There has been a steep decline in the number of UK graduates since 2016 clearing their student loans, with new figures reigniting criticism of the university funding model.
Data from the Student Loans Company, exclusively shared in The Londoners, shows the average number of graduates repaying their loans has fallen by more than half among those who graduated between 2016 and 2024.
The decline suggests the student loan system is no longer operating as a temporary graduate contribution, but as a long-term financial burden for many borrowers.
Oliver Gardner runs the Rethink Repayment campaign, which aims to address a growing feeling among graduates that student loans are a massive financial burden.
He said: “Lots of young people tend to ignore their student loan because the balance feels too overwhelming. But the system won’t change if everyone takes this approach.”
Gardner added that the system risks discouraging ambition, with graduates turning down promotions or extra hours because higher earnings trigger larger loan deductions from their pay.
Professor Nicholas Barr, a London School of Economics academic and one of the architects of the student loan model introduced under Sir Tony Blair’s government, claimed the system’s problems are real but fixable.
He said: “The parameters at the moment allow too many students not to repay in full, and that’s a loss to taxpayers.
“At the time, I told Blair to call it a graduate tax, but the government let the word ‘debt’ escape and run wild.
“People think ‘£50,000 debt’ and put it in the credit card bit of their brain, rather than the payroll deduction bit.”
The average graduate in 2024 left university owing £53,000, with government estimates suggesting only around one in three borrowers on Plan 2 loans will ever repay in full.
Plan 2 loans, introduced for students starting university in 2012, came with a 30-year repayment term and a higher interest rate.
They replaced the previous system, under which students who began their degree in 2011 or earlier typically paid tuition fees of around £3,375 per year.
The increase to £9,250 in 2012 marked a turning point, leaving graduates from 2015 onwards with substantially higher levels of debt.
In 2023, Plan 2 was itself replaced with Plan 5, which lowers the interest rate but extends the repayment period to 40 years, meaning many students are likely to keep repaying into their 60s.
Graduates like Mark, who has chosen not to share his surname, back up Professor Barr’s theory that most borrowers perceive student loans as debt, rather than a graduate tax.
Mark, a 2019 graduate, is on track to repay his loan in full in the next few years.
Raised in a business family, he studied Accounting and Finance at the University of Warwick, before taking a graduate job as an investment banking analyst in London.
He worked his way up quickly, and by 2022, he was earning just shy of £100,000.
He said: “My parents covered my rent at university, and I worked part-time, so I never got a maintenance loan, which I kind of resented at the time, but I’m glad about now.
“Once I started working full-time, I realised that my income potential meant I would be paying more for longer if I only made the minimum repayments.”
For someone like Mark that is on a Plan 2 loan, minimum repayments are 9% of all income above £28,470.
In total, he has repaid £20,000, and while initially vague about family support, he later alluded to financial help from his parents since he graduated.
This financial safety net cushions graduates like Mark as they enter adult life but for the majority, Mark’s experience feels increasingly out of reach.
Degrees are now ubiquitous, and feel more like a rip-off than ever when the average starting salaries after university often fail to cover even the most basic living costs, particularly in a city like London.
Some claim the increase in tuition fees in 2012 only made this imbalance more pronounced.
Since then, total student debt has risen relentlessly and is projected to reach nearly £268 billion by the end of this academic year.
Mark’s admission that he once resented friends who received maintenance loans reflects a general change in perspective once graduates begin working and paying taxes.
Suddenly, all that money that felt consequence-free at the time is chipping away at every payslip, yet the overall balance continues to grow through interest.
Gardner said this bolsters the belief among Gen Z that they face tougher economic conditions than their parents or grandparents.
He added: “People are beginning to realise that this generation doesn’t have it anywhere near as good as previous ones.”
For campaigners, student loans have become a microcosm of a wider breakdown in the post-war social contract: that hard work and education will lead to security and prosperity.
Today, neither guarantees home ownership or financial stability.
The role of maintenance loans has also come under scrutiny.
Eighteen-year-olds can now borrow north of £20,000 a year to support themselves while studying, prompting questions about whether the state is encouraging dependence too early in adult life.
Gardner rejected this framing and instead argued maintenance loans do not cover living costs for many students.
He said: “There’s an implicit subsidy from parents built into the system for those who receive lower maintenance loans.”
Claims that maintenance loans are too low tend to affect students from middle and higher income families, who receive less support due to means-testing.
Gardner does not directly address the experience of students from lower income households, who can receive up to £23,000 a year in London, inclusive of the loan to cover fees, which rose from £9,250 to £9,535 in September 2025.
The maintenance part of the loan comes with no financial guidance or conditions, such as proof of regular class attendance.
The irony is that while this money may feel like a boost initially, by the end of a degree these students often find themselves on the back foot compared with their peers because they have far higher debt.
The result of a loans system that is particularly generous to students from the very poorest households, without any ringfences attached, is that it risks blurring the line between a loan system and long-term state dependency.
Just this week, a report revealed that there are around 700,000 jobless graduates claiming benefits.
For critics, the figure represents a powerful indictment of a system that was designed to aid social mobility.
Professor Barr disputed the idea that the system incentivises worklessness and stressed that the loans were designed to be repaid by the majority, while protecting graduates with lower lifetime earnings.
Perhaps the issue is that while the system did work at one point, a steady decline in repayments is adding to mounting evidence that the student loan system might not be fit for 2026.
Featured image credit: Unsplash – Chris Boland
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