Outstanding student loans in England have topped £200 billion for the first time – 20 years ahead of previous government forecasts, as the number of students at universities continues to outpace expectations.
Student Loans Corporation (SLC), which manages education and maintenance loans in England, said the balance of government-backed loans reached £205 billion in the current academic year, including £19 billion of new loans for undergraduate students. The number has doubled in just six years. It reached over £100 billion in 2016-17 after the coalition government decided to increase tuition fees for undergraduates from £3,600 per year to £9,000 in 2012.
The SLC also revealed that the average amount owed by graduating students has risen again, now at less than £45,000.
Loan repayments by graduates also rose to more than £4 billion in 2022-23, which the SLC said was “significantly higher” than in previous years, in part because higher inflation “may have positively affected borrowers’ salaries”. .
Loans to students in England are still much higher than those in other countries in the UK. Students in Scotland – where tuition is free for residents – have £15,400 in outstanding loans on average, while students from Wales owe £35,500 and students from Northern Ireland £24,500 after graduation, according to the SLC.
The government projected in 2013 premium student loans to reach £200 billion by 2042, but the number of undergraduates in England swelled more quickly than expected while postgraduate students were also able to get loans. The most recent government projection cited by the House of Commons library is expected to reach £460 billion by the mid-2040s.
Student finances are expected to be a battleground in next year’s general elections, as the government recently revised the loan system so that low- and middle-income graduates would have to pay back a larger share.
From 2024-25, undergraduates will have to start repaying their loans when they earn £25,000, instead of the current minimum of £27,295, and they will have to keep repaying them for a maximum of 40 years instead of 30, when outstanding loans are written off. Interest rates will be reduced for new borrowers, which benefits high-income graduates who are able to pay off their loans early.
The changes are expected to double the number of graduates who pay off their loans in full. But the Institute for Fiscal Studies said they would more than triple expected payments to the bottom 30% of graduate earners.
Labor has vowed to reverse the changes if elected, accusing the government of “beating up the next generation of nurses, teachers and social workers”.
While the £205 billion would equate to around 8% of the UK’s more than £2.5 trillion net public sector debt, how student loans are accounted for in the national accounts is complex. The portion of loans expected to be repaid is treated as a loan, while the portion expected to be written off is recorded as government expenditure at the time the loans are made.