The Price of Knowledge

Students from the poorest 40% of families entering university in England for the first time this September will emerge with an average debt of around £57,000, according to a new analysis by the leading economic thinktank, the Institute of Fiscal Studies.

The abolition of the last maintenance grants in 2015 has disproportionately affected the poorest, while students from the richest 30% of households would run up lower average borrowings of £43,000.

Jack Britton, one of the IFS report’s authors, said that changes in recent years have been “heavily focused on further reducing the cost to central government” and that it had made the system more unequal. Replacing maintenance grants with loans reduces the government deficit but results in students from low-income families graduating with the highest debt levels.” 

Students from low- and middle-income families are also made worse off by the government’s decision to hold down the income level at which graduates must start repaying their loans to £21,000. By leaving the figure unchanged the proportion of graduates who have to start paying back loans quicker increases because average wages are rising. The thinktank added that it means that students will have to pay back £4,000 more over their working lives than otherwise.

From September, students will be forced to pay higher interest rates on their loans of 6.1% after a surge in inflation. “Due to their higher principal debt, students from poorer households accrue the most interest during study; students from the poorest 40% of families now accrue around £6,500 in interest during study,” its briefing note states. In contrast students accrued just £1,500 in interest under the system in force before 2012, the IFS said.

Student loan debt has been soaring and its total value rose above £100bn for the first time earlier this year, underlining the rising costs young people face in order to get a university education. Outstanding debt on loans jumped by 16.6% to £100.5bn at the end of March, up from £86.2bn a year earlier, according figures released by the Student Loans Company. Many debts will not even be paid off within the 30-year time scale.