Thousands of British graduates with debt due to high interest rates, flat wages

More than 3,000 students in a single year have gone up in the number of graduates with more than 100,000 student loans.

There are 6,531 British graduates with six-figure balances due to the rising debt, due to high interest rates and flat wages.

This is an increase of 3,166 per cent compared to last May, when 200 graduates owed that much.

Best of TimesWe send you our top stories, across all sections, straight to your inbox. The average loan balance has gone up since then, and British graduates have the most debt in the English-speaking world, according to the Sutton Trust in 2016.

Despite the fact that the US degrees take four years, UK students borrow more than their American counterparts. Due to high interest rates and flat wages, graduates have accrued interest on their debt without paying a substantial amount back, this is likely to be a result of high interest rates and flat wages over the past year. There are 5.6 million graduates and students with outstanding loan balances with the Student Loans Company SLC The national total student debt is valued at 161 billion.

A person who graduated in 2021 and earns 30,000 dollars will only repay 244 this year while accruing 976 in interest.

The majority of graduates with Plan 2 student loans — those taken out after fees were raised to 9,000 a year from 2012 — will never pay off their loan and will make repayments for 30 years until the debt is forgiven.

87 per cent of students will fail to clear their loan balance within 30 years, according to experts from the Institute for Fiscal Studies. Many of these people will be able to repay more than they borrowed because of the interest rates.

Interest for those with the highest salaries is at 4.5 per cent, based on retail price inflation and graduate earnings.

A graduate with a salary of 50,000 who borrowed the maximum amount for living costs and fees is likely to repay 163,630 — more than 100,000 more than they borrowed. This would still not clear the loan.

A student has a balance with the SLC for 175,830, the biggest outstanding debt held by a graduate. Another has 169,070 debt and there are 29 graduates with loan balances of more than 150,000. More than two in three students are concerned about their ability to manage their finances, according to the National Union of Students, Hillary Gyebi-Ababio, a spokesman for the National Union of Students.

Students who can't afford to go to their university library are hearing from students who are relying on buy-now, pay-later loans from companies like Klarna, which only compounded the debt crisis. Michelle Donelan, education minister, said that the government has always been clear that where it can help with rising prices and I will always strive for a fair deal for students, which is why we have reduced the interest rate on student loans from an expected 12 per cent.

We have brought forward this announcement to provide greater clarity and peace of mind for graduates, because we want to give reassurance that this does not change the monthly repayment amount.