An analysis by the Intergenerational Foundation examines the financial pressures facing students pursuing higher education in England, concluding that young graduates confront substantially higher costs than their predecessors. The research, conducted by Toby Whelton, highlights how successive governments have progressively shifted education financing onto students themselves while reducing public contributions to universities.
Under plan 5, the student loan system that began in August 2023, graduates are expected to repay an average of £56,240 over their lifetimes, compared to £25,700 under the earlier plan 1 arrangement. Lower-earning graduates face even steeper increases, with expected lifetime repayments rising from £6,430 to £42,070. Additionally, the analysis notes that graduates now encounter effective tax rates exceeding 50% at higher income levels, described as historically elevated and disproportionate.
The foundation’s research demonstrates a significant reduction in government funding for higher education. In 2015-16, the government’s combined contribution covered 46% of the total cost of a graduate’s education. Currently, that figure has dropped to just 8%, meaning the financial burden falls almost entirely on individual students and their families. This shift contradicts the original intention of higher education finance as a cost-sharing system between individuals and the state.
In response to mounting criticism from student advocacy groups, lawmakers, and campaigners, the Intergenerational Foundation recommends reducing the student loan repayment rate from 9% to 5% for both plan 2 and plan 5 graduates. Education Secretary Lucy Powell has indicated that reviewing the student loans system remains a priority, while the Treasury select committee has called for revoking a three-year freeze on loan repayment thresholds that is projected to increase annual repayments for graduates by approximately £300.
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