Britain's student debt crisis is reaching a point of no return |
This is Armchair Economics with Hamish McRae, a subscriber-only newsletter from The i Paper. If you’d like to get this direct to your inbox, every single week, you can sign up here.
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It isn’t fair that a typical UK student leaving university should have debts of more than £50,000 – but it isn’t fair either that working people who never had the opportunity to get a degree should have to subsidise those that do. A university graduate, will over their lifetime, earn between £100,000 and £130,000 more than a non-graduate, even after taxes and student loans. But that is an average. You have to choose the right course. This so-called graduate premium may narrow in the future. And the way we as a country finance our universities is nuts.
Just about everyone accepts that our student loan system is a mess. The outstanding debt at the end of March last year was £267bn and since that was up 12.9 per cent on the previous year, it will be another £30bn or so higher now. It is estimated to reach £500bn by the late 2040s. To put that in context, the UK’s national debt is currently around £2.9trn, so students account for some 10 per cent of the total. The average debt for students in England that finished their course in 2024 is £53,000.
That is huge by any standards. It is not only the highest in the world, it is also much higher than in Scotland (£18,000), Wales (£39,500), or Northern Ireland (£28,000). By contrast the average student going for bachelor’s degree in the US borrows around $31,000, or £23,000 at current exchange rates.
But not all this money owed to the Government will be paid back. The Government forecasts that........