New research commissioned by the Sutton Trust has found that almost three quarters of students completing their studies will never repay all of the money they borrowed. Most people will be repaying their student loans well into their 40s and 50s as the vast majority fail to repay their loan. While student loans are different to regular unsecured loan debt problems, it still represents a problem for society with increasing numbers of people becoming indebted.

Student loans are used to cover living costs and tuition fees in England, Wales and Northern Ireland. The Institute for Fiscal Studies wrote the recent research and considered the knock-on impact of tuition fees increasing since 2012.

The study suggested that the average student in England would leave further education owning almost £45,000.

Student Debt: What Has Changed

The cost of tuition fees has increased and this is directly impacting the amount of money students have to pay in order to gain their qualification. The change in debt has risen because of the new fee structure rising on average from £24,754 to £44,035.

The tuition fees are the main cause of concern for students in England with fees rising from £3,000 in 2011 to £9,000 in 2012.

However, students don’t have to repay the loan until they earn at least £21,000 per annum, whereas it used to be £16,910. The interest rate on the loan has increased too. The new interest rate is 3% which is lower than many unsecured loans, however if the loan isn’t being repaid monthly then the debt is simply increasing.

Can Student Loans Be Written Off?

The short answer is yes, student loans can be written off. A new style student loan can’t be included in a bankruptcy, IVA or Trust Deed but they could still be written off.

If you have not repaid your loan after 30 years of borrowing the money then the outstanding balance will be written off. You have to pay a percentage of your income above the threshold back to the loan once you’re in employment, however outstanding amounts after 30 years will be legally written off.

The new research suggests that 73% of people will have some of their student loan written off, compared to 32% of people in the old system. The typical amount of money which could be written off is around £30,000.

If your first loan was taken out during the 2005/06 academic year in England, Wales or Northern Ireland then any outstanding loan is written off aged 65, instead of the new 30 year rule.

In Scotland, if your first student loan is pre 2005/06 then any loan remaining to be repaid is written off aged 65. From 2006/07 any debt to student loans will be written off after 35 years.