Student Loans and the Skills Shortage in the UK Economy, by Krishna Mahendrakar, Wilson’s School

Thoughts and Analysis on Two of the “Sunday Times: Business and Money” Articles: “From Technology to Trucking, Businesses Can’t Find the Staff,” by Sam Chambers and “The £ 100,000 Student Loan Bill” by Imogen Tew

The article by Imogen Tew explains that the Treasury is currently considering a change in its structuring of student loans. Student loans allow students to pay for their post-secondary education. The benefit of a student loan is that it allows talented people to acquire a high quality education that extends their previous school life. It provides greater depth to a topic that improves your prospects for future employability. A government spokesperson said it also ensures that “the cost is fairly distributed between graduates and the taxpayer.” Once the individual has taken advantage of this education, he can pay off his debts (with interest). Students gain better employment prospects and can have “university experience”, while the government receives a more skilled workforce in the economy and a regular percentage of graduates’ wages. While this initially appears to be a fair compromise, the nature of student loans over the past several decades has made the relationship more one-sided and, with current considerations, may tip the scales further against students.

The article specifies that the Treasury wishes to extend the term of the loan and lower the income threshold at which loans are repaid. Currently, students start repaying the loan as soon as they start earning over £ 27,500 and it is paid over a period of 30 years. The typical graduate may pay £ 46,840 during this period (assuming the graduate’s initial salary is £ 24.00 and increases by 3% per annum for 30 years with an additional salary increase of £ 5,000 every 5, 10 and 15 years old). However, the government is concerned about the amount of debt that can be written off and the amount of students who can repay their loans in full. Current estimates suggest that only 22% of students will fully repay their student loans. Thus, the Treasury wishes to review the structure of student loans.

After 2012, tuition fees increased from £ 3,000 to £ 9,000. Universities could not charge more than this maximum, however, as expected, there has been a dramatic increase in the number of universities charging higher university fees. A 300% increase in tuition fees was a serious financial barrier for students. However, that was not enough to dissuade them from attending university. There was a decline in the number of students in higher education after 2012, but the numbers continued to rise to return to previous levels of around 2.5 million students in higher education each year. The current Treasury plan, however, may not see the same faith. If the duration is extended to 40 years, which is ten years longer than the current duration, and the threshold is reduced to £ 25,000, students are expected to pay more than £ 100,000. The combination of the longer term and the lower threshold results in such an increase.

The prospect of a £ 100,000 bill is alarming for students. Tuition fees, which once stood at £ 1,000 a year in the late 1990s, have seen significant price hikes which may deter students from going to university. All of the wonderful benefits of college, as mentioned earlier, are starting to lose their value. With the growing popularity of apprenticeships, students will be forced to seriously consider whether college is really worth the burden of a daunting loan that can be nearly impossible to repay for most people. But, while apprenticeship seems appealing to students, a recent government tax that requires employers to pay 0.5% of their payroll to fund training has dampened employers’ interest in investing in it. learning.

So what does this mean for the UK economy as a whole? Students, it seems, are placed in increasingly difficult situations, with financial burdens weighing on them before they even start working. A large amount of potential talent can be lost, simply because there is not enough financial support for young people. Chambers’ report explains that during the pandemic, while the global supply was tight, the demand for locally sourced goods and services increased dramatically. However, there appears to be a significant skills gap and the country’s immigration policy following Brexit limits recruitment from abroad. Industries, including technology and manufacturing, are unable to fill vacancies because they are unable to fill skills gaps. Training employees to a high standard takes years of precious time, resources and expense – as evidenced by the pandemic – companies may not have it. If the changes in Treasury materialize, these skills gaps could widen. Students learn theory and skills similar to those before this proposal, but must pay more to acquire them. Students can sacrifice their university education. It would be a shame if the next generation of workers missed out on a rewarding educational experience, not because of their merit, but rather because of their financial situation.

On the contrary, Chambers explains that 45% of graduates in 2019 entered jobs where their graduate skills were not used. The prospect of spending a significant amount of money over a period of 3 to 4 years, only to find that this education has not prepared you enough for your job only justifies further for students to reconsider their post-secondary choices. Yet it also allows the government to seriously consider what can be done to address this skills gap. Recently the government invested £ 2.5bn in a national skills fund. In addition, according to, since May 2015, there have been more than 2 million apprenticeships. Apprenticeship enables young aspiring professionals to acquire the skills necessary to perform their jobs, while being paid at the same time. Reconsidering their incentives and allowing more freedom for businesses (discussed earlier) may make apprenticeship an increasingly viable option. Tesco said if the government relaxed the rules on how their funds were spent, more than 8,000 apprenticeships could be created per year in the retail sector. This can allow people to be specifically trained to address the skill sets within the market.

While it is clear that universities will remain a very attractive prospect for ambitious young people, if the Treasury plan comes to fruition, students will need to reconsider this option. Not only will students need to consider their personal circumstances, but the government will also need to seek to help students move out of the financial burden dilemma early in their careers or provide them with equally rewarding experiences such as learning in order to not only to meet their needs. but also the needs of the current and future economy.

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