The report by the Intergenerational Foundation says students in England will face more extreme financial penalties than previous graduates. Photograph: Caia Image/Getty Images/Collection Mix: Subjects RF View image in fullscreen The report by the Intergenerational Foundation says students in England will face more extreme financial penalties than previous graduates. Photograph: Caia Image/Getty Images/Collection Mix: Subjects RF Students Students face ‘ticking timebomb’ of debt and higher taxes Exclusive: Analysis finds cost of higher education ‘falls overwhelmingly on the individual’
Prefer the Guardian on Google The government is piling mountains of debt and higher tax rates on young people heading to university, according to analysis into the “ticking timebomb” of costs faced by future students.
Hundreds of thousands of sixth formers will receive their A-level results on Thursday, with many expecting to continue on to higher education courses.
But Toby Whelton, author of the analysis for the Intergenerational Foundation , a thinktank, says those in England will face more extreme financial penalties than previous graduates.
Whelton said the cost of paying for university education has been shifted almost entirely on to current students, with the latest student loan package – known as plan 5 (which began in August 2023) – meaning young graduates will struggle to save for house deposits or pension contributions, delaying their key milestones.
Read more “The burden of student loans has never been higher. By stealth and with minimal democratic scrutiny, successive governments have piled costs on to young graduates in the hope that nobody would notice,” said Whelton.
“Plan 5 in particular has received far too little attention. It is a ticking timebomb, set to detonate as today’s students enter the workforce and confront repayment terms harsher than those faced by previous cohorts.”
The report by the Intergenerational Foundation details how successive governments since 2010 have increased the costs for students in England .
On top of repaying student loans at higher rates than previous generations, today’s graduates also face effective tax rates above 50% when their income reaches higher brackets, says the report, which describes this as “historically high and disproportionate”.
The analysis shows that amounts being repaid by today’s graduates in England are more than double those paid under plan 1, which was in place before the coalition government in 2012 raised annual undergraduate tuition fees from £3,375 to £9,000. Plan 2 ran from 2012 until 2023.
“We estimate that average earners under plan 5 will repay £56,240 over their lifetime, compared with £25,700 under plan 1,” the report says.
Meanwhile, expected lifetime repayments for lower earners “have risen from £6,430 to £42,070”, expressed in 2026 prices.
The report also highlights how governments have whittled away at their contribution to higher education by steadily reducing the teaching grants paid to support universities while slashing subsidies for student loan repayments.
In 2015-16 the government’s combined contribution was equivalent to 46% of the total cost of a graduate’s education. But now just 8% of the cost will be met by the government.
“What was always intended to be a cost-sharing system, in which the cost of university would be shared between the individual and the exchequer, now falls overwhelmingly on the individual,” the report notes.
The foundation…