What would make England’s student loan system fairer?

Student loans now sit at the centre of how higher education is funded in England, shaping how millions of graduates finance their studies. Many students leave university with debts of £50,000 or more and may spend decades repaying them.

The current system rests on the idea that higher education primarily benefits individuals, because going to university means that they will earn more over their lifetime. On this view, graduates should bear a significant share of the cost of their education through loan repayments once they enter the labour market.

Yet universities also generate wider social benefits. They educate professionals in sectors such as healthcare, education and engineering. They produce research that contributes to innovation and public policy. They make a significant contribution to cultural and civic life.

This raises the question of whether higher education should be treated mainly as a private investment for individuals, or as a public good that benefits society as a whole.

Research also shows that higher levels of education are associated with greater civic participation, higher levels of political engagement and improved health. These findings suggest that the benefits of higher education extend beyond individual graduates.

If this is the case, the question of who should finance universities becomes more complex. Should the cost fall mainly on graduates, or should it be shared more broadly through public funding?

The shift in funding models

Over the past two decades, England has gradually moved away from a system in which universities were funded largely through public expenditure. Now, graduate contributions play a much larger role.

Before tuition fees were introduced in 1998, most undergraduate teaching in England was financed primarily through public funding. Fees were later increased significantly in 2012, when the system that now allows universities to charge over £9,000 per year was introduced.

Students do not normally pay these fees upfront. Instead, they take out government-backed loans to cover tuition fees and living costs, which they repay once their earnings exceed a certain threshold. Repayments therefore depend on income rather than the total amount borrowed.

A fair system?

Several features of the current system have raised concerns about fairness.

One issue is the length of the repayment period. Under recent reforms in England, many graduates may repay their student loans for up to 40 years before the debt is written off.

Another concern is the interest charged on student loans. Interest begins accumulating while students are still studying and continues after graduation. It also continues to accumulate during periods when graduates are not making repayments because their income falls below the repayment threshold. This might be during unemployment, part-time work or parental leave.

Graduate earnings also vary widely. Some graduates repay their loans relatively quickly, while others work in sectors such as teaching, social care or the creative industries where salaries tend to be lower.

Lower-earning graduates typically repay more slowly. As a result, interest accumulates for longer. They may therefore accrue more interest overall and repay a larger total amount than higher-earning graduates. Some may also still have a balance outstanding when the loan is written off.

Earnings also differ across gender, ethnicity and social background, reflecting wider labour market inequalities. Because repayments depend on income over time, these differences shape how the costs of higher education are distributed among graduates.

Possible directions for reform

Different proposals for reform emphasise different priorities, shifting the balance between graduate contributions and public funding.

These include lowering interest rates, adjusting repayment thresholds so lower earners repay less, or shortening the repayment period so student debt does not follow graduates for most of their working lives. Some also argue that a fairer system would involve greater public investment in universities, reducing reliance on graduate repayments and spreading costs more widely across society.

These debates also raise a more fundamental question about justice. The issue is not simply how individuals pay for their degrees, but how societies sustain universities that produce knowledge and educate citizens for democratic life. The real question is whether higher education is treated as a private investment or a public good essential to democracy.

If universities are understood mainly as providing a private benefit to individuals, a system based on graduate repayments may appear reasonable. But if higher education is also recognised as contributing to economic development, research, professional training and civic life, the case for sharing its costs across society becomes stronger.

As discussions about student loans continue, the challenge for policymakers is not only to adjust repayment rules but also to consider how funding reflects the wider role of the university. Ultimately, debates about student loans are also debates about how societies choose to support universities and invest in future generations.

Ourania Filippakou does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.