A means-tested system could cut average student debt by a third, with those from the most disadvantaged families benefitting the most, according to a new study published by the Sutton Trust.
The social mobility charity also called for grants designed to help less well-off students with living costs to be reintroduced, warning that it is an ‘absolute scandal’ that the poorest are graduating with the highest levels of debt.
English and EU students at universities in England now pay up to £9,250 a year in fees, and are eligible for government loans to cover the cost.
Last month, the Prime Minister announced that in future, graduates will not have to start repaying these loans until they are earning at least £25,000 – up from the current £21,000 threshold.
The move came amid growing debate about university funding – an issue which has been in the spotlight since the general election when Labour made a high-profile promise to scrap tuition fees. The pledge was credited with winning the party support among young voters.
An analysis conducted by London Economics for the Sutton Trust concludes that raising the repayment threshold will mean that 45 per cent of student debt will never be paid back, while around four fifths of graduates will not repay their loans in full. The debt is written off after 30 years.
The Trust calls for a means-tested system, with those from a household with an income of under £25,000 paying no tuition fees, those from homes with an income of over £100,000 paying £12,250 and a sliding scale for those in between.
Currently, students graduate with an average debt of £46,000, the report says.
The 40 per cent poorest students have average debts of £51,600, mainly due to needing larger maintenance loans, while those from the 20 per cent richest households have average debts of around £38,400.
A means-tested fees system, and bringing back maintenance grants, would cut overall average student debt to £23,300, and reduce it to an average of £12,700 for poorer students.
Sir Peter Lampl, Sutton Trust chairman, said: “It’s an absolute scandal that the poorest students graduate with the highest debt.”