For many people, the largest debt they will ever face is the cost of buying their home, but it seems student debts in England are fast gaining ground, and are now equal to one third of the cost of the average mortgage.
Research done The Money Charity puts the graduate debts at, at least, £41,000 – while the average outstanding mortgage is £117, 162.
These debts are built up by tuition fees and maintenance costs, according to the charity, who noted, “Much of this is driven by the introduction and gradual rise of tuition fees.”
However, while tuition fees of £9,000 per year are a sizeable chunk of the debts faced by graduates, the charity also pointed to the rising cost of accommodation as playing an important yet often overlooked role.
“The other, often overlooked, driver of rising student debt is the runaway cost of accommodation, which requires ever larger maintenance loans just to keep up,” the charity said.
With average yearly rents outside London rising by £277 between 2014 and 2015, maintenance loans and the soon-to-be-scrapped maintenance grants failed to keep pace.
Under the current system, students earning more than £21,000 are required to start repaying their debts, but government plans to freeze this threshold rather than allow it to rise with average earnings as was originally promised has caused more than 130,000 people to sign a petition to Parliament.
The high level of debts carried by young people just beginning their working lives was of particular concern to the Money Charity.
The charity’s chief executive, Michelle Highman asserted, “For nearly half the young people in the UK, becoming a student will be the first step into adult life, with all the financial responsibilities that brings. We worry that these early, formative experiences of debt will leave a lasting legacy,” adding, “Normalising large quantities of debt right at the start of people’s financial independence risks setting them up to fail. The size of these sums may also affect later borrowing such as loans and mortgages.”
Despite these concerns the government maintains that the system is a fair one as they believe higher education boosts employability and earnings, while removing the financial barriers for those wishing to study.
Although student debts are wiped off after 30 years, there are already signs that the high levels of debt associated with university are turning less-well-off young people away from study.
As it stands, Scotland does not charge fees for first-time undergraduates, while fees in Wales can be up to £9,000 per year but £5,100 of this is paid by the Welsh government for Welsh students. Meanwhile Northern Irish students pay £3,925 a year in fees.