David Davis MP writes in The Telegraph on the need to reform the broken student loans system


Britain’s university system is broken and in need of radical reform

The Office for National Statistics has put the Treasury in a difficult position. Earlier this week, it recommended that a large portion of unpaid student debt should be recorded on the Government’s books as current spending.

Over the past couple of decades, we have persuaded whole generations of young people that their only future is via a university education. We have expanded universities dramatically, and to fund that expansion introduced tuition fees and student loans. We persuaded ourselves that this was a market solution to the provision of higher education. It was anything but.

Unpaid student debt has ballooned to more than £100 billion. If the ONS’s decision is adopted, it would add 
£12 billion to the deficit. That all but wipes out the windfall the Chancellor received ahead of October’s budget.

Ultimately, the impact will be on the taxpayer and those students who go on to succeed. Many graduates will achieve meaningful, well-paid jobs. Once they start earning over £25,000 they will begin to pay back their loan. But many of their peers will not go on to gain graduate employment. Their debt will never be repaid, and the bill will be footed by higher earners. The system punishes those who succeed.

In 2017, the Institute for Fiscal Studies estimated that 83 per cent of graduates would not fully repay their loans. Every year tens of millions of pounds in student loans are written off. Nevertheless, graduates carry the psychological burden of these loans through their 20s and 30s. If the Government were a company, its auditors would require it to write off a large proportion of its loans because they will never be repaid.

Meanwhile, virtually all universities charge the maximum fee, irrespective of value, quality, or cost. We charge the same for history and philosophy as for medicine and the physical sciences, even though the latter two require twice the lecture time and many times the resources. We charge the same for Oxbridge courses as for the least competitive universities. We charge the same for universities that deliver high levels of employment as for universities that lead to a high proportion of non-graduate employment.

Perhaps the most pernicious effect of this pseudo-market is universities enticing students to go to them by awarding too many first-class honours degrees. So not only are students paying too much money for low-value degrees, but some institutions are debasing the value of those degrees in a desperate scramble for business.

This is not a marketplace; it is an oppressive monopoly. The consequence is that students are leaving university burdened with debt and uncertain prospects, for the privilege of paying vice chancellors at comparatively modest colleges more than £400,000 a year.

Instead, tuition fees should more rationally reflect the value of the course, the value of the university and the cost of delivering the course. Students should have more choice on the type of education they pursue based on how much they are willing to pay. Crucially, they should get value for money. That would be a true market.

The current system sees research in science and engineering subsidised by arts and humanities students. It is their fees that fund the resources, equipment and the lab time. That cannot be fair. The Government should be investing in research based on the national interest, funded by the public at large.

The truth is, for many, university may not be the right path. They may be better leaving school at 16 and focusing on skills-based education. We need to value these choices and not stigmatise those who do not choose the academic route. We need more apprenticeships and vocational courses and better further education colleges.

For university, we should convert to a graduate contribution system that does not bite until the graduate qualifies to pay higher rate tax. Perhaps more importantly, we should require institutions to show and apply value-for-money criterion in the level of fees they charge.

It is too expensive to abolish the system, as Jeremy Corbyn would do. But it is long past time we made it fairer, better value for money, and a better method for getting on in life.