I owe 115 000 How debt is trapping uni graduates as student loan interest rates are capped at 6

Do you know how much you owe student finance? 60k. 115,000 pounds. It's about 75,000 pounds I think. Student loan debt in this country is just getting out of hand. I don't even remember the last time I checked mine but here goes. The big reveal. I need to get off this page because I need to stop staring at that number. We'll come back to that. For a lot of us the decision to go to university was about getting the degree but we were also encouraged to go, right? Education, education and education. Young people should have the chance to go to university whatever their background. University was supposed to be the ticket to a decently paid job and working towards buying a property but honestly the reality we're facing is pretty different. We made a pledge, we didn't stick to it and for that I'm sorry. We inherited their broken student loans system. And the debt's adding up. Last year there was over 266 billion pounds owed in higher education student debt in England. That number is bigger than the entire GDP of Portugal. This period of one's life is tough. It feels like a kind of adding insult to injury. I think it's an absolute travesty that young people are being penalised in this way. So here's what we're going to break down. What's going on with student loans right now? How does the system work? And who's actually benefiting? I'm Oliver Nikido-Lynam and this is Sky News Explains. The student loan system is pretty complicated. Most people with student loans in England and Wales are either on plan one or plan two. And now there's plan five but we'll talk about that later. At the moment there's a lot of controversy about plan two. These young people who've signed up to these student loans they're just not able to even break the back of the capital that they've actually borrowed and it's the interest that is kind of eating up or swallowing up large amounts of their salaries. And one of the ways to really understand why people think it's so bad is comparing it to plan one. And there's three key ways that they differ. How much you have to earn to start paying the back. How long until the loan's written off. And the interest you have to pay. You're on plan one if you started university between 1998 and 2012. I don't fit that bracket but I know someone on my team who does. My producer James. When did you start university? 2010 so I was on plan one. And I'm on plan two which is for people who started between 2012 to 2023. So if you're on plan one you'll start paying back your loan when you earn over £26,065 a year. But for my loan the threshold's higher. It's £28,470. And James how long until your loan gets written off? 25 years. Well for me it's an extra five years. It didn't really look into the interest rates that much because I just assumed it would be worthwhile from just getting the degree. Because I wanted to go to university. Oh it's just going to be something over my head for the next 30 years. When you pay back your student loan you're not just paying back your tuition fees and your maintenance loan. You're also being charged interest on top of that. So let's talk about that. The Bank of England interest rate and something called the Retail Price Index or RPI. The Bank of England interest rate is set by, you guessed it, the Bank of England. And it's used for a whole range of things in the UK economy. RPI is less commonly used. People on plan one pay Bank of England interest rates and an extra one percent or RPI. But for people like me on plan two you could pay as much as RPI plus an extra three percent. So it's a lot more. All right let's go back to my student finance page. So I owe over £50,000 which honestly is the exact reason why I didn't want to check it. I'm one of over two and a half million people in the UK who owe at least that much money. I think ultimately a lot of it comes down to fairness. That's Ed Conway our data and economics editor. And I've been chatting to him about the maths and the money behind how all of this works. You all got that? All got that with your weird blend angle? And so all of these promises that I think, you know, some unwritten some written, these promises people felt that have been made between them and the state, a lot of them feel like they've been broken or bent over time. And then on top of that the degree of what you're having to pay is just getting bigger and bigger. So it's entirely understandable that in particular when it comes to plan two people are so frustrated. We're in Birmingham and we wanted to talk to students, graduates and members of the public about what they make of the student loan crisis. The city has five universities and one of the biggest student populations in the UK. And do you feel like when you were back in uni you knew before going like what the financial cost would be that you'd end up with 60k? No, I had zero clue. If I'd known that I probably would have like hesitated to take an hour student at plan two. It's just the working young population are the ones which get absolutely hammered. I'd say I'm pleased, still pleased that I went because I think it was an amazing life opportunity to meet people and definitely enable me to get my first proper job. But now obviously I'm a bit further on in my career and yeah you do kind of question it and think well maybe I would have been better off without going to university. In the future yeah like it's kind of like overlooming like once I'm done with uni it's just like straight into I've just got to start paying this sort of stuff off and it's like it kind of makes you not want to finish uni you just want to sit in there right now. We also asked you guys for your thoughts on student loans. Lily says she was at university for five years and now she's in debt of more than £100,000 and I really feel this one. She called it a lifetime subscription that increases every time I get paid more. Someone else who wanted to be anonymous said this in my mind there's no point checking as it will make me feel terrible and a key theme in the messages and in person is that issue of interest. I just knew that I had to take a student loan out they weren't really transparent on what that was. I think that was the general view of most of us and you're 18 you don't really know what you're signing up to. We've already mentioned that you don't have to start paying back your loan until you reach a certain threshold and that's good right especially if you're unemployed but not everyone's aware of just how early that interest starts accruing. Take a look at this document it's UK government guidance on plan 2 but this applies to a lot of the other plans and it says here your charged interest from the day we make your first payment to you or to your university or college until your loan has been repaid in full or cancelled. So that means your interest starts building from the moment you take out a loan. All of this raises a wider point about how depending on your background you're impacted differently particularly around maintenance loans which are determined by your household income. Yeah it's been a challenge. I grew up like pretty poor on a council estate neither of my parents went to university. I got the full loan and I also got a bursary while I was at uni so I've definitely got that like working class background and I find that you know the people that are from that background are having to deal with the effects and pay so much money every month. It means that I now have over £100,000 in debt for the rest of my life that I wouldn't pay off and it's a tough pill to swallow. Our education reporter Andrew Pierbacos was a teacher for over 20 years and is particularly concerned about this. I always believed that education was a key to social mobility. Seeing young people whose families had not been to university previously