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The Unsustainable Rise of UK Student Debt: Why It’s Time to Change the System

 5 min read / 

When increased fees were introduced by the Conservative-Liberal Democrat coalition in 2012, the proposal was to reinvigorate the university institution, forcing universities to compete on both quality and price. However, as predicted by many, the promise of increased competition and the subsequent consumer revolution failed to materialise as the standard three-year degree charged at the maximum price quickly become the norm.

Student Debt

The university sector is facing an unprecedented challenge as unpaid student loans are quickly becoming a fiscal time bomb. Students in England and Wales are the most indebted in the world upon graduation, accruing an average debt of £57,000. This is only set to increase as tuition fees in England are expected to rise to £9,250 this academic year, and interest rates are rising from 4.6% to 6.1%.

Recently, as reported in the Guardian, the Student Loan Company declared that the outstanding debt on loans has risen by 16.6% to £100.5bn in 2017, up from £86.2bn in the previous year. By 2019, the cumulative UK student debt will comfortably exceed annual NHS spending in England and is forecasted to reach £1trn (9% of net national debt) by 2040, representing a huge liability for future generations to deal with.

The Department for Education’s auditor, the National Audit Office, highlighted “a considerable degree of uncertainty remains over the recoverable amounts of the loans issued.”  Write-off costs have reached 45% of student loan value each year, and if this increases beyond 48.6%, the economic cost of the 2012-2013 higher education reforms will exceed the original pre-2012 £3,000 tuition fee system, nullifying the proposed savings to the public finances.

Amongst the biggest beneficiaries of the consecutive hikes in fees are Vice-Chancellors, who have been accused of running a “cartel”. Capx highlighted a number of “individual horror stories” of pay packages, including the Vice-Chancellor of Bath (Dame Glynis Marie Breakwell) who received an 11% pay rise (despite a 1.1% pay rise for non-managerial staff) to a take home salary of £451,000, alongside living for free in a grace-and-favour property, and claiming £20,000 of “domestic expenses“. Other notable Vice-Chancellors pay packages include George Holmes, the Vice-Chancellor of Bolton university (one of the UK’s worst performing universities in terms of student employment and satisfaction) who, despite earning £222,120 in 2016, claimed he is not paid enough.

Student Dissatisfaction

Alongside this rise in debt, student dissatisfaction has also reached unprecedented levels. A YouGov poll conducted for UK2020 recently found that when asked to rate the overall value for money of their university on a scale of one to ten, only 29% gave a score of more than seven.

This is not really that surprising considering that teaching quality and contact time has stagnated, with UK2020 reporting that the average student receives just 11.2 hours per week of contact time, across an average academic period of 23 weeks. This widespread dissatisfaction, and the awareness of potentially more attractive alternative options such as apprenticeships, has resulted in UCAS applications declining by more than 4% (25,000 applications) in 2017.

Looking forward

With the current Conservative government resisting increasing pressure to cut tuition fees, interest rates, and repayment salary thresholds (which are arguably the easiest way to manage the growth of this debt bubble) alternative non-financial solutions must be sought to reform the “self-serving cartel of universities”.

The traditional (and arguably outdated) model of three years of undergraduate study at university is increasingly being called into question. The expansion of two-year degrees focused on providing accelerated and intensive bachelor’s degrees offers multiple benefits while ensuring the intellectual journey is not compromised, and academic rigour is maintained.

A more intensive academic experience has the potential to save undergraduate students £20,000 across tuitions fees, rental contracts, and living expenses. UK2020 reports that just under 50% of students would consider a two-year degree if it were offered. These intensive degrees not only benefit students, their parents and the taxpayer, but also the wider society by helping to alleviate the UK’s existing housing crisis. If 40% of students switched to accelerated degrees, this would free up more than 105,000 rooms in key UK cities, equivalent to 61% of the annual supply of new-built homes.


Reform also needs to focus on overcoming information asymmetry in the market by providing students with independent and audited information about teaching methods, contact time, graduate-level employability (not simply “employability rates” as existing systems produce), and course by course data on graduate earnings. This information will allow students to assess the value for money of university education compared to alternative routes.

In a rapidly changing world, universities have been criticised for being slow to respond, being run predominately by academics and administrators, for academics and administrators. Looking forward, the rising level of student dissatisfaction must act as a catalyst for change. Reform will not be easy but it is vital to ensure future generations are not burdened with significant debt liabilities, and that universities continue to be one of the UK’s greatest national assets.

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