Students tour Royal Holloway, University of London, with their families.
According to a new report released by the Institute for Fiscal Studies (IFS) on July 5, students in the United Kingdom will graduate from higher education institutions with an average of more than £50,000 in student debt.
This gloomy report comes on the heels of the April news that revealed student loan interest rates in the UK will rise up to 6.1 percent in September. Raising the interest rates by a third came after the Brexit vote caused inflation to rise dramatically in the UK.
Students in England will begin to see interest charges as soon as classes begin. The IFS estimates that students will have accumulated £5,800 in interest charges by the time of graduation.
Further, the most unprivileged of students in the country will leave college with an average debt of £57,000. This group comes from the poorest backgrounds, and thus must take out more loans.
The author of the think tank’s report, Chris Belfield, characterized the interest rates as “very high,” while the Department of Education has yet to comment on the increase. Universities Minister Jo Johnson believes more disadvantaged students will be attending college than ever before.
The rise in interest rates combined with tuition fees will push the yearly cost of attendance up to £9,250 per year for each student. Previously, this cost had been £9,000 in 2012 and £3,000 in 2006.
Additionally, the income level at which graduates are forced to begin repayment, £21,000, had initially meant low-earning students were better off, but even that has changed. The repayment threshold has remained stagnant since 2012, and the IFS report believes English borrowers from all income levels are now worse off.
Students that come from less advantageous financial situations can now borrow more in maintenance support, but since these have changed from grants to loans, the poorest of students will graduate with the highest debts.
While the cost of loans is almost guaranteed to rise for all graduates because of the rise in attendance costs, the highest earners will end up paying interest fees nearing £40,000.
Mr. Belfield stated that the 6.1 percent interest rate is “very high compared with current market rates.”
Finally, there is a law in the UK that states loans are written off if they are not repaid in 30 years. The IFS predicts that nearly 75 percent of all students will not pay off their debt in full, despite making payments well into their 50’s.
The Student Loan Report has covered the student loan debt situation in the UK extensively. The Student Loans Company recently reported that student debt in the U.K. surpassed £100 billion for the first time in history. The majority of this debt is held by England, who owes £89.3 billion of the total debt in the UK. Outstanding student debt in England rose by 17.2 percent from this point last year, when it was at £76.2 billion.
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