Students face £57,000 debts on leaving university

5 July 2017
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The poorest university students face total debts of more than £57,000 on graduating, according to new research.

Replacing maintenance grants with loans based on household income has meant that students from the poorest families could graduate with student debts in excess of £57,000 from a three-year degree, the Institute for Fiscal Studies (IFS) says.

Meanwhile, the average student accrues £5,800 of interest while studying, meaning that they borrow £45,000 but find on the day of graduation they have a debt of £50,800.

Contributing factors to this cost include the government freezing the £21,000 earnings threshold at which graduates start repaying their loans until at least 2012. It had been due to rise in line with average earnings.  

The interest on student loans is also very high at 4.6% and is expected to rise again later this year. The interest charged for current students is set at 3% plus the Retail Prices Index (RPI) inflation rate. With March’s RPI standing at 3.1%, this means students will be hit with interest charges of up to 6.1% from September.  

These debts are so large, that the IFS believes “most” graduates will still be paying off student debt as they enter their 50s – although normally any outstanding student loans for those going to university from 2012 onwards will be written off 30 years after it becomes eligible to be repaid.

However, the report does say these measures have reduced government borrowing and increased university funding.

Jack Britton, an author of the report, comments: “Recent policy changes have increased university funding and reduced long-term government spending on higher education while substantially increasing payments by graduates, especially high-earning graduates.

“There is probably not much further to go down this route, but proposals for reducing student fees tend to hit the public finances while benefiting high earners the most.”

Comments

In reply to by anonymous_stub (not verified)

spot on, totally agree, what is that useless piece of paper worth in the real world, jack s**t.

In reply to by anonymous_stub (not verified)

I think this is disgusting! The government have made things so hard for students who go to university in order to get better educated and get a better job then rip everything away from them when they do manage to get a good job! Stop giving things away for free to foreign people and look after our own young people and pur future before the government drive every BRITISH young out of the county !!

In reply to by anonymous_stub (not verified)

If the interest rate is high, would it be better to try & get a more preferential rate elsewhere & pay off the Student loan that way?

In reply to by anonymous_stub (not verified)

Time for a re-think about which courses need to be residential and at University. When I was young I was offered the chance to be an articled clerk and to qualify to be an accountant. I would have received £100 a year for the 5 years until I qualified. My parents worked hard but did not generate sufficient to help. There were no grants available to me. The result was that I took a paid position with the Inland Revenue and then studied accountancy in my spare time eventually qualifying as an International Accountant. There are always alternatives. However if the country needs certain skills then help must be given.As a footnote, is the size of student loans a major reason why house purchase is reducing amongst the young?

In reply to by anonymous_stub (not verified)

Your choice to go to uni for your fun years so you pay, no one forced you to go. Many are wasting time at uni trying to get a useless degree they never really use. Only those with the best brains should go to uni like it was years ago, get to work and paying into the system.

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