Labour urged to halve ‘absurd’ 40-year student loan repayments

The student loan repayment term should be cut to 20 years and the debt should never rise, a former government adviser has said.

Tim Leunig, an economist and an adviser to the Treasury and the Department for Education under the Conservatives, has published a 10-point plan for “fixing” weaknesses in the student finance system in England.

In a paper, published by the Higher Education Policy Institute (Hepi) think tank, Mr Leunig has called for the “absurd” 40-year repayment term introduced last year on student loans to be cut in half.

Mr Leunig, who is a visiting professor at the London School of Economics (LSE), also said all graduates should have to repay at least £10 a week “no matter their income” to make the system more financially stable.

University leaders have warned of significant financial concerns as a result of frozen tuition fees paid by domestic students and a drop in overseas students.

The previous government raised the cap on university tuition fees in England to £9,000 a year in 2012, but it has been fixed at £9,250 since 2017.

Earlier this month, Universities UK (UUK) suggested that students should pay higher tuition fees and more taxpayers’ cash is needed to tackle a funding black hole in England’s universities.

Other proposals in the paper by the economist include a 1pc “surcharge” payable by employers when they hire a graduate and new maintenance grants of around £11,000 for students whose families have incomes below £25,000.

The report calls for a £2,000 per student rise in university funding, paid for directly by the Government rather than by increased tuition fees.

Mr Leunig said: “This is the only zero-cost reform package out there – offering a proper maintenance package for students, shorter repayment periods for graduates and more money for universities.

“The new government should just get on with it.”

Professor Eric Neumayer, deputy president and vice-chancellor at LSE, said: “Tim Leunig provides a costed and principled proposal for radically reforming the current system of student finance.

“One may quibble with some of the details he puts forward, but one cannot argue with the fact that student finance in its current form is broken and leaves all stakeholders dissatisfied.

“It desperately needs the kind of radical reform that Leunig’s hugely welcome intervention puts on the table for discussion and serious consideration.”

Earlier this month, Bridget Phillipson, the Education Secretary, said she could not promise “painless or immediate resolutions”, but she promised to give her attention to the issues facing the sector.

UUK is due to publish its “blueprint” this week with proposals for a “reset” of the university sector.

A spokesman for UUK said: “Universities UK believes that Government should link fees to inflation to stop their value eroding year on year, reintroduce grants for the poorest students and lift the value of the maintenance loan to support students while they are studying.

“This could all be done rapidly without major rewiring of the system, and we believe action must be taken swiftly to stabilise both university and student finances, which are under enormous pressure.

“Beyond that we agree there is a role for public funding, through upfront grants to support the costs of teaching, which are no longer covered by the fee.

“This would have the additional benefit of restoring the balance between public and private funding to pay for the costs of teaching, which are currently heavily weighted towards graduates.”

A Department for Education spokesman said: “The Government is determined that the higher education funding system should deliver for our economy, for universities and for students – we will look carefully at all options and come forward with proposals.”