A review of higher education funding is inevitable – It must support current students, recent graduates, and the whole sector

The English student loan system is doomed. Not because it’s a bad deal – on paper, it’s remarkably generous. But those who built it did not factor in what it would feel like once the repayments started ramping up.

To a generation of graduates now entering their early 30s, watching 9 per cent of every paycheck disappear while their debt total somehow keeps growing, it feels oppressive. It feels like an incomprehensibly unfair deal they did not understand and now cannot escape. And a system that feels so suffocating to so many is fundamentally broken, no matter how many graphs about average graduate salaries we make.

Those defending the system say that, whatever graduates think about it, it is a bargain: the taxpayer will lend you fees (about £9k a year) plus living costs (around £5-10k a year), and you will pay nothing back until you earn above a certain level, stop paying if your income goes back below that number, and have whatever is left written off at some point near retirement.

No private bank would offer such generous terms. The intention was to permit 18 year olds to pursue their uni dreams without worrying if it’ll be financially beneficial – because if it isn’t, you’ll never pay back what you borrowed, and you’ll never have to pay your student loan back ahead of, say, buying food.

But it isn’t playing out like that: the frozen repayment threshold means that even those at an entry level of their profession can earn enough to have them paying back, but their debt is such that, unless they reach the very, very top earning brackets, they aren’t going to be clear of it before that retirement write-off. Worse, every year the Student Loans Company sends them an update, and for many, it shows they’re now further in debt than they were when they left university.

In one sense, that shouldn’t matter – if you were never going to pay the loan off before it was written off, that there is now more of it for you to never pay off is really more of a problem for the Treasury than for you.

But it doesn’t feel that way: it feels overwhelming, to lose nearly a tenth of your earnings to not even make a dent in your borrowing, especially as the cost of living gallops up around you. That you won’t be paying your student loans out of your pension isn’t, it turns out, much comfort.

Even the fact that this current crisis relates to only a subset of graduates (those who attended university between 2012 and 2022) doesn’t help. Partly that’s because the system in place since 2022 has its own problems, including a write-off date ten years later than other grads, but more because pointing out to the so-called “Plan 2” students that this isn’t happening to everyone just compounds their sense of unfairness. They know it isn’t happening to everyone: they are working with more senior colleagues who had exactly the same education experience but went to university 12 years (or even 12 months) earlier, and have already paid their loans off. Or at the next desk, there’s someone whose parents had the resources necessary to mean no money had to be borrowed in the first place.

Government ministers, clearly concerned that the system is too fragile to change, are defending the arrangement on its merits, but it’s a futile task. Actuarial neatness is no match for lived experience, and spreadsheets cannot rebut a widespread sense of injustice. The English higher education system, despite much criticism, really is world-leading, and it should be one in which social justice is done and is seen to be done. The student loan system now fails that second test.

The question, therefore, is not whether the system must change, but how and when. Delay carries costs. While recent debate has focused narrowly on fees and loans, the underlying fragility of university finances has not abated. Institutions are responding with short term retrenchment, eroding quality and reputation in ways that will be hard to reverse.

Labour should be deeply worried that the students who will be hit hardest by such panicked measures are those most disadvantaged already, who the party historically has done so much for. The sense that higher education leaves many worse off is already shaping choices further upstream, deterring those from poorer backgrounds from applying to the best course for them, and undermining decades of effort to widen participation.

But all young people are watching, and that means the impact is electoral too. On social media sites frequented by the voters of tomorrow, influencers with vast followings are raging about a system they compare to payday loans – that the comparison is unfair will be cold comfort to Labour, as young people lend their vote to populist forces who are more willing to assert they can and will fix such failures. The Greens, for example, are today capturing 45 per cent amongst young voters, up from 26 per cent four months ago.

A review of higher education funding now feels unavoidable. The choice for government is whether to lead it, or be forced into it by crisis. It can act deliberately, with time to balance graduate contributions, taxpayer support and institutional stability, and a message that it understands young people’s anger and is seeking to help.

Or it can wait until a succession of failing universities, mounting public anger and relentless media scrutiny make reform both urgent and chaotic. For all that there are no easy policy solutions, that isn’t a very hard choice at all.

Professor John Blake is the first Director of The Post-18 Project, the think tank for new thinking, ideas & policy solutions for post-18 education in the UK. He was previously Director for Fair Access and Participation at OfS and before that, he worked across education policy and practice in a variety of school trusts and social reform organisations, including Ark, Now Teach and the think tank Policy Exchange. He also works for the University of Salford as Professor of Social Innovation and Public Policy.