Student loan system is 'unsustainable', claims expert

Professor Nicholas Barr wants payment threshold lowered

The majority of students will still be paying for their education decades after they graduate (Getty Images)

A leading expert on university finance has warned that the current student loans system – under which graduates start repayments once they earn £21,000 a year – is “unsustainable”.

Professor Nicholas Barr, from the London School of Economics and Political Science, said the repayments should start once students were earning £18,000 a year to avoid massive increases in taxes or cuts to university finances. Failing that. he argued, the repayment threshold should be pegged at £21,000, with no upward adjustment for inflation, a key concession wrung out of the Conservatives by the Liberal Democrats when the system was first introduced.

Prof Barr’s comments come at a time when experts are predicting that less than 30 per cent of students will end up repaying their loans, leaving a potential £1bn in unpaid student debts.

“The threshold surely needs to come down one way or another,” he added. “If it can’t come down to £18,000 in full, then the provision should be removed to increase it so that inflation reduces the real value of the threshold.”

Former Conservative Universities Minister David Willetts, who was chairing the meeting, said that students’ “biggest concern is repaying costs while at university” rather than the level of fees.

Labour has not yet unveiled its higher education policy.