The true cost of education – How traditional student loans are damaging the digital economy

As the world around us grows increasingly digitised, it is becoming ever clearer that the future of our economy lies in tech.

According to LinkedIn research, 150 million new technology jobs will be created in the next five years. The snag, however, is that 40% of the UK’s working population lack the digital skills required to fill these positions.

While there are many people who are eager to pursue a career in tech, some may not have an in-depth understanding about how to go about achieving their goals. Instead, they end up with a degree that does not adequately prepare them for work in their chosen field and thousands of pounds of debt.

Although the Government provides student loans to many – currently almost £20 billion is lent to around 1.5 million students each year – it is failing to deliver clear and sound guidance to students about the most appropriate tech sector courses for fulfilling their career aspirations, and because people are focusing on areas of tech that do not pertain to their career aspirations, the digital skills gap is continuing to widen.

Where the private sector is going wrong

Many students turn to the private student loan sector because doing so may provide them with access to more flexible lending, and allow them to borrow larger amounts. In this sense, the aim of the private sector is to offer a viable alternative to government loans which, in addition to being provided in a uniform, almost arbitrary way, are costly, complex and rigid in nature.

Rather than being a gateway to students who are looking for a more affordable loan that will enable them to fund their studies, the traditional private sector is acting as yet another barrier to borrowers, given the exorbitantly high rates of interest that are number of providers expect them to pay.

This means that many people are cancelled out from gaining access to the further education that they need to get a job in tech, but are left with vast amounts of money to pay back regardless.

It is clear, therefore, that another approach is needed, whereby students are not only given fairer and more affordable access to funding, but also receive valuable and clear-cut advice about the courses they should enrol in to get the skills and training needed to enter tech.

Why challengers to the traditional models are needed

A new breed of loan provider is offering a solution that puts the best interest of students first. By harnessing real data, challengers are guiding students through the process of selecting a course that is relevant to their tech industry goals. A student’s career aspirations and existing skills are researched in depth to determine which courses are right for them, and those courses that are likely to only be a waste of their time and money can also be identified.

With no hidden fees or interest rates to pay, students then work closely with providers to agree a repayment plan that they are happy with and will be within their means. In this sense, learners can be given greater peace of mind that they are not only pursuing further education that will help them to achieve their career goals, but that they will also not be hit by any unexpected or costly additional fees.

What’s more, given that taking a more transparent, hands-on approach to guiding students through the process of accessing funding means loan providers are more likely to get their investment back, this model is just as much in the best interest of lenders as it is in borrowers.

People need to be encouraged to pursue further education in tech

While the expense of traditional government and private sector loans are putting people off from pursuing further education in tech, the emergence of challengers to the traditional models is providing the incentives and confidence that people need to seek the skills and training required to work in the industry.

With technology constantly evolving, it is of paramount importance to the continued prosperity of the UK economy that people’s skills evolve alongside it. There is no denying that the country faces uncertain days ahead, and that technology and those who possess the digital skills necessary for harnessing it will have key roles to play in our driving our economic growth. At present, however, government and private sector loans are only acting to damage the economy, and students are not being given sufficient guidance in how to go about achieving their career goals.

Only by making funding and advice around further education more accessible can the gaps in the nation’s digital skills begin to be bridged.

By Brett Shanley, Founder and CEO of Knoma