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.”