Graduates buckled by staggering amounts of student debt
UK borrowers have become burdened with excessive amounts of student debt, as interest on loans continues to climb.
According to a freedom of information request submitted to the Student Loans Company (SLC) by asset manager Royal London, at the end of June 150,453 people had loans of £100,000 or more.
This was a 33 per cent jump from the January figures of 113,029 people.
It is also roughly double the average amount borrowers owe when leaving university, according to the SLC.
Strikingly, more than 2.6m borrowers owed over £50,000 in student debt, with the highest balance hitting an eye-watering £300,000.
The sharp rise in student debt has been credited to rising tuition fees, which increased 3.1 per cent to £9,535 per year this academic year, higher living costs, interest accrual and the impact of longer repayment periods under newer loan plans.
Sarah Pennells, consumer finance specialist at Royal London said: “These figures are a wake up call.”
“What was once a smart investment into your future is now turning into a financial trap for thousands of graduates.“
“Six figure student loan balances aren’t just numbers on a screen, they’re delaying dreams, derailing saving plans and making it harder for young people to feel financially secure.”
Debt snowball
Graduates begin paying back their student loan when their income is over the threshold amount for their repayment plan, which ranges from £25,000 to £28,740.
Many borrowers also face harsh interest rates on their loans of up to 6.2 per cent, meaning that despite graduates making monthly repayments, the debt keeps snowballing.
As the total loan balance continues to grow, it becomes significantly harder to pay off, and for some impossible, pushing many into an unstable financial position.
Pennells added: “In today’s economic climate, where every pound counts, adding a mountain of student debt to the mix is pushing financial resilience to breaking point.”
“Graduates need to think about saving for a deposit, building an emergency fund, investing for the future, or even just feeling confident enough to start a family, but for graduates with six-figure loan balances hanging over them, those goals may be delayed or feel increasingly out of reach.”
Royal London is urging grads to be aware of their payment plan rules and keep up to date with increasing repayments upon moving jobs or receiving a pay rise in order to avoid being snowed under with debt.