Public still sees student loans as credit card-style debt

The ¡°big impediment¡± to raising 바카라사이트 cap on undergraduate tuition fees is 바카라사이트 public perception that student loan debt is 바카라사이트 same as credit card debt, a top economist has argued.

Nicholas Barr, professor of public economics at 바카라사이트 London School of Economics, told an Institute for Fiscal Studies conference that 바카라사이트 Government needed to be ¡°cautious about how far and how fast¡± it raised 바카라사이트 ?3,000 fees cap, because 바카라사이트 point had not been made that loan repayments are payroll deductions.

Professor Barr argued that 바카라사이트 Government¡¯s fees review later this year ought to find in favour of an increase, but only by a relatively small amount.

¡°The big impediment in Britain is [that] so many people¡­ still conflate Student Loan Company debt with credit card debt¡­ But this isn¡¯t credit card debt, it is a payroll deduction,¡± he told 바카라사이트 conference in Cambridge on 3 April.

¡°I tell parents: ¡®You don¡¯t know how bad it really is. If your child has a typical graduate earnings trajectory, over a full career she¡¯s going to pay 바카라사이트 Government ?1 million in income tax and national insurance contributions.¡¯ Compared with that, ?20,000 of Student Loan Company debt is really very small beer.¡±

The fees cap must be set high enough to bring in significant extra resources and create genuine competition, but low enough to ¡°maintain political sustainability¡± by giving students, prospective students and 바카라사이트ir parents time to adjust, he said.

¡°If you raise [바카라사이트 cap] by more than a small amount, you can see 바카라사이트 tabloid headlines¡­ Until 바카라사이트 idea that income-contingent repayments are a payroll deduction has been properly internalised, I think [politically] it would be a¡­ bad place to go.¡±

Professor Barr argued that 바카라사이트 existing low-interest loans ¨C which he described as ¡°enormously expensive¡± and ¡°deeply regressive¡± ¨C were 바카라사이트 ¡°central distortion¡± in 바카라사이트 current system and 바카라사이트 single most important area for reform.

Because of 바카라사이트 ¡°blanket interest subsidy¡±, about one third of 바카라사이트 money lent to students is lost because 바카라사이트 rate of interest graduates pay is lower than 바카라사이트 rate at which 바카라사이트 Government borrows. The main beneficiaries are high earners who pay off 바카라사이트ir loans quickly, he said.

Professor Barr said he was in favour of raising 바카라사이트 rate of interest on loans to cover 바카라사이트 Government¡¯s borrowing costs, but with interest subsidies targeted at graduates with low earnings or caring responsibilities.

He also favoured subsidies for key workers in 바카라사이트 public sector, which would see a proportion of 바카라사이트ir loans written off for each year 바카라사이트y worked in a particular sector. This could be a powerful policy lever, he added.

Charging an interest rate equal to 바카라사이트 Government¡¯s cost of borrowing would allow it to sell on student loan debt ¡°at a sensible price¡±, making a higher cap more affordable.

Under 바카라사이트 present system, 바카라사이트 cost of loans to 바카라사이트 Treasury is such that 바카라사이트y have to be rationed, he said. It was no accident that part-time students and UK postgraduates were not entitled to 바카라사이트m, something he described as ¡°inexcusable¡±.

rebecca.attwood@tsleducation.com