Students will be paying off loans into their 50s, study warns

The Telegraph covered the new Sutton Trust/IFS ‘Payback Time?’ report.

The vast majority of students will still be paying back university tuition fee loans when they are in their early fifties, and many will never repay their debt, according to new research.

A study suggests that almost three quarters of graduates will have at least some of their loan written off under the new repayment regime, with the average amount wiped out standing at around £30,000. The Sutton Trust, an educational charity which commissioned the research, said the new fee system would leave professionals, such as teachers, in the position where they have to find cash to cover loan repayments at a time when their family and living costs, such as mortgage payments, are at a peak.

Under major reforms of university finances, tuition fees were raised to a maximum of £9,000 a year in 2012, almost treble the previous fee which stood at around £3,000. Students do not start repaying their loans until after they have graduated and they are earning at least £21,000 a year, at a rate of 9 per cent of all income above this threshold.

This compares with a £15,795 threshold in 2012 under the old system. Debts are written off after 30 years.

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

“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.”

Read the full article here.