Students are graduating with debts of nearly £50,000, as higher fees and soaring interest rates take effect. The interest charged on student loans is now about 18 times the Bank of England base rate, adding up to £5,000 to debts before graduation.
Critics have called the interest charges 'exorbitant', warning that a generation is being forced to start adult life 'on the back foot'. Figures show the average graduate finishing a three-year course this summer owes £48,633, including £4,980 in interest accrued during studies. Those on four-year courses owe £66,659, with £8,455 of interest.
Since 2012, students have paid up to £9,000 a year in tuition fees, set to rise to £9,500 from 2018. The interest rate changed from inflation-only to inflation plus 3%, now around 4.6%, compared to the Bank of England base rate of 0.25%. After graduation, interest accrues at inflation for those earning under £21,000, and inflation plus up to 3% for higher earners.
Even graduates starting on £30,000 with good pay rises will take 28 years to repay their loans, according to Hargreaves Lansdown. The government says loans not repaid after 30 years will be written off, but experts warn of a possible U-turn. Some parents are considering remortgaging homes or cashing in pensions to help their children avoid loans.
Nathan Long of Hargreaves Lansdown said: 'For many people, if they make the minimum repayments, their debts will only get bigger. Many may never be able to pay them off at all.' The National Union of Students called the interest rates 'yet another betrayal by the government'.
