Wednesday 22 July 2026 5:46 am
| Updated:
Tuesday 21 July 2026 12:54 pm
The government has been misleading students over loans
One in four graduates will end up worse off than they would have been had they not gone to university, but that’s not just down to imperfect information, it’s down to expectations that need to change, says Paul OrmerodThe holiday season is now in full swing. Relaxation for most, but in many households tensions will mount as a deadline approaches. August 13 is the fateful day when A-level results are expected, and students find out whether they have made the grades for their university offers.A record number of 18-year-olds are wanting to go to university, up by five per cent on last year. The rise is mainly due to simple demographics. The number of 18-year-olds has increased. But the puzzle is why so many of them still choose this route rather than getting a job.It should by now be well known that when they emerge from university clutching their shiny new degrees, they also carry a very large burden of debt. Students are now graduating with an average debt of £53,000, mainly due to tuition fees.Substantial numbers will never earn enough to pay off this debt. But their situation is even worse than that. Even if they do succeed in paying some off, the interest rates charged on the loans are such that the total amount outstanding can still increase.The debt trapLast year, some 4m graduates made repayments. But two-thirds of these accrued more in interest than they paid. The total amount repaid was £5bn, but interest charges amounted, incredibly, to £15.2bn.Why, then, do these young people bother to go in such large numbers?If you have a place to read economics at Cambridge, the answer is obvious. The average salary five years after graduation is £105,000 a year. But an Institute for Fiscal Studies (IFS) report last month showed that one of four of those who graduated 20 years ago will be worse off over the course of their working lives than if they had not gone to university. And the situation is almost certainly worse now for the recent generations of graduates.Earlier in the summer, the Treasury Committee of the House of Commons published a report on its inquiry into student debt. The findings were built around responses to a survey from 50,000 graduates.It found that 57 per cent of graduates did not understand the terms of the loans they were taking on, while 51 per cent would not have taken on the debt if they had known what they did now.
