UK Graduates Now Owe Over £100,000 in Student Loan Debt: Causes and Consequences
UK Graduates Now Owe Over £100,000 in Student Loan Debt, marking a profound and unsettling financial milestone that redefines the cost of a degree in 2025.
This six-figure burden, once an exception for a few post-graduates, is becoming an increasingly common financial reality for high-earning Plan 2 borrowers from England and Wales.
The soaring debt levels are not merely a result of rising tuition fees; they are the calculated outcome of a flawed, inflation-linked system designed to accrue maximum interest over decades, fundamentally changing the financial trajectory of an entire generation.
This extraordinary debt growth is directly linked to the mechanics of the Plan 2 loan system (for those starting between 2012 and 2023).
Where high-interest rates, tied to the Retail Price Index (RPI) plus up to 3%, cause the loan balance to swell faster than all but the highest earners can repay.
Recent Freedom of Information (FOI) data obtained by Royal London in September 2025 revealed the gravity.
The number of borrowers owing £100,000 or more jumped by a devastating 33% in just the first six months of the year, transforming a higher education investment into what many now call a “debt sentence.”
What Are the Core Causes of the Six-Figure Student Debt Spike?
How Does the Interest Rate Mechanism Drive Up Loan Balances?
The primary engine fueling the massive debt accumulation is the interest rate structure applied to student loans, particularly for Plan 2 borrowers.
The interest rate accrues from the moment the loan is taken out, not just when repayments begin.
Crucially, the rate is often significantly higher than commercial rates, set at RPI plus up to 3% while students are studying, and varying post-graduation based on income.
During periods of high inflation, like those experienced in 2023 and 2024, the interest rate can temporarily climb well above 6%, which means the average graduate’s loan balance can increase by thousands of pounds annually even while they are making regular repayments.
This toxic mechanism ensures that for all but the top-tier earners, the total amount owed is highly unlikely to ever be cleared before the 30-year write-off period, leading to the crisis where UK Graduates Now Owe Over £100,000 in Student Loan Debt.
Why is the Current Repayment System a Long-Term Tax on High Earners?
The student loan system operates more like a graduate tax than a conventional loan, structured at 9% of income above a certain threshold (currently £28,470 for Plan 2 in 2025/26).
However, the high loan balance is not inconsequential, especially for high-earning graduates who will clear their debt.
These graduates, despite their higher earnings, face the double penalty of paying off the original debt plus a substantial amount of compound interest accumulated over decades.
Unlike lower earners whose debt is simply written off after 30 years, high earners effectively repay a colossal sum, making their degree far more expensive and fueling the statistic that UK Graduates Now Owe Over £100,000 in Student Loan Debt.
Also read: Rise of Buy Now, Pay Later (BNPL) Among Older Britons: What It Means for Consumer Debt in 2025
What Recent Policy Changes Have Contributed to the Debt Trap?
Recent and proposed policy changes, particularly the shift to the new Plan 5 loan system (starting for the 2023/24 cohort), have intensified the debt burden for future graduates.
While Plan 5 has a lower interest rate (RPI), the repayment term has been extended from 30 to a grueling 40 years, further minimizing the chances of full write-off for many.
This extension guarantees a longer stream of repayments from graduates and maximizes the total amount recovered by the government, effectively keeping individuals tied to the debt for a much larger portion of their working lives.
For those currently under Plan 2, the high RPI-linked interest rates in recent years have already done the damage, pushing the total balance into the six-figure bracket with alarming speed, a severe problem as UK Graduates Now Owe Over £100,000 in Student Loan Debt.
What Are the Real-World Consequences for Graduates?
How Does This Debt Affect Housing and Mortgage Applications?
The six-figure debt acts as a powerful deterrent to achieving financial milestones, most notably homeownership.
While the Student Loans Company debt itself does not appear on a credit report, the monthly repayment is treated by mortgage lenders as a regular fixed expenditure, reducing the amount they are willing to lend.
For a high-earning graduate making significant monthly repayments (9% above the threshold), this mandatory deduction severely limits their borrowing capacity.
Consequently, the ability to save for a deposit is hampered, and the maximum mortgage available is reduced, pushing the age of first-time homeownership further out of reach for thousands who face the burden of UK Graduates Now Owe Over £100,000 in Student Loan Debt.
Read more: How the £5,000 “First Job Bonus” Proposal Could Change House Buying for Young Workers in the UK
Why Are Graduates Facing a Crisis of Financial Security and Well-being?
The psychological impact of carrying this perpetual, ballooning six-figure “shadow debt” is profound.
Unlike a traditional debt that shrinks with each payment, many Plan 2 borrowers watch their student loan balance grow even while working, creating a debilitating sense of financial hopelessness.
This cognitive dissonance earning a good salary yet feeling financially trapped leads to increased stress, anxiety, and a diminished sense of financial freedom, making it harder to plan major life events like marriage, starting a family, or career changes.
This debt anxiety undermines the supposed value proposition of the degree itself.
