University Loan Costs Rise for England’s Young Graduates
Young people in England face rising university loan costs as new rules put more pressure on graduates. A new analysis warns that the system could delay major financial goals.
Higher repayments ahead
The Intergenerational Foundation says Plan 5 loans create a heavier burden. The scheme began in August 2023 and affects new borrowers in England.
Under Plan 5, graduates repay more of their earnings than earlier groups. Average earners could repay about £56,240 during their lives. Under Plan 1, the figure stood near £25,700 in today’s prices.
Lower earners also face a sharp increase. Their expected lifetime repayments could rise from £6,430 to £42,070.
As a result, young workers may struggle to save for homes or pensions. Higher tax rates could add pressure as incomes increase.
The report says governments have shifted education costs towards individuals. Meanwhile, funding for university teaching has fallen sharply.
Calls for a fairer system
In 2015-16, government support covered about 46% of a graduate’s education costs. Today, that share has fallen to 8%, according to the analysis.
Therefore, the foundation wants ministers to reduce the repayment rate. It proposes a cut from 9% to 5% for Plan 2 and Plan 5 borrowers.
Education Secretary Lucy Powell has said loan reform remains a priority. The Treasury select committee has urged ministers to reverse a repayment threshold freeze.
That freeze could increase repayments by around £300 for some graduates. However, the Department for Education says the inherited system needs reform.
The department is reviewing the committee’s recommendations. Meanwhile, students await their A-level results and university offers.
Professor Alan Smithers expects a rise in top grades this year. He links the increase to the popularity of maths. For young people, university offers bring excitement and uncertainty. However, the rising cost of higher education may shape their finances today.
