Student finance: student loans aren’t broken – they protect inherited advantage
This blog was kindly authored by Hannah Rolley, Head of Access at Trinity College Oxford.
We are told, endlessly, that student finance is a problem of scale: the size of the loan, the length of repayments, the psychological weight of ‘lifetime debt’. Graduates are warned to expect forty years of deductions, balances that never quite fall, interest quietly compounding in the background.
But student finance isn’t broken. It is doing exactly what it was designed to do: protect inherited advantage while shifting risk onto those with the least.
There is a profound difference between students who must borrow the maximum available and those whose parents can afford to pay the full cost of university outright: tuition fees, accommodation, living expenses, the lot. No debt. No repayments. No interest. No forty-year shadow.
For years, I wondered whose parents were wealthy enough to do this. Then I remembered the cost of private education. In 2026, it is cheaper to fund a UK home student through three-years at the University of Oxford (fees of £29,379) than it is to send a child to Eton, Radley or Westminster for just one year as a boarder. For families who have already paid over £60,000 a year for secondary school, university fees are not a hardship, they are a staggering 84 per cent discount.
The system works precisely as intended. Tuition fees do not come close to covering the true cost of a degree. This is certainly true at Oxford and other Russell Group universities, where students from the most advantaged backgrounds remain disproportionately over-represented. These students graduate with a world-class education at a fraction of its real cost and then pay nothing further once they enter their high-earning careers.
Meanwhile, students from less wealthy backgrounds borrow the maximum, accrue interest from the moment they enrol, and repay for decades. Two students sit in the same lectures, receive the same degree, and leave with radically different futures – not because of talent or effort, but because of parental wealth. And for some, the barrier comes even earlier: the system quietly excludes those whose faith forbids interest-bearing loans and deters working-class students for whom the prospect of decades of debt is enough to rule university out altogether.
This is not meritocracy. It is inheritance, laundered through policy.
I agree that the psychological impact of graduating with huge ‘debt’, where students see their balance grow year on year despite making monthly payments creates a stifling sense of being trapped. Those whose faith means they have to self-fund rather than borrow, end up putting themselves and or their families through years of hardship – or see attending university as impossible to even contemplate.
I am realistic enough to know that the argument for free university education no longer wins political traction, even though I believe, deeply, that education should never have been commodified in the first place. I was among the first students to take out a loan to pay my tuition fees, and every postgraduate qualification since has required further borrowing. I continue to make repayments today.
But if we are going to insist that degrees must be paid for, then everyone who benefits from them must contribute. That is why I agree that we need a graduate tax. Not as a punishment. Not as an ideological crusade. But as a basic correction of an indefensible imbalance. A graduate tax would ensure that contributions are based on outcomes, not upfront privilege. It would finally lift the burden of loans accruing interest and capture those who currently glide through the system debt-free and go on to lucrative careers without ever paying back into the education that enabled them. It would finally acknowledge that the real subsidy in higher education flows upward toward those who need it least.
The current system asks the least advantaged to shoulder the greatest risk, while the most advantaged are insulated entirely. That is not accidental. It is a political choice. And it is one we should no longer accept.
If we truly believe that higher education has economic, social, and civic value then that value must be shared. Not deferred onto the backs of those with the fewest options but reclaimed from those who have benefited most.
Until we are willing to say that out loud, student finance reform will remain a distraction. The problem is not just the loan. The problem is who never has to take one and why.
Comments
Paul Wiltshire says:
But what about the fact that about half those that are getting a loan are buying a product (a degree) that doesn’t improve their career pay ? So by recklessly offering them easy credit for a product that will prove of little use for them, we are blighting their finances for 40 years and creating an unpaid debt mountain for the general taxpayer to write-off. We need to cut student numbers in half and stop the harm and waste associated with Mass Higher Education. Then we can make it cheaper for those remaining graduates who will then be able to pay it off themselves. We should absolutely not build in an extra tax for the whole of society to bear
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Pete says:
The statistics show that the vast majority of students take out tuition fee loans: there is little evidence that the issue identified is a substantive one.
