Incentives

Lindsay Mitchell blogs some interesting stats about Student Loans : The truth about student loans
But I think her last point needs repeating:
It's quite obvious that the current scheme, combined with the benefit system, produces the worst of incentives. These will be exacerbated when people don't have to pay any interest.

This is my problem with the whole interest free bribe from Labour. The fact that for what is probably the first major debt of many young peoples lives, we are making it so that economically they SHOULD borrow as much as possible and pay it off as slowly as possible, hardly seems like a good lesson in a country with a negative savings history.

Personally I don't actually have a big issue with the Government subsidising student loans - but if they are going to it has to be in the lines of a payment top up etc which actually incentivise good repayment habits.

A better situation from my perspective would actually be for the Government to stop handling the student loans at all, but act as a guarantor for student loans taken out from a bank. The banks would fall over themselves to get the business and with the Govt as guarantor should be able to give rates around or better than the current mortgage rates. Would save the tax payers a whole lot of money and bureaucracy too....