University Debts Could Follow You Until You're 50

Could Your University Debts Follow You Until You're 50?

University debts will follow 50% of students into their fifties claims a report from the IFS. Students from middle-class families are likely to be hardest hit when the new funding regime - maximum tuition fees rise to £9,000 a year plus higher levels of interest - commence in September.

Average student debts could soar to close to £40,000.

New graduate tax

The Mail claims middle-class students with families earning around £43,500 a year may be clobbered with bigger loans to cover living costs as many won't be eligible for student grants. Working class graduates are likely to be better off because they will borrow less overall, as well as more likely going to universities with lower fees.

Despite cuts to direct public university funding, the IFS claims, UK taxpayers will save up to £3,000 per student and that universities will be broadly better off financially because of the changes.

But university fees are rising. IFS analysis of 90 universities claims average fees of £8,660 a year. Overall, just under 65% of students will be charged at least £9,000 per annum. Compare that to the the existing system where tuition fees are capped at £3,375-a-year for 2011/12.

Class gap

The rate of interest on which students pay back their loan also rises. This will be at the retail price index - higher than the consumer price index, note - plus 3% on the outstanding balance.

To sweeten the new deal some students will pay less annually. That's because under the current system graduates repay 9% of everything above £15,795. From September this threshold climbs to £21,000, which means substantially lower annual payments overall.

But the IFS report also damned the performance gap - on average about two years - between 15-year-olds from poor backgrounds and those from privileged backgrounds. "This gap in attainment amongst the most able children in England is," it said, "twice the equivalent gap observed in some other developed countries."

Bear in mind that the changes will only affect new undergraduates commencing their courses in 2012, not existing students.

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