Surely we'll never pay back our Tuition Fees. Have I made an error here?

Nobody assumed this. The government knows the jobs situation and what graduates are likely to be earning. They know that a lot of graduates will end up not repaying the full costs of their tuition fee loan, for those students their education is largely government subsidised. Back in the day of grants, the government subsidised the full costs of everyone's education.

The new system brings a market for HE, on the one hand government is paying more in terms of loans for these higher fees, but the fees are higher because the government's direct grant to universities has been cut so the government saves money that way. Now universities will end up making more money the more students they recruit so it's supposed to force them to taking a more student-focused approach to get students through the doors, rather than just complacently taking the government's direct grants every year and treating undergrads as a necessary burden.

It was Buckinghamshire, I don't think that has a particularly good reputation.

I just get the feeling it'll be the minority actually managing to pay it back...

There is also this argument that was noticed in the Financial Times.

Under the government accounting rules, when the government spends money on a student loan now it is balanced by the student's obligation to repay the money in the future (whether they actually do or not it counts as a future cash inflow on the books). So it is a way of breaking even on the accounts even if in reality it's far from breaking even.

Well I guess mortgages wasn't such a good example, but certainly having parents with lots of liquid assets will probably help with your credit rating when taking out secured loans against your parent's assets and will likely mean a lower interest rate on that loan.

Though your model assumes that they wouldn't be receiving any interest on their savings that they would otherwise have. And the interest rate on their savings might well be higher than 3%, so they would infact have been better off not paying it off.
Also, by having their savings, they might be able to help with a deposit on their children's house, whereas not having a student loan won't really help. If for some unfortunate reason, their children lost their job and needed help, not having a student loan won't help, since you don't need to pay it if you earn under £21,000. But having savings will certainly help with financial support in emergency situations.
So really, even if you do have the money lying around, it isn't a very smart plan to pay it off, since you could probably make more money by putting it into a nice little savings account.

Also, I forgot to say that the student loan is quite cheap debt, by which I mean the interest rate is comparatively low. Therefore, it would make much more sense to pay off much more expensive forms of debt (Putting down a bigger deposit on their children's mortgages) rather than paying off the student loan.

Sorry, I'm confused... why would I take out a loan secured against my parents liquid assets? Is this normal! I've never even considered such a thing.

What makes you think that?

It's not that simple, but as with all taxes and tax like payments, there are loopholes which can be exploited legally.

£30k is a decent wage for a comfortable lifestyle, so how would your time going to university be wasted?

It's all relative. I'm hoping to be on about 40k when I graduate and then around 60k once fully qualified as a soliciter at 24. I know I will have to work very hard though...But, this shows to many that earning 30k after 30 years in the industry is not great. I'd hope to be on a six figure salary by then.

I just get the feeling it'll be the minority actually managing to pay it back...

Seems high after graduation.. is £40k the norm for law graduates? I seem to remember my friend starting on £25k with her London law firm though that was some time ago.