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Three-quarters of graduates will never repay their student loans - IFS

Three-quarters of graduates will never repay their student loans - IFS

Agnes Chambre

3 min read

Three quarters of students will not repay the full amount they borrowed for tuition fees and graduates from poorer backgrounds will face the biggest debt burden, according to new research. 

The Institute for Fiscal Studies (IFS) found that students in England now finish their courses with more than £50,000 of debt on average.

They do not have to start paying it back until they are earning £21,000 a year, and after 30 years the debt is written off.

But according to the report, 77.4% will not repay what they owe - compared to 41.5% before the 2012 hike in fees.

The IFS also found that changes to the student loan system have wiped out a £1,500 boost for the lowest-earning graduates when fees were tripled to £9,000 a year.

Jack Britton, one of the report’s authors, said Labour’s policy to scrap university fees altogether would help the top earners most, while increasing public borrowing.  

“Recent policy changes have increased university funding and reduced long-term government spending on HE while substantially increasing payments by graduates, especially high-earning graduates,” he said.  

“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.”


However, Shadow Universities Minister Gordon Marsden claimed the IFS analysis vindicated Labour's plan. 

“This report shows that any argument that the current fee system is progressive is absolute nonsense," he claimed.  

"From scrapping the maintenance grant to freezing the repayment threshold, this Government has increased the debt burden of students from disadvantaged backgrounds, who will graduate with debts in excess of £57,000.

“Under the Tories, student debt continues to rise with no end in sight, and students in the UK will now graduate with a shocking average of over £50,000 in debt.

“After Labour pledged to scrap tuition fees, the First Secretary of State has called for a national debate on tuition fees, and he is right to do so. The Government must decide if they want to carry on funding our higher education system through a lifetime of debt and a tax on aspiration, or deliver a debt-free education system run for the many not the few.” 

Universities Minister Jo Johnson defended the existing system, saying: "The government consciously subsidises the studies of those who for a variety of reasons, including family responsibilities, may not repay their loans in full.

"This is a vital and deliberate investment in the skills base of this country, not a symptom of a broken student finance system.

"And the evidence bears this out: young people from poorer backgrounds are now going to university at a record rate - up 43% since 2009."


The IFS said higher interest rates on the student debt – which run at 3% above RPI inflation for those still studying and the higher earners – was adding up to £40,000 to the amount repaid by some graduates. 

Chris Belfield, another author of the report, said: "Interest rates on student loans reached up to 6.1% in March 2017 and are very high compared with current market rates. Combined with high levels of debt, this increases average debt on graduation by £5,800.

"There is no impact on the repayments of the lowest earners, but the highest earners can expect to repay up to £40,000 in interest payments."

Tuition fees have become an increasingly contentious issue since Jeremy Corbyn announced he would abolish them – at a cost of approximately £11bn to the public purse.

Top Conservative minister Damian Green said last week debt was a "huge issue" and that there should be a "national debate" about student funding.

However, Michael Gove subsequently cooled speculation at the weekend and said the Tories are not considering a rethink of university tuition.

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