Is the Graduate Loan System Fair?

There’s been a noticeable rise in conversations about the UK’s graduate loan system — and not just among students. Parents, employers, and older graduates are increasingly asking whether the current structure is fair, especially for those who studied after tuition fees rose in 2012.

Why the Graduate Loan Debate Is Back in the

• Many graduates now repay for 30 years, often without clearing the balance.

• Repayment thresholds have been frozen, increasing the effective repayment burden.

• Interest rates have fluctuated, sometimes reaching levels far above inflation.

As a result, younger graduates often face a very different financial reality compared with those who studied before 2012.

A Real Example: A Typical Plan 2 Graduate After 2012

Example: 4‑year degree, full tuition + full maintenance loan

A typical student on Plan 2 might graduate with:

• Tuition fees: £9,000–£9,250 per year

• Maintenance loan: £6,000–£8,000 per year (depending on household income and living arrangements)

Total debt after 4 years: Usually £45,000–£60,000, sometimes more once interest during study is added.

How repayments work for them

• They repay 9% of earnings above £27,295 (current threshold).

• If they earn £30,000, they repay £243 per year — around £20 per month.

• If they earn £50,000, they repay £2,043 per year — around £170 per month.

• After 30 years, any remaining balance is written off.

Because interest accrues quickly, many Plan 2 graduates never repay the full amount, even if they earn a decent salary.

This is why some people describe the system as functioning more like a graduate tax than a traditional loan.

How This Compares With Pre‑2012 Graduates

Graduates who studied before 2012 typically experienced:

Lower fees or no fees at all

• Before 1998: University was free.

• 1998–2006: Fees were around £1,000 per year.

• 2006–2012: Fees rose to £3,000–£3,375 per year.

Lower interest rates

• Often close to inflation, sometimes 0%.

Lower total debt

A typical pre‑2012 graduate might have left university with £10,000–£15,000 of debt — or none at all.

Shorter repayment periods

Many repaid fully within 5–10 years.

No repayments for many older graduates

Someone in their 50s or 60s today may have:

• Paid nothing for tuition

• Taken no loan

• Or repaid a small loan long ago

Yet they earn the same salary as a younger graduate who is still paying 9% extra every month.

Why Some People Believe Older Graduates Should Contribute More

Supporters of reform argue that:

• Younger graduates face significantly higher lifetime costs.

• The system functions like a tax, so it should apply more evenly.

• Older graduates benefited from free or heavily subsidised education.

• Intergenerational fairness should be part of the conversation.

Some proposals include a small, time‑limited contribution from older graduates who paid no fees.

Why Others Strongly Oppose the Idea

Critics argue that:

• Retrospective taxation is unfair and undermines trust.

• Older graduates made decisions based on the rules at the time.

• Many already contributed through higher income tax rates earlier in their careers.

• The real issue is the current system, not past generations.

Where Does This Leave Us?

The conversation isn’t really about blaming older graduates — it’s about recognising that the financial landscape for students has changed dramatically.

Whether reform comes through:

• adjusting repayment thresholds

• Rethinking interest rates

• or redesigning the system entirely

…it’s clear that the current model is under pressure.