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Students: Debts

Volume 475: debated on Friday 9 May 2008

To ask the Secretary of State for Innovation, Universities and Skills what estimate he has made of the average debt a student beginning a higher education degree course in 2008 is likely to have on graduating. (194090)

We estimate that students beginning higher education degree courses in 2008 are likely to graduate with personal debt, on average, of some £16,000. However, the average will depend on: how many students choose to take-up a loan for tuition fees; whether those students who are eligible for grants thereby reduce how much they borrow for maintenance; and whether trends in the level of commercial debt remain stable.

Student loans have very different features to most commercial loans. Repayment is based on income, not the amount owed. Graduates only repay once they are in work and only when their annual income reaches £15,000. Interest is charged at the rate of inflation, so students only pay back in real terms the amount they originally borrowed.

In July last year we announced plans to introduce greater flexibility in the repayment of student loans by allowing borrowers to take repayment breaks of up to five years.

A generous package of support is available to students, particularly those from low income households. In 2006/07 over half of eligible full-time students received a full or partial maintenance grant of up to £2,700. From 2008/09 onwards, the minimum threshold (of household income) for a full maintenance grant of up to £2,835 per year will be extended from £17,500 a year to £25,000 a year; with a partial grant available up to an income threshold of £60,005. This will mean that two thirds of all eligible students in England entering higher education in the academic year 2008/09 are expected to be entitled to a full or partial non-repayable grant—compared to just over half now.