One in three graduates not repaying student loans

One third of graduates from British universities cannot afford to pay back their student loans, claim the Liberal Democrats.

The Lib Dem's innovation, universities and skills secretary, Stephen Williams described the situation as “shocking” that nearly 400,000 graduates aren’t yet earning enough to repay their student debt up to seven years after they leave university.

Williams said: “Having forked out for at least three years to get a degree, many new graduates would be expecting to be in well-paid employment.

“Aside from their student loans, many of these young people will have also stacked up large amounts of commercial debt which they will be struggling to repay on their relatively low wages.”

Research undertaken by the party show that out of 1,237,300 British students who graduated since 1998, 384,300 had yet to make a single repayment towards their student debt. This means that approximately 32 per cent of all graduates still do not have an annual income greater than the £15,000 threshold.

Some ministers have claimed in the past that the loan system is failing because so many graduates have yet to pay back the money.

Graduate poverty is likely to snowball in the immediate future, affected by the economic turmoil that Britain is currently facing. The rate of inflation stands at 4.8 per cent and competition for graduate jobs is fierce as degrees become more commonplace.

These findings will worry Higher Education Minister, Bill Rammell, who claimed last year that going to university was “one of the best investments a young person can make.”

Neil Munroe of credit reference agency, Equifax, has warned students not to overestimate their earning potential after they leave university.

He said: “For those banking on clearing student debt quickly once graduating, this could be an unrealistic dream for many as they are misjudging their starting salaries once they graduate by over £2000.

“New graduates were paid an average wage of £16,600, rather than the £18,600 they had expected.

“With a little careful preparation and budgeting, students can avoid getting into financial difficulty, which will help them deal with the realities of graduate wages.”

Mr Munroe also urged prospective students to think about the costs of going to university before entering higher education.

He said: “Students and their parents can easily run the risk of misjudging what they can afford when it comes to funding student life.

“With recent studies revealing the average parent thinks it would cost about £12,550 for their child to complete a three-year degree course compared to the reported real cost being closer to £40,000, learning to budget from the start will be the key to students staying on top of their finances.”