UNIVERSITY should be paid for through student savings rather than debt according to a new report released today.
Graduating students are now faced with record levels of debt of more than £40,000, which they will spend much of their working lives paying off, according to the Centre for Policy Studies.
The think tank report suggests an alternative system by creating a new ISA style Education Savings Plan which would start at a child’s birth.
Money would be paid in by a student’s family throughout their childhood and withdrawn from the scheme once they started higher education.
A scholarship and bursary fund would also be created for those “unable to contribute” to a savings plan.
Under the current system which came into effect two years ago tuition fees almost trebled to a maximum of £9,000-a-year to offset a large cut in state funding for university teaching.
Graduates only start to pay their fees off once they start earning more than £21,000.
Any debts not cleared 30 years after graduating are written off.
The report says: “The 2012 reforms of higher education in which the cap on university tuition fees was raised has resulted in record levels of student debt.
“Students are now charged real interest rates on income contingent loans while they are studying - with loans being repaid once graduates are earning over a certain income...The introduction of a real above inflation interest rate of up to three per cent means that 45 per cent of graduates will repay more than they borrowed in real terms under the new system.”
However the report also notes the current system is progressive in that the lowest earning graduates will be better off as a result of the way repayments are made.