For example, in 2023/24 there were 1,216,855 full-time undergraduate students domiciled in England prior to beginning their studies who had home fee status (HESA) and 1,188,129 tuition fee loans issued to full-time undergraduate students domiciled in England (SLC).
This implies that there are up to 29,000 full-time undergraduate students (2.4%) who could potentially be eligible for a tuition fee loan who decided not to take one out. This is an upper bound: some of these will not be eligible for support due to not studying towards a qualification or due to already having a degree, some will be being sponsored by their employers, some will not take out a loan due to religious reasons, and some will be mature students.
This is not unexpected. Student loans are heavily subsidised – try and get a commercial loan on the same terms – and come with insurance against the risk of low income, which is in itself valuable, even to students from highly economically advantaged backgrounds.
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Paul Goldberg says:
Excellent article. I know people who have paid for their kids’ tuition fees upfront, and they then graduate debt-free, and presumably have more incentive to seek high-paying jobs because they keep more of their income. By contrast, a highly-indebted graduate is disincentivised to seek high (or even medium) paying employment, since they’ll be highly taxed. Indeed, the problem is more severe for medium-paid employment than high, because with highly-paid employment there’s a prospect of paying the debt early. It’s also a problem for careers like academia, in which you make very little early on, so the debt is increasing unchecked.
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Jonathan Alltimes says:
The government policy rationale and purpose of the expansion of student numbers was a route out of poverty and to close the productivity gap, using foundation degrees, paragraphs 1.24 and 1.25 of the 2003 White Paper, ‘The future of higher education’. Has the policy worked?
Your argument is the product of the policy drift from 14 years of the last administration. The government is moving away from higher education towards post-16 education and training because the higher education policy has proved too costly relative to realising the original purpose.
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Johnny Rich says:
Hannah makes a compelling case, but a graduate tax creates more problems than it solves.
Firstly, the problem of the richest students being able to graduate without debt is not widespread: around 3% of eligible students do not take out loans. That’s still unfair, but a graduate tax that affects everyone is not necessarily the right solution unless it solves other problems and/or comes without risks.
The biggest risk is that it doesn’t solve the problem of sustainable HE funding. While a grad tax might bring in revenue to the Exchequer to pay for HE, the Exchequer would strongly resist any hypothecation of taxes. Even if a commitment could be reached that grad taxes would fund HE to start with, such commitments don’t usually last until the next budget, let alone a parliament or more.
There is also a principle at stake around taxing people because of who they are, rather than what they earn or how they chose to spend money. If it’s fair to tax people for being graduates, might it not be argued it’s fair to tax people for using the NHS more than others or having kids who go to state schools?
The counterargument to that is that graduates earn more as a result of accessing a state-subsidised service (HE), but it strikes me that that’s an argument for taxing those who actually do earn more rather than all graduates above a modest salary threshold.
In other words, most graduate tax arguments work better as an argument for more progressive income tax. Hannah’s argument could certainly be seen as an excellent case for wealth taxes.
There are technical reasons why the current loans system – which operates very like a graduate tax – was not classified as such in the first place. Perhaps it should have been as it wouldn’t have led to misguided expectations that it’s a ‘debt’ that most people would pay off or where the interest rate is a mistakenly seen as a measure of usury in the system rather than of deliberate progressiveness.
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Luc Riou says:
As a plan 2er I think the current system is incredibly unfair and I agree with a lot of the points made. However, I think there are two significant issues with a graduate tax:
1) It will encourage graduates to leave the country and work abroad to escape it, leading to the benefits of the education being lost on the country. Thousands of graduates are already doing this (read any Reddit thread) to escape loan repayments and it will be even easier if it’s changed from a loan to a tax.
2) The wealthiest will go to university in other countries, such as America, and come home to escape the tax. The inequality will remain.
I don’t think there’s anything wrong with borrowing for education (but do acknowledge the religious implications for some). To me, the core issue is simple – charging excessive interest to successful graduates to keep them in a debt trap so that they repay the education of others is wrong. It stifles ambition. It reduces growth. And it was not clearly explained at the time of taking out the loan. The government need to shut down a significant number of courses that do not add value, so that there is no need to trap ambitious graduates in a debt trap.
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