go on to achieve a university level education was life-changing but what's happened now is that that seems to be further and further out of the reach of those young people who might be from disadvantaged backgrounds. But we've got to address the elephant in the room. You probably remember this moment. We made a pledge, we didn't stick to it and for that I'm sorry. That's Nick Clegg, the former Lib Dem leader who promised to not raise tuition fees. Under the Tory and Lib Dem coalition tuition fees were trickled from £3,000 to £9,000 a year for students in England and Wales. The reason? The government argued that the system wasn't fit for purpose. The university system we've got today is unsustainable, uncompetitive and unfair. And people were not happy. Trust between the government and students was broken as tens of thousands of people took to the streets. This is London but protests took place across the UK. By the way we did try to talk to Nick Clegg about that decision and its consequences but his office declined to give us an interview or comment. University used to actually be free and for many students in Scotland it still is. But since fees were introduced in England the rising costs have been dramatic. From 1998 they've gone up from £1,000 to £9,585. And if you're starting university this year it's going up again to £9,790. So who's actually benefiting from the system and frankly where does all our money go? If you've taken out a loan you're probably very familiar with this website. Repayments are handled by the SLC, the student loans company. On its website it calls itself a non-profit making government-owned organisation. When you take out a student loan from the government they pay your tuition fees directly to the university. But where does all that interest go? A lot of people thought that this money that we were and are paying for our student fees will go towards those universities to make those universities better off. But actually that's not the way the system works. The way the system works is the money goes into the general exchequer pot. So it goes into, you know, the government, into Whitehall. And then Whitehall, you know, pays that out where it sees fit. And obviously part of the payments go to universities. And so indirectly it does finance universities. And so the link that you might think there is, that direct link you think there is between the money you're paying and where it actually goes, it's not quite as direct as you might have hoped for. And we asked the government how much of the money from loan repayments is put back into higher education. But they didn't respond. The relationship between the student loans company and the government has also been criticised. It is such a complex system. The precise relationship between the treasury and the loan company is very difficult to disentangle. It's not a clear relationship. We did ask the student loans company if they take any profit. And they said they do not benefit in any way from student loan repayments. Who do you think economically kind of benefits from the current student loan system? It's not really the students, because students are paying more now than they ever have done before. The government has lots of money coming in from this. But by the same token, it's not like they're kind of drowning in extra cash to spend at the moment. Our universities are pretty underfunded, but also our public services are. Many parts of our public services, not all, but many parts of our public services are kind of underfunded right now. And we don't necessarily have a particularly good fiscal situation for the government. And that's why we're talking about it now. People are struggling and student debt is making things worse. Youth unemployment is the highest it's been in 11 years. It's hard to get on the property ladder as a young person. And then there's the increased cost of living. Thank you, Mr Speaker. The government and opposition parties have all got opinions on what should happen next. The system is now at breaking point for graduates. I believe the student loans have become a debt trap. We inherited their broken student loans system. We've already introduced maintenance grants to improve the situation, which they scrapped. And we will look at ways to make it fairer. MPs have recently launched an inquiry to investigate whether parts of the loan system, like interest rates, are actually fair. The government told us that the student finance system protects lower earning graduates, and that since coming into power, they've been committed to supporting those who want to attend higher education. They've also announced a freeze on the threshold on loan repayments, which they said protects taxpayers and students. But calls for reform are also coming from inside the education sector. I'm really disappointed in the response of the government so far, because this really matters to thousands of young people. So what's the solution to all of this? Golly. How do we fix the situation? I don't think there is an easy fix to it. We have to somehow fund our education system. We have to somehow fund universities. And it does just make more sense for people who benefit from that system to be contributing to that system. I mean, I think that's a principle most people would agree with. The difficulty is that what we have at the moment is a system that no one's particularly happy with. I think everything is about choice. We don't have to do it this way. There are other options. If you look across just to Scotland, Scottish students don't have to pay to go to university. If you look at the Nordic countries, they don't charge their students to go to universities. All of these are choices that successive governments have made in order to make the system financially viable. There will be a lot of other universities, really good universities, that will suffer if the student loan system is not reformed. It's a bit too late for us. But what about the students thinking about going to university? Their terms are a bit different with Plan 5, which has been in place since 2023. They do pay less interest, but the threshold for repayments is lower at £25,000. And their loan won't get written off for 40 years. I don't think I'm going to go to uni. There's no point because I still apply and stuff. But it's more to do with I'm more of a hands-on learner. I definitely want to go to university. I think it's very important, especially for me. I need my degree to get a job as a primary school teacher, so I have to get it. I feel like just tuition fees plus accommodation costs adding up is very scary for me. I'm also the first in my family to probably attend uni. And I think nowadays it's heavily emphasised how important a degree is to get into the job market. And so uni is still worth it to you guys? I think having a degree and going to university is a fantastic experience. And I think young people, if they want to pursue that, they should have the ability and the accessibility to do that. When I started uni, there wasn't really an awareness about the cost. And to be honest, it's forced a young generation like you and like me to rethink our futures, factoring in our student debt into those big life decisions. But speaking to sixth formers, it seems there might be a better understanding these days. It's not clear what the government's going to do about this, but hopefully future generations will have enough knowledge to make an educated decision about whether university's worth it. If the system could be made fairer so that people felt like they were engaged in a contract that they could get behind, I think that would make a big difference. So I think it goes back to, OK, what choices do we want to make? What choices serve the next generation and future generations? And then I think we sit back and we take stock and we say, OK, so how can we make this happen?