Graduates' long loan goodbye

GRADUATES could be repaying their student loans for longer than their mortgages under proposals laid before the Commons education committee this week.

Nick Barr and Iain Crawford, of the Centre for Educational Research at the London School of Economics, have devised a scheme to fund students privately with repayments of over 25 years.

Their third submission to the education and employment select committee, called Private Funds for Higher Education, gives an example of a student owing Pounds 15,000 in a privately-funded income-contingent loans system charging market interest rates.

The student, on a starting salary of Pounds 14,000, would begin paying Pounds 360 a year, roughly Pounds 30 a month. This would rise until the student, earning Pounds 29,313, makes a final payment in the th repayment year of Pounds 1,738 or Pounds 144 a month.

A spokeswoman for the National Union of Students said: "The scheme does not take into account the effects of people's varied working patterns and the case of mature students." Repayment periods could be even longer for women off work having and caring for children or invalided relatives. Mature students may not clear their debt before retirement.

But Barr and Crawford say the scheme would massively improve higher education funding. It would lead to higher loans and the abolition of parental contributions. It could also provide loans for part-time, postgraduate and further education students.

Their scheme envisages loans from banks or other commercial financial institutions, thus saving the state money. Repayments, based on income and deducted at source by the Inland Revenue, would go to a learning account.