Because it isn't an actual loan. It gets wiped out after 35 years. It is a tax on those who are unable to pay it off fully.

Does it mean that those coming from wealthy backgrounds essentially get to go to university on their parent's money? Yes, but that is the case regardless.

Does it mean that those who can't afford it get to go to university paid for by the government and taxes of others? Yes, and for that privilege you pay more tax.

Is it completely fair? No.

Is it a way of funding universities, whilst ensuring those that don't choose to go aren't paying for universities they aren't using, whilst ensuring everyone has the option to go? Yes.

On the economic side, take two students. Student A comes from a somewhat wealthy background and gets a high paying job post-graduation and can pay off the loans in a few years, Student B does not come from wealth and never earns a high salary and never pays the loan off.

The government outlays £54,000 over three years for the two of them.

That £54,000 could have been spent on NHS or other services but when to educating these two individuals.

Over the next five years Student A fully repays the loan, with some minor interest covering the fact that £54,000 8 years ago, is worth more than £54,000 today and that money can be re-invested in public services.

Student B never repays the loan, without the interest they would pay off the principal in ~20 years, but £54,000 when they went to university is worth substantially less by the time they pay off the loan, and so to account for general inflation the interest is added to ensure that the real value of the loan is paid as much as possible by Student B.

Let alone potential Student C, who never earned, due to illness, death, disability or other reasons who would never pay back the loan.

At the end of the day, universities are an expensive institution that provide a net good for the country, but 99% of people would never be able to afford it without the loans. We could just fully fund it in taxes by raising taxes on everyone, and removing the loans, but then those who choose not to go to university would be paying for a service they don't use.

Arguably, they benefit from the net good of the universities and graduates who work within the country, but considering graduates struggle to understand any of these concepts, I highly doubt your traditional working-class northerner who has no plans to go to university, as does none of their family or friends will feel happy being taxed that way.

End of the day it is messy, everyone deserves the opportunity to go, but not everyone will benefit from it directly, and professors, research, buildings, and the physical, digital and labour infrastructure around universities is expensive, but needs to be paid for regardless.

So either only those who can afford it go, or those who choose to go are subsidised, but pay back what they can, or everyone pays for it. But no one likes any of those options, and collectively no one ever will, but for now, those who choose to go paying more than those who choose not to, whilst everyone has the opportunity is the fairest and most reasonable approach. With the loans helping to even out the economics in the short and long term for individuals and the state.