Posted on Thursday 6th July 2017, by James Howell
According to new predictions by the Institute of Fiscal Studies (IFS), changes to interest on student loans will see some debts break £50,000 mark.
The IFS has raised concerns that changes made to the interest on student loans will disproportionately impact students from poorer backgrounds. Interest rates of 6.1% are expected to be introduced on student loans which would see students accrue over £5000 of interest before they even finish their studies.
One issue of particular concern to the IFS is repayment. The new system of higher fees and higher repayment threshold, introduced in 2012, has now been accused of being worse than the old system. The repayment threshold of £21,000 has not changed since it was introduced which means lower income graduates were initially better off but are now facing larger debt when repayments begin.
The IFS highlights an extremely worrying concern for students and graduates from poorer backgrounds. Support for students from low income backgrounds were provided in the form of maintenance grants, however these are now issued as loans which means disadvantaged students are saddled with yet more debt.
The author of the report, Research Economist at the Institute of Fiscal Studies, Chris Bellfield says the rates are very high in comparison to market rates.
Universities Minister Jo Johnson says more disadvantaged students are attending university than ever before.
"The government consciously subsidises the studies of those who for a variety of reasons, including family responsibilities, may not repay their loans in full," he says, quoted on BBC News. "This is a vital and deliberate investment in the skills base of this country, not a symptom of a broken student finance system."
In response to the IFS report, Shadow Education Secretary, Gordon Marsden, told the BBC the report had exposed the Conservative's flawed system.
"This report shows that any argument that the current fee system is progressive is absolute nonsense," says Gordon.
"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."
Read the graduatejobs.com Guide to Student Loan Repayments.