More than 150,000 people in the UK now have student loan debts of more than £100,000, with one borrower owing £298,000, data shows.
The company that obtained the figures says these “debt sentences” hanging over people are damaging graduates’ ability to save for the future and get on the property ladder.
The sharp increase in the number of people burdened with six-figure debts – apparently up by a third in six months – will send a chill down the spine of many students who have started university this autumn or are about to.
A freedom of information request submitted by the insurance and investment firm Royal London to the government-owned Student Loans Company (SLC) revealed accelerating levels of student debt.
The FoI showed that at the end of June 150,450 people had outstanding balances of £100,000 or more. In January this year, it was 113,029 people.
In total, more than 2.6 million people owed £50,000-plus in student debt.
Meanwhile, the average amount of debt for people in England who finished their course last year is £53,000.
Royal London says the sharp rise in high-balance student debt is likely to be the result of a range of factors including rising tuition fees, higher living costs and the impact of longer repayment periods under newer student loan plans.
Student finance is made up of the tuition fee loan, which covers the course fees and is paid directly to the university, and the maintenance loan, which is designed to help with costs such as rent and food. These both need to be paid back.
When someone starts repaying their loan and how much they pay depends on which repayment plan they are on. There are five plans for UK borrowers, each of which works in a different way. Which one someone is on is determined by where they lived when they took out their loan, when they started their course and what they studied.
For example, if you are from England and started your degree after 1 August 2023, your loan will be on Plan 5. Students from England who started in the previous academic year have Plan 2 loans.
Plan 5 loans currently have an interest rate of 3.2%. Crucially, they will be written off 40 years after you are due to start making repayments, which the website Save the Student says is “a lot longer than other plans” – so a bigger proportion of students on this plan are likely to pay off their student loans in full. Plan 2 loans are written off 30 years after you are due to start making repayments.
Sarah Pennells, Royal London’s consumer finance expert, says: “Six-figure student loan balances aren’t just numbers on a screen – they are delaying dreams, derailing savings plans and making it harder for young people to feel financially secure.”
A SLC spokesperson says: “In many cases, exceptional balances are a function of government policy that in certain circumstances exempts specific courses from repeat study restrictions, permits funding for additional years of study and results in SLC awarding additional years of funding when an individual demonstrates compelling personal reasons.”
A Department for Education spokesperson says these balances “are not typical of the vast majority of graduates”.
They add: “It is vital that students can be confident the significant investment they make in higher education delivers real value for money, and that universities provide teaching and experience they deserve to help students pursue a rewarding career.
“It’s also important we have a sustainable student finance system that works for both students and taxpayers. Since last academic year, new students have been issued loans which require them to start repaying when earning over £25,000 per year and have an extended repayment term of 40 years.”