Essentially, isn’t it possible for me to not ever repay my student
loan in full, even if I'm above the repayment threshold?
I guess the idea is that at some point I’ll earn more than £30k per
year and will ultimately end up paying off the full amount, but it’s
still possible for this not to happen, right?
It is not only possible, but for the average student it is likely the student loan will not be paid off in full. Some ex-students will never make any payments at all. A BBC article from 2014 states that "Around 45% of university graduates will not earn enough to repay their student loans, the government now believes."
If so, isn’t this bad for the government, because they’re lending out
money they might not get back?
The government has traditionally subsidised higher education (the benefits to society of an educated workforce being best left to another question). However policy over the last few decades has been to transfer more of the costs onto students in order to reduce the costs borne by the government and to increase investment. This has been done by reducing or eliminating grants, by increasing tuition fees, and increasing the interest rate on tuition fees funded through the student loan system.
As the balances owed by graduates increases, it is to be expected that increasing numbers will be unable to repay the loan in full. However, initially it was "estimated that 28% of loans would never be paid back in full" (BBC, 2014) and that the costs of the new system would exceed those of the old one "if 48.6% of all student loans were not repaid".
Since the BBC article was published, the government initially froze the student loan repayment threshold at £21,000 instead of increasing it annually as previously promised, in order to reduce the cost of the system. However, this year the government has raised the repayment threshold to £25,000. It will remain the case that for large numbers of graduates the loan will never be repaid in full.