Findings from the Labour Party’s analysis into the country’s student loan debt have shown that the collective interest rate owed by students is set to soar from £4.4bn in 2018-19 to more than £8.5bn in 2024.
The main contributor for major increase in student loan interest from student debt is undergraduate loans, specifically after the rise in tuition fees (after 2012), which increased from £3,000 to £9,000.
The UK’s total value of student loan debt that was still to be repaid reached a staggering £105 billion in March 2018. MP Angela Rayner, the Labour Party’s lead education secretary, has commented on these results, warning that these increasingly large costs could price aspiring students out of a university education. MP Rayner claimed as follows:
“A combination of sky-high tuition fees and soaring interest rates is pricing young people out of education and creating eye-watering debts for those who do go to university.” Rayner followed that: “Under the Tories and their broken student loan system, thousands of students are being burdened with vast levels of debt that they will never be able to repay”
The Labour Party’s lead education secretary has stated that the solution to this drastic increase in outstanding student debt, and its subsequent effects on university applications, is to scrap the fees entirely. Rayner has claimed that only 17% of UK students are set to pay back their loan in its entirety, with taxpayers footing the bill for 47% of debts predicted to reach the 30-year write-off period.
The MP claims that scrapping fees and reviving maintenance grants must happen “so that access to education is a right for all, and everyone can reach their potential”. Requests have been made to the Department for Education to respond to these recent findings from the party.
Before even graduating, university students have interest applied to their student loan. Students can leave university having already accrued around the figure of £6,000 in interest. Interest is applied from the very start of the borrowing process at a rate of 3% + inflation. The Department of Education has recently published statistics predicting the total available amount for student loans throughout the country will rise from £16.5 billion in 2019 to £20.7 billion by 2024.
The implications of higher student debt mean that it takes the average pupil to reach their 50s before their debt has been paid off in full, and putting further pressure on their finances and delays to get onto the property ladder. For some, it will mean reverting to credit card debt and high cost direct lenders in order to pay off their tuition (Source: The One Stop Money Shop).
Earlier this year (in May) the former PM Theresa May supported a report requesting interest fees were held off until a student’s studies had ended. The report was developed by Philip Augar, and not only urged for interest rates to be held off until after graduation, but also that tuition fees overall should be cut by £1,750. This would lead to students paying a reduced annual fee of £7,500 from the current £9,250 students are currently facing.
These results have come at a time where students in sixth form are collecting their A-level results. As previously touched on, concerns have been made that the increase in these already staggering fees will price aspiring university students out of pursuing their education further.