On 17th December, the office of National Statistics announced that it is going to change the way for accounting the total student loans that may add almost 12 billion pounds to Britain’s budget deficit. According to David Bailey, “The new changes will reflect the government spending for students’ help in better meaning because in future the student loans write-offs will be marked as government’ spending”. The ONS officials ensure that students would not be affected in any way; they will continue to get loans from all the sources like today.
About 40-45 % Student Loans tend to be Unpaid:
The student loan repayment is linked to student’s earning in future. Many students do not earn enough to repay the student /education loan fully after meeting out post marriage increased living expenses before this debt is written off automatically after 30 years of graduation. About 40-45 % current student loans and due interest amounts are not going to be paid back; the unpaid amount will be accounted to Govt. funds for public finances. From the next year, ONS will treat part of student loan as the spending in statistical calculation.
New Policy Will Increase Govt.’s Deficit:
Matt Whittaker at Resolution Foundation said that the new policy is not going to impact on the UK government’s approach for education financing. The expected result of this changed policy to account the student loan will increase the £25.5bn deficit to £37.5bn. According to data available in March 2018, total value of unpaid student loans was £105bn. Jonathan Athow at ONS says, “To ensure that student loan amount reflects the Govt.’s way of working for students’ welfare better, we will split student loans into two portions; the repaid loan amount will be counted as genuine lending; the loan amount that seems to remain unpaid will be accounted as government’ spending”.
Speculations & Responses about New Student Loan Ruling:
Andy Westwood, the professor at University of Manchester, said, “The changes will force the UK government to innovate new ways of higher education funding unaffected by the several constraints of existing lending process. Increasing subsidy on higher education may be a solution to stop the mounting deficit.” There exists high possibility of danger that the increased deficit may be compensated by other sectors.
The Students are more likely to face increased interest loan rates up to 6.3%; at present the interest rate on Govt.’s student loans is 6.1%. The student loans will be taken as payable for the £25,000 income while it is £21,000 at present. The new regulations would not affect the monthly instalment repayment; it would continue based on individuals’ earning. Middle earners are going to feel more heat of new regulations because of increased interest rate; while the high earners will repay the debt at the earliest. On the other side, the National Union of Students says, “Although the expected rise in interest rate is low yet it will add psychological pressure on the youths.”
How Will The New Regulation Affect Direct Student Loan Industry?
As is being said that all types of Govt.’s financial help for students will remain same despite the mounting amount of unpaid loan, the students do not need to worry at all. All the benefits including scholarships will continue in future also but you must be clear about your eligibility apart from being a UK citizen to get financial help from most of traditional Govt. sources:
- You belong to low-income family
- You have children
- You have adult dependent/s
- You have permanent disability
- You are studying in particular type course.
The recent announcement of readjusting the unpaid student loan amount as Govt.’s expenditure will encourage more students to go for higher education because they will be less worried for the funds. Higher the fees will be, the higher would be the lending. The available funds may not be adequate for students to meet out the unaccounted study expenses and rising living cost, therefore, they may need external financial help; and, the direct lenders will emerge as the preferred choice rather than the banks for student loans.
Getting student loan for any stage study in the UK is not a tedious task because of presence of many resources including Govt., private and social. The Govt.’ student loans have been the cheapest besides having the longest repayment period. No doubt despite the expected increased interest rate, the Govt. funding for higher study will remain the preferred choice despite rigid terms and conditions but online FCA registered direct lenders too will feel the rush for long-term quick cash help as student loan because of unmatched ease in availing.