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Poorest students will finish university with £57,000 debt, says IFS

Poorest students will finish university with £57,000 debt, says IFS

Students from the poorest 40% of families that entered university in England for the first time this September will emerge with an average debt of around £57,000, according to a new analysis by the Institute of Fiscal Studies.

It said the abolition of the last maintenance grants in 2015 had disproportionately affected the poorest, while students from the richest 30% of households would run up lower average borrowings of £43,000.

The economic thinktank's conclusion immediately prompted a sharp political exchange between the main parties and elite universities over the fairness of student finance - and a hint from the minister responsible that amid soaring debts the system could be reviewed again.

Tuition fees were lifted to £9,000 a year in 2012 by the coalition, in defiance of promises made by the Liberal Democrats in the run up to the 2010 election. Under the 2017 system, average debt on graduation is more than double the average debt students would have faced had the system remained unchanged from 2011.

Outstanding debt on loans jumped by 16.6% to £100.5bn at the end of March, up from £86.2bn a year earlier, according to figures released by the Student Loans Company.

The IFS also found that more than 77% of those taking out student loans will have some or even all of the loans paid off by the government because graduates will not earn enough to repay their loans within that time.

Students from low- and middle-income families are also made worse off by the government's decision to hold down the income level at which graduates must start repaying their loans to £21,000.

By leaving the figure unchanged the proportion of graduates who have to start paying back loans quicker increases because average wages are rising. The thinktank added that it means that students will have to pay back £4,000 more over their working lives than otherwise.

The IFS also highlighted changes to the interest rates charged introduced since 2012, with students now charged 3% plus the retail price index on loans accrued while they are still undergraduates. From September, students will be forced to pay higher interest rates on their loans of 6.1% after a surge in inflation.

Source: The Guardian

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