Students to take an average of 26 years to repay loans

Students to take an average of 26 years to repay loans

The average graduate will be £8,850 worse off over their lifetime as a result of reforms to student funding.

Written by Melanie Tynan on 09 July 2012

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A report by the Institute for Fiscal Studies predicts that students will take 26 years on average to repay their student loan debt.

More debt for students

All graduates will leave university with significantly more debt on average under the new funding system than under the current one, according to the report. On average they'll accumulate £40,302 of debt compared to the £23,195 they do now.

The report shows that in September the average tuition fee will be £8,660. 64% of students will pay the full £9,000.

Students from the poorest backgrounds will build up the lowest debt (£37,713) primarily because of eligibility for fee waivers under the National Scholarship Programme and because they are less likely to attend universities charging the highest fees.

But the poorest 29% of graduates will actually be better off under the new system despite borrowing more. That's because they'll only pay back 11% of the amount they borrowed, largely as a result of the write-off of debt after 30 years.

By contrast, the richest graduates end up paying back more than they borrowed because of the higher interest rates that high-earning graduates are charged.

Student funding reforms

The report looks at the effects of the reforms of student funding which come into effect in September. These include:

  • an increase in the cap on tuition fees from £3,375 to £9,000
  • an increase in the earnings threshold above which students repay loans from £15,795 to £21,000
  • an increase in the point at which loans are written off from 25 to 30 years
  • more generous support for students from the poorest families
  • positive real interest rates on loans

For more information about student finances, take a look at our range of guides on the subject:

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