There are a number of profound injustices within the student finance system.

These include the less well off having twice the debt and costs of their better off peers; rip-off interest cost on the loans; investors profiting from students and unregulated loans; inadequate maintenance support for students; and the promulgation of misleading defenses for this system which is in crisis:

Illustration by Rachael Bolton.

1. Working class students have more than twice the debt and interest than their wealthier peers since maintenance grants have been replaced with maintenance loans. The punitive 6.1% loan “interest” is actually compounded monthly, making larger debts snowball more quickly. For example, by the end of March in the year following their graduation;

  • Tuition fee loans which started off being £27,750[1], will have increased to £31,663 and will continue to grow;
  • A combination of tuition fee and maintenance loans, which started off being £61,720[2], will have increased to £70,560 and will continue to grow;
  • Tuition fee loans cost student borrowers £5.17 a day. That figure is also on the increase.

Tuition fee and maintenance loans together costs less well-off borrowers £12.20 a day, a figure which, you guessed it, will continue to increase.

2. Compound interest creates a debt trap for student borrowers. This is why I launched a petition to remove rip-off compound interest from student loans – please sign the petition. This systemic inequality is sharpened by the fact that the less well-off are more debt averse.

3. Making matters worse, investors profit from university halls accommodation. Less well-off students fund their own exploitation with maintenance loans at punitive rates. Because student loans are unregulated, these rates are allowed to be horrendously high. If student loans were regulated, student borrowers would not be subject to unfair, misleading and overpriced loans.

4. Expensive though they may already be, maintenance loan support for students is inadequate. After paying rent, students typically have only £5.37 a day to live off. Everything that less well-off students purchase with a maintenance loan ends up costing more because of the escalating interest costs on the maintenance loan.

For example, a weekly shop of £55.08 in fresher’s week costs that student borrower approximately £104.62 [3] ten years later (assuming the student borrower eventually paid this portion of the loan back after earning £21,000 for five years and £41,000 for five years); and £141.82 [4] fifteen years later (assuming the student borrower pays off this loan after another five years, earning £41,000).

5. Government seeks to defend the present system by saying, “It doesn’t matter because most loans will be written off after thirty years”. This is misleading because by the time many loans are written off, the borrower will already have repaid the original loan amount and in many cases 100% + of its value.

The write-off will be the extortionate compounded interest, which should not have been added in the first place, and would not have been added were loans fair and regulated.

It is unwise to trust that a government 30-years in the future will do as this government says and write off the loans.

It is also said that “Only the better off will benefit” if loans are reduced or written off. This, too, is misleading because much of the “benefit” referenced comprises amounts accumulated because of monthly compounded interest that should not have been added in the first place. In any event, because the less well off are more adversely affected by debt and yet have twice the debt; the less well-off would benefit more from loans being abolished.

To cap it all, further student loan sales have been announced – and this puts students and the taxpayer at risk. That is a whole new topic!


[1] Assuming three years of tuition fees at £9,250. (3 X £9,250 = £27,750).

[2] Calculated assuming that tuition fees remain at £9,250 for three years and using London maintenance rates of £11,002 rising with inflation of 2.9% to £11,321 and £11,648 in years two and three and assuming three terms: autumn term 3 months; spring term 4 months and summer term 5 months. Please note that tuition fees are paid 25% at the beginning of terms one and two and 50% at the beginning of term 3. Thank you.

[3] 66.11 x 3.1% compounded monthly for five years = £77.18 and 77.18 X 6.1% compounded monthly = £104.62

[4] 104.62 X 6.1% compounded monthly for five years

Estelle Clarke

Estelle Clarke is a former City solicitor (banking) and student loans campaigner. Estelle’s work is widely referenced including by the BBC, ITV, LBC, Voice of Islam, the Financial Times, The Independent, Verge, Mail on Sunday,, Unilad, Renegade TV, Yahoo.

Other published papers, evidence and briefing notes include:

• “Right to buy: A proposal to end the student loans crisis” (October 2017)
with a foreword by Sir Keith Burnett published by Finance and Society;

• “Packhorse Generation, the long debt tail of student loans” (January 2017) published by the Intergenerational Foundation;

• “Feeling the Squeeze”, (2008) a trilogy on finance and security published by Henry Stewart and republished by ResearchGate;

• House of Commons, Treasury Committee(2017): Student loans inquiry – evidence on “recent changes to the student loan system, including the repayment threshold, interest rates, tuition fees” and the impact “of the Government's management of the student loan book” and student loans and mortgages; evidence accepted and awaits publication;

• Lords Select Committee, Economic Affairs Committee (2017): Economics of higher, further and technical education inquiry - evidence on student loan interest rates, loan sales and improvements needed; evidence accepted and awaits publication;

• House of Commons Education Committee (2017): Inquiry into value for money in higher education - evidence on the student finance system; evidence accepted and awaits publication;

• Briefing note (re: House of Lords): 22/2/2017 – “The Higher Education and Research Bill. (1) ‘Compromise amendments’ to stem falling admissions; and (2) ‘Rescue amendments’ to prevent public and economic damage by loan sales”;

• Briefing note (re: House of Lords): 17/1/2017 – “Higher Education and Research Bill 2016/217 (the “Bill”) – Amendments - Suggested amendments to the Bill, Part 2 Other Education Measures, Financial support for students are new clauses 80, 81 and 82”;

• Briefing note (re: House of Lords): 13/1/2017 – “The Higher Education and Research Bill – House of Lords “Access to higher education remains uneven...”
Evidence on loans, maintenance grants and mental health, referencing, inter alia, Lord Dearing; Sir Paul Nurse; the Browne Review; loan sales; the OECD; Hurley and Moore v Secretary of State; mental health research”;

• “Written evidence on clause 78 of the Higher Education and Research Bill” (6/9/2016) accepted and published here

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