Over 100,000 Individuals Now Bear Student Loan Balances Exceeding £100,000
Recent revelations from The i Paper indicate that the number of individuals in the UK with student loans surpassing £100,000 has now exceeded 100,000. This alarming statistic highlights the sheer scale of student loan debt, which many may never fully repay.
Data obtained through a Freedom of Information (FOI) request to the Student Loans Company (SLC) sheds light on the extent of student loan debt in the UK, exacerbated by years of accumulating interest. As of January this year, a staggering 113,029 students owe more than £100,000, collectively amounting to at least £10 billion in outstanding student loan debt. This figure encompasses both those who have commenced repayments and those yet to do so.
Among these individuals, 3,687 have outstanding balances ranging between £150,000 and £199,999.99, while 153 individuals face the daunting prospect of repaying over £200,000. Most borrowers with such sizeable debts can expect to spend the majority of their working lives making repayments, as the interest on these loans often leads to growing balances even while payments are being made.
Students who have accrued the highest debts frequently pursued fields such as sociology, nursing, social policy, and business studies. Tom Allingham, a student finance expert at Save the Student, expressed skepticism regarding the likelihood of these graduates ever fully repaying their loans.
In the UK, the structure of student loan repayments operates on an income-contingent basis, meaning repayments only begin when an individual’s income surpasses a designated threshold. The monthly repayment amount is determined as a percentage of earnings above this threshold, automatically deducted from salaries via the Pay As You Earn (PAYE) system for employed individuals. Additionally, interest is charged on these loans, with rates varying based on the borrower’s background and the period of study. For those from England who began their courses between 2012 and 2023, interest rates range from 4.3% to 7.3%.
Kate Ogden, a research economist at the Institute for Fiscal Studies, noted, “For someone with an outstanding balance of £100,000, they would need to earn approximately £110,000 annually to start reducing their loan balance.” Although only a minority of graduates carry such hefty balances, this figure is expected to increase over time due to accruing interest and the entry of new cohorts into the system.
Understanding Student Loan Repayment Plans
Students in the UK begin repaying their student loans only when they can afford to do so. Currently, the repayment threshold for most students who commenced their courses after 2011 but before 2023 is £27,295, with a lower threshold of £25,000 for those who started after this date. The duration until a student’s loan is written off depends on the repayment plan they are enrolled in:
- Plan 1: For those who took out loans in England, Wales, or Northern Ireland before September 2012, these loans are written off after 25 years if the first loan was paid after 2006.
- Plan 2: For students who took loans in England and Wales starting from September 2012 until July 2023, these loans are written off after 30 years.
- Plan 3: This plan is for postgraduates who borrowed to fund their studies in England and Wales. These loans are written off 30 years after the April they were first due to repay.
- Plan 4: For any undergraduate or postgraduate who borrowed in Scotland, these loans are written off after 30 years if the first loan was paid after August 2007.
- Plan 5: For students starting their courses after August 2023, these loans will be written off after 40 years.
Ms. Ogden emphasized that students burdened with such substantial debt are likely to make repayments throughout the entire repayment period—potentially up to the next 40 years for those who began their courses after August 2023. Consequently, it is highly improbable that they will repay their loans in full.
Mr. Allingham added that according to their latest National Student Money Survey, 70% of students express concern over their loan repayments, while 71% do not anticipate clearing their balance entirely. He further explained, “The striking findings from this FOI request underscore how improbable it is for many graduates to fully repay their loans, and that it should not be as significant a source of anxiety as it currently is. Graduates are only required to repay 9% of their income above the threshold, and any remaining balance for Plan 2 borrowers will be written off after 30 years, regardless of the amount repaid.”
Universities across the UK are facing a financial crisis, with 72% projected to be in deficit this year, as reported by the Office for National Statistics (ONS). This situation has been attributed to the freezing of tuition fees at a maximum of £9,250 since 2017, coupled with a decline in international student applications due to stricter visa regulations. Recently, Labour announced an increase in fees to £9,535, with potential additional hikes in future years still under consideration.
During the announcement of the tuition fee rise in November, Education Secretary Bridget Phillipson stated that the Government must make “tough decisions to ensure universities are financially stable.” However, Liz Emerson, CEO of the Intergenerational Foundation, expressed concern that the current system is “failing students, graduates, taxpayers, and the broader economy.” She advocated for the removal of exorbitant interest rates and a reduction of the 9% repayment rate, asserting that this would allow graduates to retain more of their earnings and stimulate the economy as the nation faces recession.
Vivienne Stern MBE, chief executive of Universities UK, reassured that repayments are linked to earnings above a £25,000 threshold (for those who began after 2023), ensuring that students only repay when they are financially capable. She remarked, “While the figures may appear high, they do not represent the typical debt for most students and should not misrepresent what they will pay on average. Graduates are not expected to pay more than they can afford monthly, as the repayment structure is designed to be manageable. Furthermore, evidence indicates that, over the long term, the majority of graduates earn more than their non-graduate counterparts, especially those from disadvantaged backgrounds.”
A spokesperson for the SLC noted that on average, graduates leave their studies with a debt balance of £48,470 in England, and the higher balances reported constitute only 1.6% of all customers repaying their student loans. Often, elevated balances result from customers pursuing additional studies in exceptional courses. Such courses, including medicine, dentistry, and veterinary science, typically have longer durations and are governed by government policies that permit funding for extra years of study under certain circumstances.
