Student loan debt in England surpasses £200bn for first time

Outstanding student loans in England have surpassed £200bn for the first time – 20 years earlier than previous government forecasts, as the number of students at universities continues to outstrip expectations.

The Student Loans Company (SLC), which administers tuition and maintenance loans in England, said that the balance of government-backed loans reached £205bn in the current academic year, including £19bn worth of new loans to undergraduates. The figure has doubled in just six years. It reached more than £100bn in 2016-17 after the coalition government decided to increase undergraduate tuition fees from £3,600 a year to £9,000 in 2012.

The SLC also revealed that the average amount owed by graduating students had risen again, and now sits at just under £45,000.

Loan repayments by graduates also rose to more than £4bn in 2022-23, which the SLC said was “considerably higher” than the previous years, in part because higher inflation “may have positively affected borrower salaries”.

Loans to students in England remain far higher than those in other countries in the UK. Students in Scotland – where tuition is free for residents – have £15,400 in outstanding loans on average, while students from Wales owe £35,500 and those from Northern Ireland owe £24,500 after graduation, according to the SLC.

Government forecasts in 2013 were for outstanding student loans to reach £200bn by 2042, but England’s undergraduate population has swelled more rapidly than expected while postgraduate students have also been able to take out loans. More recent government forecasts cited by the House of Commons library are for the total to reach £460bn by the mid-2040s.

Student finances are expected to be a battleground in next year’s general election, with the government having recently revised the loans system so that lower and middle-earning graduates will have to repay a greater share.

From 2024-25, undergraduates will have to start repaying their loans when they earn £25,000, rather than the current threshold of £27,295, and will have to continue repaying for a maximum of 40 years rather than 30, when outstanding loans are written off. Interest rates will be lowered for new borrowers, which benefits high-earning graduates able to pay off their loans earlier.

The changes are expected to double the number of graduates who pay off their loans in full. But the Institute for Fiscal Studies has said that they will more than treble the expected repayments for the lowest-earning 30% of graduates.

Labour has pledged to reverse the changes if elected, accusing the government of “hammering the next generation of nurses, teachers and social workers”.

While the £205bn would equate to about 8% of the UK’s public sector net debt of more than £2.5 trillion, how students loans are accounted for in the national accounts is complex. The portion of loans forecast to be repaid are treated as a loan, while the part expected to be written off is recorded as government spending at the time the loans are made.