Politicians are keen to fix what is seen as a mounting political problem with student loans. An increasing number of graduates are pointing out that the Plan 2 loan scheme in particular imposes some painful and unreasonable marginal burdens on their earnings. After all, paying another nine percentage points of student loan charges on top of your marginal tax rate is a miserable experience. So too is the absurd interest rate charged on those loans, which is based on the RPI measure of inflation that, in almost every other regard, the government has conceded is unrealistic and unviable.

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So we have a large number of graduates unhappy about their financial situation. Since those graduates are potentially significant – especially to the Labour party – in future elections, politicians of all sorts are keen to respond to their complaints. This has brought politicians and policy wonks scurrying with ideas for how to fix the system.

The bad news for all of them is that this isn’t really about the design of the student loan scheme. Bluntly, even the cleverest fix for student loan repayments will not address the root cause of graduate unhappiness and so will not fix the political problem here.

The regime of student loan repayment is implicitly based on two founding premises. The first is that wages will go up. This has, after all, generally been the norm for most of recent modern economic British history. The second is that being a graduate is worth it – that people who go to university will earn more........

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