Hundreds of thousands of sixth-formers got their A-level results today, but those who plan to continue into higher education face a “ticking timebomb” of higher taxes and debt, said The Guardian.
Students will face trickier financial obstacles and penalties than previous graduates, according to a report from the Intergenerational Foundation.
Higher burden
The cost of paying for a university education has been shifted almost entirely on to current students, found the researchers. The latest student loan package, Plan 5, means young graduates will struggle to save for house deposits or pension contributions, delaying key milestones.
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Plan 5 is the repayment system for people who started an undergraduate course or took out an Advanced Learner Loan in England on or after August 2023. It has a lower repayment threshold than previous iterations: for 2026/27, Plan 2’s threshold is £29,385, compared with £25,000 for Plan 5.
The amounts being repaid by today’s graduates in England are more than double those paid under Plan 1, which was in place before 2012, when annual undergraduate tuition fees rose from £3,375 to £9,000. However, Plan 5 has a lower interest rate than Plan 2.
The “burden of student loans has never been higher”, said the author of the report, Toby Whelton. “By stealth” and with “minimal democratic scrutiny”, successive governments have “piled costs on” to young graduates and hoped that “nobody would notice”.
On top of repaying student loans at higher rates than previous generations, today’s graduates face effective tax rates above 50% when their income reaches higher brackets. Meanwhile, they also have to save for retirement while trying to meet these challenging financial demands.
Perfect storm
The report comes as younger generations in the UK already face unique challenges. A perfect storm of economic factors means they have a much harder path to home ownership than that of previous generations. House prices have risen much faster than wages, increasing roughly three to five times faster than average earnings over recent decades.
House deposits have also become harder to build. Where previous generations might have set aside a few months of spare salary, would-be buyers may now need up to years of gross earnings. This has created a renters’ trap: young people need savings to buy a house, but a large proportion of their income goes towards housing while they are trying to save. Meanwhile, the housing shortage has pushed up both prices and rents.
In May, Barratt Redrow, Britain’s largest housebuilder, said a combination of rising interest rates, higher levels of student debt and the squeeze on wages was making it the most challenging time to be a first-time buyer since the financial crisis. This means the “dream of home ownership” is moving “increasingly out of reach for many young people”, said The Guardian.
But Andy Burnham said in July he’s considering giving billions of pounds in tax relief to young people so they can save for a house deposit, according to The Independent. The “major offer” would also include help with rent to buy, said allies.
