The Public Accounts Committee (PAC) says the government has underestimated the scale of student loans that will not be paid back.

Publishing a report into the issue today, PAC chair Margaret Hodge said the government is too optimistic in its assessment of annual returns from student borrowing.

There is around £46 billion of student debt on government books, a figure that will rise substantially when the full impact of university fee increases comes into effect.

The government assumes that between 35 and 40 per cent of the debt will never be repaid, between £16 billion and £18 billion in today’s figures.

But Ms Hodge said that the PAC had “no confidence” in those figures.

“We think that the value of student loans never to be repaid could be even higher – because the government consistently overestimates what’s due to be repayed by some 8 per cent,” she said.

“The department must improve its forecasting so that action can be taken to reduce the ever-growing write-off figures.”

If true, this would mean up to 48 per cent of student loans will not be returned to government coffers.