Students in England leave university with three times more debt than in the US

Students in England graduate with an average debt three times higher than their counterparts in the United States and more than any other developed country, official figures show.

The data reveals a system that is “hugely damaging for young people”, campaigners say, which cement inequalities and disadvantages poorer students.

Student loans are a notoriously political issue in the US, and the system there is usually considered to be a cautionary tale by UK observers. When Barack Obama ran for re-election in 2012 he was cheered by students when he revealed he had only managed to pay off his student debt four years before becoming president, at the age of 43.

Yet data from the Organisation for Economic Co-operation and Development (OECD) shows that the average debt on graduation in 2021/22 was $68,683 (£50,313) in England and $20,569 (£15,068) in the US. The gap is growing. In 2016, the Sutton Trust warned that England’s graduates owed £44,000 at the end of their degrees, while even Ivy League students owed only £23,000 on average.

Averages mask extremes – some US students graduate with debts running beyond $200,000. But the average student debt in the US is lower because more graduates leave university debt-free thanks to generous scholarships, and those who study in their own state are often subsidised.

Oliver Gardner, founder of the campaign Rethink Repayment, said England had the most expensive public higher education cost per year of OECD countries. “That, combined with unfair student loan repayment terms, has created a system that is hugely damaging for young people compared to graduates in neighbouring countries and from previous generations,” he said.

Graduates in England are in a different kind of system that its supporters say is much more progressive than other countries. Fees for a three-year degree are £28,605, and students can get maintenance loans to cover the cost of living. These loans only need to be repaid – direct from salaries – after graduates earn above a threshold of £25,000 a year for the latest scheme, called Plan 5. In theory this means that lower earners might never need to repay their loans.

But the repayment rate is separate from the amount of interest that the loans accrue. Graduates with Plan 2 loans, in place from 2012 to 2023, pay 9% of their salaries above their threshold, while interest accrues at 3% above RPI.

Many graduates find they owe more money each year and have no hope of paying off their student debt, while seeing £300 or £400 a month come out of their pay packet. That amounts to a 9% tax increase, Gardner said.

The effect of this extra cost is to increase inequality. Pay analysis by the Social Mobility Foundation shows that professionals with working-class parents get £6,287 less each year than those in the same occupation with more privileged backgrounds. The reason is that middle- and upper-class professionals can rely on the “bank of mum and dad” to get help with a deposit on a house, pay into a pension or afford childcare.

This is compounded by chancellor Rachel Reeves’s decision to freeze the Plan 2 salary threshold at £29,385 for three years, according to Jason Bunting, advocacy manager of the Fairness Foundation thinktank.

“The freeze to repayment thresholds will hit lower earners hardest, while higher earners can clear their loans more quickly,” Bunting said. “That's a lifetime education penalty for modest earnings. Many graduates were told student loans were a no-brainer, yet increasingly feel they were duped.

“If the budget was about everyone making a contribution, it's now clear who has been asked to contribute disproportionately. The chancellor should unfreeze the thresholds and commit to meaningful reform before an entire generation loses faith in the system altogether."

Tuition fee loans contribute £23.4bn to UK universities’ income, a growing proportion which is out of step with other countries, according to Toby Whelton of the Intergenerational Foundation.

“Graduates do benefit from better earnings, better employment prospects,” Whelton said, “but there’s a wide range of societal benefits too, not just for business and the exchequer, but graduates are healthier, they commit less crime.” Most people think a fair split is 50/50, he said. “But what we’ve seen, by stealth and without democratic consent, is that increasingly the burden is put on graduates.”

Some graduates feel those benefits are more theoretical than real. About 155,000 graduates and students signed up to Student Group Claim to bring legal actions against UK universities over teaching quality during the Covid lockdowns and lecturers’ strikes. Last week, University College London settled claims with the group and other universities may follow.

Alex Stanley, vice-president of the National Union of Students, said there was a risk young people would be put off going to university. “The second we start talking about financial barriers as a reason why someone might choose not to go to university, we've failed on using university as a vehicle for social mobility,” he said.

“I think it's £66,000 you need to have as a yearly salary to start paying off your loan without seeing the number go up? It's absolutely ridiculous.”