approximately 400,000 graduates across the UK who accumulatively owe £5,324,866 with the 4.8% interest rate applied. Stephen Williams, the Liberal Democrat Universities and Skills Secretary, describes this revelation as “shocking” in accordance with the view of the students themselves, who often find that their total repayments due are far in excess of what they anticipated. This is largely due to little attention being placed on the ever-increasing interest rates.
The main reason for this current predicament is that graduate incomes are not meeting the repayment threshold of £15,000. As the situation stands, the Glasgow based Students Loans Company (SLC) have no plans to alter this amount. According to Reg Empey of the Ulster Unionist Party in Northern Ireland, the threshold has “considerably increased by 50% – from £10,000 to £15,000 – in April 2005.” The repayment method is too dependent on graduate incomes, which results in the SLC receiving only a fraction of what they have loaned. It is widely unsettling that nearly a third of graduates are not yet earning enough to be repaying their students loans.
A variety of other factors contribute to this situation including graduates leaving the country which, while perfectly viable, poses yet more complications for loan repayments. In order to leave the country, students must fill out an Overseas Income Assessment Form which must be given to the SLC before departure. However, there is no official tracking of those who emigrate and so many find this to be an easy way of avoiding loan repayments. Some even find it to be a rather attractive alternative, as one current Sussex student claims: “I’m just going to move abroad after my degree so I don’t have to worry about my loan.” While dishonest in its implications, this attitude regrettably reflects the view of some students across the country.
Student debt appears to be having a negative impact on the economy, and in light of the current economic crisis, there seems to be little hope for the future. The credit crunch is placing immense pressure on the job market, resulting in greater strain on fresh graduates to find employment. Even for those who do manage to find work, incomes are simply too low. One spokesman for the Liberal Democrats claims that, “as the financial crisis worsens the burden on new graduates is going to be even greater.”
The government is providing little insight into how to combat this problem, leaving students not only in debt, but also increasingly frustrated.
With an ever-rising number of students graduating from University these days, the number of graduates not paying back their loans will see a sharp increase if action is not taken soon.