Behind the illusion

Changes to how student loans are accounted for could have a big impact on the national higher education policy debate.

Student loans are not loans. They are not quite grants, given the interest, but they are certainly not typical loans—and they never have been. In fact, only about 30 per cent of the full-time English undergraduates starting this academic year are predicted to fully repay their loans, but those who do not won’t be running from the debt collectors. They will simply not have earned enough to repay.

This is no secret. Most in higher education (and particularly those who subscribe to Playbook) have long been aware of how the loan system works. Ministers, it is claimed, were conjuring up a “fiscal illusion” by treating all loans as assets despite knowing full well that a significant proportion of what was “loaned” out would never come back again. Not exactly David Copperfield levels of wizardry—this was an illusion more on a par with producing a shiny shilling from behind a child’s ear (although in this case, the value on the balance book is £12 billion as opposed to 12 pennies).