The First-Time Buyer’s Loan Reduction
Consider a London-based graduate earning £45,000 in 2025, owing £110,000 on a Plan 2 loan. Their monthly repayment is around £124.
This repayment, though small compared to their salary, is a direct subtraction from the income assessed by mortgage lenders.
A lender that might have offered a £200,000 mortgage based on their full salary may only offer £180,000 after accounting for the mandatory student loan payment.
This effectively blocks them from accessing properties in their target area, purely because of the student loan obligation.
The Repayment That Didn’t Reduce the Balance
Take a graduate who leaves university owing £60,000 in 2017. By 2025, they have been consistently earning over the threshold and have repaid approximately £12,000.
However, due to high RPI-linked interest rates, the total amount they now owe is £105,000.
They have paid £12,000 but the debt has grown by £45,000, creating an undeniable sense of being penalized for their success and perfectly illustrating why UK Graduates Now Owe Over £100,000 in Student Loan Debt.
Why Is the UK System Analytically Unique and Problematic?
What is the Analogical Flaw in the UK Student Loan Model?
The UK student finance model can be understood through the analogy of a leaky bucket on a perpetually rising tide. The loan is the bucket it’s necessary to hold the water (the degree).
Repayments are the attempts to scoop the water out, but the high RPI-linked interest rate is the major leak, ensuring the water level (the debt balance) continues to rise rapidly.
Simultaneously, the rising tide (inflation and rising fees) constantly pushes the bucket deeper into the financial quicksand.
The flaw is not just the high fees, but the fact that the interest is levied so aggressively that repayment efforts become meaningless for a vast swathe of borrowers.
Is the Education Value Still Worth the Price Tag?
This leads to the unavoidable question: is the financial value proposition of a UK degree still intact, given that UK Graduates Now Owe Over £100,000 in Student Loan Debt?
For many, the answer is still yes, but with severe reservations.
While graduate earnings still generally outpace non-graduate earnings over a lifetime, the sheer scale of the debt acts as a drag on social mobility, delaying wealth accumulation and homeownership by years, or even decades.
The current system extracts a premium from high earners while offering a de facto time-limited tax to lower earners, creating a highly unequal financial burden.
| Repayment Plan Type | Start Date Range | Repayment Threshold (2025/26) | Repayment Period | Interest Rate (Example Max 2025/26) |
| Plan 2 (The Six-Figure Debt Driver) | Sept 2012 – July 2023 | £28,470 | 30 years | RPI + 3% (up to 6.2%) |
| Plan 5 (New System) | Sept 2023 Onwards | £25,000 | 40 years | RPI (up to 3.2%) |
| Plan 1 (Older System) | Pre-Sept 2012 | £24,990 | 25 years | RPI (up to 3.2%) |
Conclusion: Confronting the Financial Reality
The staggering statistic that UK Graduates Now Owe Over £100,000 in Student Loan Debt is a loud alarm bell for both the government and future students.
The current system, particularly the Plan 2 and the newer Plan 5, is fundamentally broken for financial well-being, prioritizing the government’s balance sheet over the economic freedom of its future workforce.
This debt is not merely a number; it is a profound societal drag that is altering family formation, discouraging entrepreneurial risk-taking, and entrenching intergenerational wealth gaps.
Graduates and students must treat this debt not as a simple loan, but as a long-term, high-impact tax on future earnings, making career choice and salary negotiation even more critical than before.
The system requires urgent and intelligent reform to align the cost of education with realistic repayment expectations.
What is the single biggest policy change you believe the government must implement to address the six-figure student debt crisis? Share your thoughts and experiences below.
Frequently Asked Questions (FAQ)
How is the £100,000 debt figure calculated?
The £100,000 figure is the outstanding balance owed to the Student Loans Company (SLC).
It includes the original tuition loan (£9,250 per year) and maintenance loan amounts, plus the compound interest that has accrued since the loan was taken out.
For many Plan 2 borrowers, high interest has caused the balance to balloon far beyond the original borrowed amount.
Does owing £100,000 in student debt affect my credit score?
No, the Student Loan is not considered commercial debt, and the balance does not appear on your credit file.
However, mortgage lenders do consider the mandatory monthly repayment (9% of your income above the threshold) when assessing your affordability, which severely limits the amount they will lend.
Will my student loan ever be written off?
Yes. For most Plan 2 borrowers (2012-2023 entry), any remaining debt is legally wiped clean after 30 years from the April following graduation.
For the newer Plan 5 (2023 entry onwards), the write-off period has been extended to 40 years. This write-off is the main safety valve for low and middle earners.
What is the difference between Plan 2 and Plan 5 loans?
Plan 2 (2012-2023) has a repayment threshold of £28,470 (2025/26) and a 30-year write-off. The interest rate is RPI + up to 3%.
Plan 5 (2023 onwards) has a lower threshold of £25,000, a longer 40-year write-off, but a lower fixed interest rate of RPI only. Plan 5, despite the lower rate, will cost low-to-middle earners more in total due to the extended repayment term.
