September 8th, 2016
As students are preparing to embark on or return to their university journeys across the UK, startling figures have emerged showing the struggles some students will face in repaying their student debt. Among the worst hit are middle-income families whose children may never repay their loans.
Graduates from middle-income families can only fully repay student loans if they pursue high-paying medicine or law careers, a study has suggested. The majority will be unable to pay them off entirely before they are written off after 30 years. It comes as more universities are set to announce they will charge record-breaking tuition fees of £9,250 a year from next autumn. Durham, Kent and Royal Holloway have already declared plans to hike them above £9,000.
The Centre for Economics and Business Research estimates the average cost of degree study is already £20,000 a year, with undergraduates needing to supplement loans by working or with parental support.
Middle-income students eligible for £7,023-a-year maintenance loans accrue around £52,000 worth of tuition fee and living costs debt after three years. Richer students eligible for smaller loans – the minimum is £3,821 – end up with around £41,000. And those studying longer courses such as medicine, veterinary science or architecture are likely to owe around £94,000 for a five-year course.
The report, commissioned by private client investment house Killik & Co, claims that if students are unable to repay their loans immediately upon graduating, this becomes ‘the most expensive way of funding university’. Outstanding balances start incurring interest at a 3 per cent rate above inflation while students are still at university.
Once earnings reach £21,000, graduates must start repayments at a minimum level of 9 per cent of earnings. But upon graduation, ‘most professional salaries cannot keep up’ and repayments may end up being ‘double the original size of the loan’, the study said. Researchers analysed 12 professions and average salaries over the 30-year lifetime of student debt for graduates from middle-income homes. Only doctors and lawyers would be able to repay loans in full before the debt was cancelled after 30 years. The report stated that many of the other professions, including the relatively well-paid ones, never manage to pay off the loan because it can easily rise at a faster rate than salaries.
Students are facing a raft of rising living costs and it has been determined that most now pay a large proportion of their income towards higher standards of accommodation as new students become more aware of spending their loans for higher priorities such as boutique accommodation. Good living conditions have a huge impact over student life and poor conditions can often lead to similarly poor results in their studies as they become tired and even malnourished. As students get more savvy with their money and incomes universities must provide a higher quality service.
Investment in student accommodation has become highly popular across the UK with relatively low entry costs in comparison to residential properties allowing investors more diversity. Aside from this the boutique apartments offer competitive yields and capital gains.
As the scrutiny on student accommodation focuses strongly with rising costs so the quality and investment of these schemes must continue to rise to keep up with demand.