£100 billion: the cost of writing off student debt?

12 July 2017
What was claimed

Writing off current student loans would cost £100 billion.

Our verdict

This is roughly the value of current student loans in the UK, including maintenance loans. But the true ‘additional’ cost of a policy to write off current student loans, compared to the amount the government already ‘writes off’ from unpaid loans, would be lower than this.

“...her own party’s education spokesman has admitted that the tuition fees policy has a £100 billion…She has admitted that there is a £100 billion black hole in Labour's student fees policy.”

Damian Green MP, 12 July 2017

In its 2017 manifesto, the Labour party pledged to abolish university tuition fees.

There are two costs potentially associated with this. The first is the cost of scrapping the tuition fees (and associated loans) of future students—this is the policy in Labour’s manifesto. The second is the possibility of wiping off the amounts owed by current graduates—which Labour has separately said it would like to try to do.

It was the latter that Angela Rayner, Labour’s Shadow Education Secretary, was talking about when she referred to a £100 billion cost. When asked on Sunday’s BBC’s Andrew Marr Show how much wiping out current student debt would cost, Angela Rayner said “it’s £100 billion which they estimate currently, which will increase”.

The Student Loans Company has put the outstanding balance due from student loans in England at £89.3 billion (which includes English students studying in the UK, and EU students studying in England). This isn’t just about tuition fee loans—it also includes the cost of maintenance loans. It goes up to £100.5 billion UK wide.

But there are a few reasons to think the cost would not be as high as this—at least when talking about the current amount of student debt (the total amount of debt is increasing each year as more students go to university).

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The government already writes off some student loan debt

First, as Ms Rayner said on the programme, the government already ‘writes off’ a certain amount of this anyway due to the way the system is designed.

Graduates only start to repay their debts when they reach a certain income threshold (currently £21,000 for students taking out a loan since 2012) and have their debts written off if they’re not repaid after 30 years (or after 25 years for students who started courses between 2006 and 2012).

So a certain amount is always expected not to be paid back.

The cost would depend on which loans were written off

Second, this £89 billion includes the cost of maintenance loans and tuition fee loans before the higher £9,000 fees came in back in 2012. When discussing the idea, Jeremy Corbyn was talking about alleviating those “that had the historical misfortune to be at university during the £9,000 period”. Some have interpreted this to mean the policy would focus on these graduates.

So if the focus is on wiping off only tuition fee debts for students studying in the £9,000 period, the cost would be lower. The Institute for Fiscal Studies has estimated the outstanding stock of loans for these graduates is roughly £30 billion (but this still excludes the amount of these that are already expected not to be repaid).

Other long-running costs

These costs are separate to the costs of removing future tuition fees, which the IFS has looked into here.

Correction 1 August 2017

We updated the text in the claim so that it did not refer to writing off the £100 billion cost as “Labour’s policy”. We also added in further detail in the text about what Labour has said about writing off the costs.

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