Students to face higher interest rates on loans

The Russell Group, which represents 20 elite, research-intensive universities, has suggested that graduates may have to start paying back their student loans earlier and at a higher rate of interest, in order to prevent a major funding crisis.

Following an official review of student finance and fees, the group warned that the financial sustainability of the UK’s top universities was “severely at risk” under the current system.

It is warning that the country’s leading higher education institutions could face a deficit of £1.1 billion by 2013 and cuts will be required to tackle the deficit, which would include staff and infrastructure cuts.

Rusell Group director general, Wendy Piatt, comments: “With funding reductions and the prospect of future cuts to manage, without clear means of increasing their income, meeting these challenges begins to look like an impossible task.

“There is now a real risk that we could lose academics who have been responsible for discoveries that have changed the lives of millions of people for the better,” she adds.

The report states that in order to reduce their annual deficits, universities will need to cut costs by shedding staff, increase income by recruiting more students from overseas or increasing income through domestic tuition fees.

It also suggests that graduates could repay their loans earlier and at a higher interest rate.

Under the current system, students pay back their loans when they earn over £15,000 a year, at a low interest rate.

The report adds: “One way of modifying the current system is therefore that student loans should carry a real rate of interest; one which would be equivalent to the Government’s overall cost of borrowing.”

University and College Union general secretary Sally Hunt said: “The future for the UK is, as the Russell Group report correctly identifies, as a high-skilled knowledge economy and that requires proper funding for our universities.

“We desperately need to overhaul how universities are funded and move away from the idea that the current review of student funding is merely a question of how much student fees go up by,” added Ms Hunt.

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