Graduates on salaries in the middle of the spectrum will "never" be able to pay off their student loans during the 30-year repayment period, a new study has warned.
Middle-income graduates would need to earn £51,000 a year, more than twice the national average wage, to begin paying off any capital on the average £40,000 student loan. Students are already charged double the amount of interest compared to the worldwide OECD average.
The report, by the Intergenerational Foundation (IF), compares English student fees and loans with the rest of the world's higher education institutions, and reveals, even with living costs factored in, interest rates on student loans in England are the third highest in the world.
The current agreement for loans issued during 2012/13 academic year contains the following cause: "You must agree to repay your loan in line with the regulations that apply at the time the repayments are due and as they are amended. The regulations may be replaced by later regulations."
This means students will be forced to pay 9% of all earnings above the repayment threshold, which is currently £21,000, until they pay off their loan in the specified time frame. The contract also means the repayment terms can change at any time.
Last month chief secretary to the Treasury Danny Alexander confirmed the government would be selling off the student loan book to private investors, thus putting graduate debt into the hands of profit-making companies.
Angus Hanton, co-founder of the IF, said urgent action needed taking. "Policy-makers are creating an indentured class of future graduates with little protection against further interest rate rises or a lowering of the repayment threshold. Urgent action must be taken to bring student loans within the protection of the Consumer Credit Act.
"Parliamentary oversight and approval must be guaranteed now commercial rates of interest are being charged."
Josh White, author of the report, called on parents and grandparents, who received their university education free of charge, to "stand united" with young graduates and "demand better protection".
"No-one would sign an open-ended credit agreement for a luxury car without fixing the terms of repayment," he added. "Yet this is what young people are being asked to do."
Under the new student finance regime, England charges students 6.6% interest compared to an OECD world average of 3.3%. Only two other countries charge higher interest rates - Mexico and the Czech Republic. Tuition fees in Mexico cost between $378 and $818 per academic year, while in the Czech Republic, there are no tuition fees at all.
Read the full report here.