According to various committees, student loans attracts very high-interest rates. Most universities in England charge high tuition fees which greatly burdens students and the taxpayers as reported by a parliamentary committee. The economic affairs committee of The House of Lords projects that the student loans would rise to more than £1 trillion in 25 years time. This means that the student loan system is utterly unfair to university students. However, the Education Department made it clear that there is a review underway that is intended to ensure that students pay a fair monetary price for their education.
The damning report put the government on the spot for employing some tricks in accounting geared towards concealing the actual cost of higher learning and to burden future generations with huge debts to pay. The report from the committees recommends immediate interventions which include interest rates review and restoration of grants for the needy yet deserving students.
Lord Forsyth, a Committee chairman and a retired conservative minister expressed astonishment over the rate at which part-time education was collapsing almost completely. The cross-party committee which comprises of two retired chancellors and two former chief secretaries noted that the student finance system employed abstract fiscal approaches in order to make the loan deficit appear smaller.
Lord Forsyth. expressed shock at the revelation that George Osborne, the former chancellor, was able to make it appear as if he increased funding by £3bn and at the same time cut down the deficit by over £3.8bn. Unpaid student loans are written off at the elapse of thirty years after which their cost is included. It was clear from the committee report that student loans are becoming a future burden. It is estimated that by the year 2044, the student loans will have risen to over £1tn up to £1.2tn in 2049 when a good number of today’s students will still be servicing their university loans. The public stand for deficit cutting was to prevent debts from being passed to the next generation.
The committee observed that the student loan system has had dire consequences by occasioning high interest rates,expected to hit 6.3% to which the committee feels is the limit as it should not be higher than 1.5%; the government borrowing rate. According to Lord Forsyth, the most disadvantaged students end up completing their education but with huge debts to pay because of the conversion of grants to loan.
He also observes that the current loan repayment system is more expensive for the middle-income earners like nursing than the high-income earners like financiers or lawyers who settle their debts earlier. Lord Forsyth says the loan system fails because it was introduced with the intention of creating more market in university education to which he explains was the biggest mistake since there is no reasonable choice or competition in higher education.
The committee recommends that institutions of higher learning develop better frameworks to help boost quality of learning by helping people who want to re-train as part-time students and giving more focus on the vocational skills development and apprenticeship. The cost of higher education also needs urgent review, according to the committee.
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