Over 100,000 people have now accumulated student loans totalling more than £100,000 – a balance which many will never pay back, The i Paper can reveal.
Data obtained through a Freedom of Information (FOI) request to the Student Loans Company (SLC) reveals the extent of student loan debt in the UK after years of high interest.
Some 113,029 students now owe more than £100,000 as of January this year, which collectively totals outstanding student loan debt of at least £10bn. This includes those who have started repaying their loans already and those who are yet to.
It has also revealed that 3,687 now have balances between £150,000 and £199,999.99, and 153 have to pay back more than £200,000.
Most people with balances of this size will face making repayments for the majority of their working lives, because the interest on the loans mean they are constantly growing in size, even when money is being paid back.
Those facing the highest loan debt studied subjects including sociology, nursing, social policy and business studies.
Tom Allingham, student finance expert at Save the Student said it was “unlikely they will actually pay their loans in full”.
In the UK, student loan repayments work on an income-contingent system, meaning you only start repaying your loan when your income exceeds a specific threshold.
The amount you repay each month is calculated as a percentage of your earnings above that threshold and this repayment is automatically deducted from your salary through the Pay As You Earn (PAYE) system if you are employed.
There is also interest charged on the loans.
The interest charged varies depending on where you are from and when you studied, but for those who from England who started courses between 2012 and 2023, it is charged at between 4.3 per cent and 7.3 per cent.
Kate Ogden, research economist the Institute for Fiscal Studies said: “That means someone with an outstanding balance of £100,000 would need to earn around £110,000 to be repaying enough to get their loan balance falling.
“While only a small minority of graduates have balances this large, we would expect this number to grow over time as more interest accrues on existing loans and as extra cohorts join the system.
“But importantly, how much graduates have to repay each month is not affected by the size of their outstanding balance (which instead affects how long they will make repayments for).”
Ms Odgen explained:
According to the latest figures, for the financial year 2022/23, the Government issued almost £20.1bn in student loans. This was made up of 94 per cent Plan 2, full-time higher education loans.
It comes just weeks after The i Paper revealed a graduate with the highest student debt in the UK owes more than £270,000.
Ten people in total have accrued debt of more than £235,000 each and have added at least £62,000 in interest to their repayment sum.
Students only start repaying their student debt when they can afford to.
In the UK, the current threshold for most students who started their course after 2011 but before 2023 is £27,295 and £25,000 for those after this date.
When your student loan gets written off depends on which repayment plan you’re on.
Ms Ogden said students with this level of debt will likely be making repayments for their whole repayment period – the next 40 years for those who started their course after August 2023.
As such, they are extremely unlikely to repay the loan in full, she said.
Speaking about this, Mr Allingham said: “Our latest National Student Money Survey shows that 70 per cent of students worry about their loan repayments and 71 per cent don’t expect to clear their balance in full.
“But, what the startling findings of this FOI does underline is just how unlikely it is that many graduates will actually repay their loans in full, and how it shouldn’t be as big a source of concern as it is.
“Graduates only ever have to repay 9 per cent of their earnings over a threshold, and the remaining balance for Plan 2 customers will be wiped after 30 years, no matter how much or how little they’ve repaid.
“So, for the graduates with the highest debts in particular, it’s important not to see your current balance as the amount you will have to repay.”
Universities across the country are in the grip of a cash crisis, with 72 per cent forecast to be in deficit this year, according to the Office for National Statistics (ONS) modelling.
This has been blamed on tuition fees being frozen at a maximum of £9,250 since 2017 and a downturn in international student applications because of tighter visa restrictions.
Labour recently announced that fees will rise this year to £9,535. Further rises could follow in later years, but that has yet to be decided.
When she announced the tuition fee rise in November, Education Secretary Bridget Phillipson said the Government was having to “take the tough decisions needed to put universities on a firmer financial footing”.
But Liz Emerson, CEO of the Intergenerational Foundation, said the current system is “failing students, graduates, taxpayers and the wider economy”.
She said: “The Government should remove these sky-high interest rates and lower the 9 per cent repayment rate. Doing so would put wage back into the pockets of graduates and stimulate the wider economy as we enter a recession.
“The Government is placing too much of the financial burden of student finance on individuals.
“Successive governments have taken the most onerous recommendations from various reviews rather than playing fair with a generation that should be the economic drivers of the economy.”
Vivienne Stern MBE, chief executive of Universities UK, said: “It is important to remember that repayments are linked to earnings above a £25,000 threshold [for those who started after 2023], set by government, so students will only pay back when they can afford to.
“Although the figures are high, this is far from the typical amount for most students and doesn’t reflect what they would pay on average.
“Graduates are not expected to pay more than they can afford each month as student loan repayments are designed to be manageable.
“While universities cannot control interest rates, evidence shows that the vast majority of students earn more over the long term than those who choose not to take a degree – especially for students from poorer backgrounds.”
A SLC spokesperson said: “On average, graduates leave study with a debit balance of £48,470 in England and these higher balances represent 1.6 per cent of the total number of customers repaying their student loan.
“In many cases, higher balances are the result of the customer completing further study on an exception course.
“Exception courses, including medicine, dentistry and veterinary science, which tend to have a longer duration, are a function of Government policy that allow in certain circumstances to have repeat study restrictions removed, permitting funding for additional years of study.”
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