Has the introduction of Student Loans made the country wealthier

malcsaunders

I am wondering whether HMRC or anyone else for that matter has performed any analysis on the impact of Student Loans on the economy. Wouldn't it be reasonable for the Government to want to understand whether legislation that they implement has made a positive or negative impact on the country? If a young person begins their working life with a debt of £50,000 say, how easy is it for that person to borrow money so that they can purchase their first home? Assuming that first home is not brand new, it means that the owner or owners of that property can move on to their next home. Generally, people spend money when they move. They buy things like carpets, curtains, furniture, windows, kitchens, bathrooms, heating systems and maybe they have their gardens landscaped. This all stimulates the market generating lots of tax income for the Government which means it's great for the tax payer because the Government don't need to invent new ways to tax us. I have heard that First-Time Buyers have disappeared from the market and I wonder whether it is the amount of debt that young people have that has caused that to happen. Please can someone point me to a scientific study rather than anything anecdotal that proves whether or not Student Loans have benefitted the Country?

zagfles

Compared to what? To the old system of no tuition fees, and grants for living costs, funded from general taxation but where only about 5% went to uni? Or to not having loans/grants at all and making all students work/scounge off their parents? 

As Martin keeps saying, student loans aren't like normal loans. They're like a graduate tax. The situation is pretty similar for students now as it was 30 years ago, I graduated with no debt but a basic rate of income tax of 29% when I started work. Graduates today pay 20% income tax plus 9% student loan repayment.

The problem with buying houses is stupidly high house prices. Not student "debt".

malcsaunders

I am sure there will be tons of different views on whether we like Student Loans or not. My question was not about whether we liked them or not. It was about whether anyone could point me to a scientific study that had a conclusion on whether Student Loans had had a positive or negative effect on the UK economy.

uknick

This 2017 article says 75% of students will never pay of their loan so in effect that is a tax payer funded education, as it was before loans came in.

https://www.independent.co.uk/student/graduates-three-quarters-never-pay-off-debt-loan-maintenance-grant-institute-for-fiscal-studies-a7824016.html

But, it also says country is better off by £3bn per year in the long term.  So, on the basis of this article, the country is better off.

However, if 75% of loans aren't going to be repaid, they'll have to be written off at some time in the future.  To my mind this makes the country worse off in the long term.  The receipts expected from the loans won't materialise so taxes will have to go up or services cut to make up the future shortfall.  Same as PPP & PFI; short term gain, long term pain

p00hsticks

malcsaunders said:

It was about whether anyone could point me to a scientific study that had a conclusion on whether Student Loans had had a positive or negative effect on the UK economy.

I can't point you to one, but I suspect that if there was a study that showed a negative effect the government would be taking steps to do something about it

Pennywise

uknick said:

This 2017 article says 75% of students will never pay of their loan so in effect that is a tax payer funded education, as it was before loans came in.
However, if 75% of loans aren't going to be repaid, they'll have to be written off at some time in the future.  To my mind this makes the country worse off in the long term.  The receipts expected from the loans won't materialise so taxes will have to go up or services cut to make up the future shortfall.  Same as PPP & PFI; short term gain, long term pain

The 75% figure is loans not paid off in full.  Most people will pay off some or most of their loan.  As they've not been going 30 years yet, no one knows how much will be paid off the average loan over the repayment period.
Re the future write offs, I believe they loans are sold by the government to institutions at a discount to reflect the numbers expected to be partly or not repaid at all - similar to how banks sell off parcels of loans at a discount.  So, the taxpayer "hit" will have already crystallised on that sale - leaving the institutions to make profit/loss according to reality over 30 years - they'll have done actuarial style projections on likelihood of amounts repaid etc.