UK has the most indebted graduates in the world

[Sleepy432]

Gobsmacked to read this morning that the UK now has the most indebted graduates in the world. I was aware of the gulf between us and Europe but had always imagined the US was still streets ahead - apparently not!
« Over 90 per cent of UK graduates take out a loan, accumulating an average debt of around £45,600. 60 per cent of US graduates take out a loan, with an average debt of $28,400. The UK government contributes the least to a student’s education of any OECD country ». (Source:Tortoise Media). Obviously these stats will only get worse with the changes to repayment charges brought in last year.

As with so many things, we’ve been conditioned to think this is normal?

In the US defaulting on a student loan ruins your credit score massively. You can't even get student loans discharged if you go bankrupt in the USA.

In the UK if you earn below the limit you don't pay and the debt is written off.

The whole university system is the US is so different it is hard to compare. Fees are high but there are more scholarships (like the top 10% highest grades each year get tuition fees paid for or Sport scholarships etc). University’s have endowment funds to pay them which There is a culture of graduates donate too.

And I feel in state tuition fees are lower?

@Sleepy432 I agree that universities are underfunded however I think England (as it's different for Wales & Scotland) have a different setup to rest of Europe.

Students in England tend not to go to local Uni so incur accomodation costs, which isn't the case for many European countries. The change in approach to Uni finding has caught many parents out...many are still unaware of how much money is needed to support students.so Apprenticeships are still not widely available so choices for 18years are limited and there is negative bias towards trades, which is madness. There seems to be a stigma in UK that doesn't exist elsewhere.

What is very worrying is the reliance on UK universities of international students. How can this be good for UK plc if the students, once qualified, return home.

It does show that the government has spun a tale that U.K. fees are the same as elsewhere when they are not.

I was trying to explain to a graduate a few years ago that student loans weren’t as large as they are now and there was a time student funding money went straight to the university without the need to pay it back. He didn’t understand at all and thought the only option to a loan would be rich parents who could pay upfront.

But it isn't a loan in the normal sense. Most people never pay them off, and there is no penalty. It's really a graduate tax, regardless of how much you take out, you pay the same monthly percentage.

The US system demands huge parental contributions. It’s really not comparable at all. You have to pay up front, even if also taking some loans. Many parents start saving from birth to cover their portion of the costs.

Not really the case now though that most people will never pay them off. With the new Plan 4 the IFS estimated for the 2023 cohort that 79% would fully repay the loan, as compared with 49% for the last cohort (2022) under the prior Plan 2 system.

The new Plan 4 of course also shifted the burden with the highest lifetime earners expected to pay significantly less than had they started in 2022 whereas lower earning graduates can expect to pay considerably more.

The only reason the USA is lower is that parents routinely pay their kids college costs. The college loans are quite different there and are now much higher as costs have soared in last few years, the average hasn't caught up yet.

The new Plan 5 will mean more students pay the loan.

Low to middle earners will repay all their original borrowing, but only some interest added, so their effective interest rate will be less than inflation.
– Mid to high earners: With 52% predicted to clear in full under Plan 5, more people than previously will pay all the interest (though the interest rates are lower than the previous system)

The changes to funding is now feeding through and I suspect will impact students choices, perhaps more will commute and some may choose not to go at 18 and wait until they have saved money or are very sure of the degree choice.

A private University in the US is running about 50,000 dollars a year for tuition with an additional 10-20k of room and board depending on where the University is (New York City more expensive than Ithaca)

In State tuition at a State University is around 15k in tuition with room and board on top, out of State rates at the same places can go up to 40k plus room and board

All of this is for 4 years for a Bachelors degree

Many parents start saving from their child’s birth to afford University
Many parents go into substantial debt themselves to pay for their childs degree
Many students work one or two jobs for hours a week to afford it

Most figures only show the amount of Federal subsidized debt that the child has taken on to finance a degree, not parental debt, paid work they took on, or other loans

It's more correct to say that England has the most indebted graduates in the world.

The average student loan debt in England is over £45,000 whereas in Scotland, it is less than a third of this figure (£14,840).

I'm mid 20s yes it could be worse here in the UK but the fact is that young people have been so shafted by this government that this additional tax makes it even harder for us. No one actually cares about the issues that young people face. The additional student tax really does impact us and I wish people would tell the truth. It does affect your mortgage borrowing amount.

In the uk student loans are also not written off on bankruptcy. There are some forgiveness programs in the us but depends on type of loan

That’s not necessarily the case. Tuition for in state students is lower at many universities in the US than in England. Also there are far more scholarships in the USA.

The additional student tax really does impact us and I wish people would tell the truth. It does affect your mortgage borrowing amount

I'm glad you have said this. Bottom line, graduate net pay is lower and continues to be until the loans are paid off.