Student loan changes will hit disadvantaged graduates hardest

Head and shoulders photo of a young man stood against a wall

Evidence from Next Steps has shown that changes to the student loans system in England will hit the pockets of people who are already disadvantaged the hardest.

The reforms include a significant reduction in the amount graduates need to be earning before they have to start making loan repayments, meaning they would need to repay their loans sooner. Researchers using Next Steps to predict the potential impact of this, found it would lead to around 50% more graduates beginning to pay back their loans by the time they are 25. And those who would be impacted the most would be disadvantaged groups, such as those who had been the first in their family to go to university or who received free school meals whilst at secondary school.  In addition, ethnic minority graduates would likely be more negatively impacted than white graduates.

What we asked you

When we surveyed you at Age 25, we asked you for permission to link administrative records held by some government organisations to your Next Steps survey records. This included information from the Student Loans Company. We also asked you about university and your current job in this survey. In previous surveys, we’d collected information about your parents and your family background.

What the researchers found

The decrease in the amount graduates need to be earning before they are required to start repaying their student loans only applies to new borrowers, from August 2023. But while those of you who have graduated previously will not be affected by the change, a team of researchers at UCL were able to use your information to predict which groups of people would be in future.

The researchers found that graduates who would need to start making repayments under the new system, who wouldn’t have had to before the decrease in the income threshold, are likely to be among the more disadvantaged in society.

The most affected include those who were the first in their family to have gone to university, those who did not attend a prestigious Russell Group university, and those who had been entitled to free school meals. People on zero hours contracts or in other unstable work at age 25, those working part-time and those juggling work and education together would be more likely to now have to start making repayments. The research also shows that ethnic minority graduates would be more affected than white graduates.

Why this research matters

Your evidence has helped to highlight which groups of people in society are most likely to be negatively affected by recent student loan changes. Writing in a briefing paper, the researchers highlight why these findings are important:

“… the recent student loan reforms could further disadvantage marginalised groups and put additional pressure on young graduates, particularly those who may still be in education and working part-time. The increase in repayments more generally could be considered to be putting increasing financial pressure on young people, especially now during the existing cost of living crisis.”

They suggest that the goal of increasing the proportion of the student loan bill repaid could be achieved through more progressive means, such as via a ‘stepped’ repayment system.

Find out more about this research

Read the policy briefing by Charlotte Booth, Morag Henderson and Claire Crawford on the Centre for Longitudinal Studies website, published in February 2024.

Read researcher Charlotte’s blog for The Conversation website, published in February 2024.