(5) Charge commercial interest rates on student loans

Proposed by Elizabeth Truss of the Reform think tank as part of a £30bn plan to return Britain to the black.

The introduction of student loans reduced the burden of education on the state and allowed individuals far greater financial autonomy. However student loans are still subsidised by taxpayer to the tune of £1.2 billion a year (in addition to the tuition subsidy). There is no need for this support to continue - there is already a strong incentive for people to study, an earning premium of 77% over non-graduates. Indeed Reform’s Mobile Economy report showed that low income groups are more likely to study in countries with high fees and well developed loan systems than the UK. A removal of the subsidy will also help drive better education as when students make a greater financial contribution to their education they demand higher quality courses.
 
Recommendation: charge a commercial interest rate on student loans.
 
Area: DIUS
Saving: £1.2 billion
Traffic light status: TBD

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Previous idea for saving: (4) Cut doctors' pay by 10%