Poorer students’ debts to rise to £53,000

The Chancellor announced proposals in his Summer Budget earlier in July to remove access to grants for poorer students, which were worth up to £3,387 annually, instead replacing them with bigger loans for those entering university in 2016.

But the IFS estimates only a quarter of these loans will be repaid and the long-term annual saving will be £270m.

The government recently announced that they will be scrapping maintenance grants, which are now paid to the poorest students who attend university.

From 2016, these will be replaced with loans, which they will be expected to repay in addition to loans for their tuition fees.

In the short term, government borrowing will fall by £2bn a year, because spending on grants counts towards the government’s borrowing, while spending on loans does not count in the same way, the IFS says.

The IFS calculated that while saving the exchequer an estimated £1.4bn per cohort of students, middle income graduates will end up paying more per year for the majority of the repayment period.

IFS research economist Jack Britton said: “While the small increase in support for living costs available to students from lower-income families will undoubtedly be welcomed by many, the switch from maintenance grants to maintenance loans will result in substantially higher debt for the poorest students”.

Graduates start to pay back their loans once they earn more than £21,000 (from £16,000 if graduated in or before 2014).

“For most, though, it is the freezing of the repayment threshold which will do more to raise loan repayments, and hence increase the cost of higher education”.

Funding reforms by the Conservative government are being criticized for discouraging the UK’s poorer students from moving into higher education.

He said the previous reforms had not necessarily had a “negative effect” on students, but added only “time would tell” if the new measures would be successful.

A Department for Business, Innovation & Skills spokesman said: “The IFS recognises the reforms in 2012 did not deter students from going to university and in fact applications from disadvantaged students are at a record level”.

Sally Hunt, university and college general secretary claimed the scrapping of grants was a “tax on aspiration” and said that it exposes the government for “not being on the side of striders”.

“Lifting the cap on student numbers also means that more people will be able to benefit from higher education than ever before”.