Student loan debts are rising and rising, according to new research.
While some people who can afford to pay off their loans can still get on the path to homeownership, others who have had to default on their loans have been pushed into poverty and faced with higher costs of living.
The new research, from Oxford University, also shows that debt from student loans has risen significantly over the past few years, despite the fact that the average income of students has not grown in recent years.
The research comes as the US is grappling with the fallout from the Great Recession, which was triggered by the housing crash.
The study also shows the rise of interest rates and a spike in the cost of student loans.
“In the past, there has been a focus on student loans and the potential for them to be a significant driver of the financial problems facing people,” said Dr Nick Wilcox, from the Oxford Centre for the Study of Student Debt.
“But, since the crisis, student debt has risen substantially, and is currently projected to exceed £300bn by 2020.”
A recent report by the US Department of Education showed that nearly two-thirds of all borrowers are over the age of 55.
The average student loan debt for a first-time borrower is now more than £100,000.
While the US has seen a lot of debt, the country’s share of the world’s total debt is only slightly higher at 42 per cent.
The UK is the second most indebted nation, with £31.9bn in student debt.
However, the UK’s debt levels are lower than many other European countries.
The figures come as the European Union, which has long been criticised for having too many student loans, has introduced measures to make its loans more affordable.
The move comes after a number of European countries, including Germany and Spain, introduced new rules in 2016 which meant they could no longer get rid of their student loans in exchange for paying them off.
This year, the EU agreed to make the repayments of loans to students on a lump sum of up to 5 per cent of their income, as well as allowing countries to opt out of the repayment plan entirely.
In addition, a new EU scheme to tackle student debt, called the Student Loans Borrowing Guarantee, was launched in 2018.
“The UK’s student loan system is the best in the world, but it is also the biggest burden on the poorest people,” Dr Wilcox said.
“It’s really a mess.
People in low-income households are going to struggle to make ends meet if we don’t change it.”
However, there is hope for the UK.
According to the new research by Oxford, the government could take some steps to try and reduce the number of people who have to default or forego loans.
These include introducing a new repayment plan for first-timers, or allowing those on lower incomes to make payments on the same terms as their more affluent peers.
Dr Wilox said the UK could also offer a greater variety of options to people with lower incomes.
“We know from previous research that people with relatively low incomes are more likely to struggle, and the problem with this is that they tend to make up a lot more of the debt burden for those with higher incomes,” he said.
The government should look at the potential impact on the UK economy, and take a more pragmatic approach to tackling the issue, he said, by working with financial services providers to improve the repayment arrangements.
“I think it’s possible to get more of a diversified and inclusive debt repayment system.
This would be a more progressive system, where people who might have been very dependent on loans could get on a path to buying a house.”