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Published on:April 10, 2014Author:The Debt Advisor

New research has found that most students will still be paying their student loans when they’re in their 40s and 50s.

The research commissioned by the Sutton Trust has found that many will never fully clear their debts; almost three quarters of graduates will have some of their loan written off.

The trust has said that the 2012 student finance regime will leave people vulnerable at a time when family costs are higher than ever.

The study which was written by researchers at the Institute for Fiscal Studies (IFS) found that a typical student would now leave university with debts averaging £44,000; £22,000 more than the old system.

As with the old system, graduates will begin to repay their loans once their income is above £21,000. Lower-paid graduates whose income rarely goes over £21k will pay less overall with the new scheme, while those who earn higher salaries will pay substantially more.

However, even though some graduates will pay back more than they borrowed, the vast majority will never pay their loan back in full.

The IFS said: “We estimate that 73% will have some debt written off at the end of the repayment period, compared with 32% under the old system. The average amount written off will be substantial – about £30,000.”

The study uses the example of an “average” teacher who takes out a student loan and works every year after graduation, earning an average salary for the profession.

Under the old system, they would repay £25,000 in 2014 prices and finish their repayments by the time they are 40 years old.

Under the new system they would repay £42,000, and finish paying in their early 50s having around £25,000 written off.

Conor Ryan, the director of research at the Sutton Trust said: “There has been a lot said about the lower repayments that graduates make in their 20s under the new loan system, but very little about the fact that many graduates will face significant repayments through their 40s, whereas many would previously have repaid their loans by then.

“The new system will benefit graduates who earn very little in their lifetime. But for many professionals, such as teachers, this will mean having to find up to £2,500 extra a year to service loans at a time when their children are still at school, and family and mortgage costs are at their most pressing.

“With recent revelations about the proportion of loans unlikely to be repaid, it seems middle-income earners pay back a lot more but the Exchequer gains little in return. We believe that the government needs to look again at fees, loans and teaching grants to get a fairer balance.”

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