Brits are already angry about student loans – the newest ones cost even more
Key Points
- Plan 5 graduates will repay £16,040 more on average than under Plan 2, and lower earners £21,780 more.
- Expected lifetime repayments for lower earners have risen from £6,430 under Plan 1 to £42,070 under Plan 5.
- Higher earners are £16,600 better off, largely because interest was capped at RPI.
- The average female graduate repays around £25,000 more under Plan 5; the average male graduate repays £4,000 less.
- The state now covers 8% of the cost of a degree, down from 46% for the 2015/16 cohort.
The average graduate on a Plan 5 loan will repay £16,040 more over their lifetime than they would have under Plan 2, according to modelling published by the Intergenerational Foundation.
Plan 5 covers everyone who started an undergraduate course in England from September 2023.
The report, Repayment Repression, estimates that the average earner in that group will repay £56,240 across the life of their loan, against £25,700 for graduates on the older Plan 1 terms.
Lower earners see the sharpest change: expected lifetime repayments for that group have risen from £6,430 under Plan 1 to £42,070 under Plan 5.
Three changes drive the increase. The repayment term was extended from 30 years to 40, adding an estimated £12,720 for average earners and £17,360 for lower earners.
The repayment threshold was cut to £25,000, adding a further £3,320 and £4,420 respectively. Interest was capped at RPI rather than RPI plus 3%, a change worth £16,380 to higher earners and nothing at all to everyone else.
Higher earners are the only group better off. The Intergenerational Foundation estimates they will repay £16,600 less than under Plan 2, because most would have cleared their balance inside the original 30-year term anyway, and the lower threshold now lets them clear it sooner.
Measured as a share of lifetime earnings, Plan 5 repayments account for 2.2% of total earnings for higher earners, 3.0% for average earners and 2.8% for lower earners.
The switch also falls unevenly by gender. The average female graduate is expected to repay around £25,000 more under Plan 5 than under Plan 2, while the average male graduate repays around £4,000 less.
Women in the lowest earnings quartile, who would have made almost no repayments under Plan 1, are now expected to repay around £31,000.
Public anger has so far centred on Plan 2, which applied to the 11 cohorts entering university between 2012 and 2022.
A Treasury Committee inquiry launched this year drew 49,000 responses from graduates, of whom 93% called the terms unreasonable and 82% said the loans were worse than they had expected. The Chancellor of the Exchequer, Rachel Reeves, described the system as broken in March.
State support has fallen alongside the rise in graduate costs. The Intergenerational Foundation estimates the government subsidy for a typical graduate has dropped from £26,600 for the 2015/16 cohort to £4,200 for current starters, leaving 8% of the total cost of a degree with the state.
Funding per full-time undergraduate now stands at £9,880, back at pre-2012 levels and £2,680 below the 2015 peak.
