The majority of students will still be paying off their student loans when they are in their 50’s, whilst three-quarters of graduates will never completely clear the debt, a new study has found.
The research, carried out by the Institute for Fiscal Studies (IFS) shows that, whilst reforms introduced by the coalition government in 2012 rendered poorer students £1,500 better off a year, replacing maintenance grants with loans has significantly increased debt rates.
These changes have led to students from low-income families to graduate with up to £57,000 worth of student debt. In addition, the average student who borrows £45,000 during their time at university will have to repay an extra £5,800 in interest, whilst “higher earners” could pay up to £40,000 in interest.
Despite this, the recent reforms did decrease government borrowing by nearly £6 billion and cut the long-term cost to taxpayers by around £3 billion per year. This is despite higher education funding adding less than £1 billion a year to public spending.
The IFS report states that: “The combination of high fees and large maintenance loans contributes to English graduates having the highest student debts in the developed world”
Authors from the recent IFS thinktank report also commented that: “There is a risk that better-off parents will pay fees up front, especially if they think their offspring will be high earners. This would increase the cost to government in the long run”.
Gordon Marsden, Labour’s shadow higher education spokesman, states that “the IFS study has made a nonsense of the government’s defence of the current system”.
Mr Marsden went onto comment that: “Under the Tories, student debt continues to rise with no end in sight, and students will now graduate with a shocking average of over £50,000 in debt. The government must decide if they believe a lifetime of debt and a tax on aspiration are the best way to fund our higher education system.”
Laura van der Erve, who works for the IFS, said: “Universities are undoubtedly better off under the current system than they were before the 2012 reforms. However, their incentives have shifted towards providing low-cost subjects.”