Think 45% of students aren't going to repay their loans? Think again.

22 July 2014

Government forecasts of the repayment of student loans have been the subject of scathing criticism today, in a report from a group of MPs.

The report, published by the Business Select Committee, warned that the student loans system is reaching a tipping point, due to a

"persistent record of inaccurate debt forecasting and a failure to collect student loans effectively".

But some of today's coverage could cause inaccurate interpretations too.

It would be easy to take these statements

"45 per cent of loans would never be repaid" (Daily Mail)

"45 per cent of student loans will never be repaid" (Telegraph)

to mean 45% of the number of loans given will never be repaid.

But they don't. The government expects to receive back the equivalent of 55p (in today's value) for every £1 it now loans to students. Which means 45p or 45% of the money loaned out is 'lost', but not that 45% of students will default.

That's partly because some graduates won't earn enough to start repaying their loan and some won't pay it off in full. And, where graduates earning less pay lower interest rates, the value of the money received back will be less than was loaned because the money loses it's 'worth' due to inflation.

See our Factcheck on it here.

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