The news that the Government’s loan scheme is now likely to be as expensive than the system it replaced due to the amount of student debt that is now unlikely to be repaid, probably won’t surprise many people.
But the response that this may mean a reduction in teaching budgets and so a reduction in support to students, will be the wrong response. Such a reduction is likely to increase levels of student dropout with a consequent increase in unrepayable debt and the entry into what bankers’ apparently call a ‘death spiral’.
It’s not difficult to show that investing in some kinds of student support can have a positive return on investment to universities as more students continue and go onto to pay further tuition fees. The time to invest, as Warren Buffett says, ‘is in a down market’.