Over 100,000 England-based graduates have made additional voluntary student loan repayments, and for many it has likely been a waste of money.
According to the latest statistics from the Department for Education and Student Loans Company, the average overpayment for the 130,000 graduates who offered more of their money to pay off their student loans was £ 2,740.
However, 10,600 people made voluntary payments averaging £ 4,310 each before the money was even due.
This compares to the average student loan repayment in 2019/20 of £ 950 (by students in England, via automatic deductions from salary and income), up just £ 120 in a decade.
In total in England, £ 140bn was due in student loans in 2019/20, an increase of 15% from the previous year, with the average amount remaining due for people starting repayments this year rising at 40,280 pounds sterling.
But according to Hargreaves Lansdown’s analysis, a student starting this year and taking full tuition loans and maintenance loans could end up owing more than £ 61,500 by the time they leave college.
Despite the exorbitant amounts and graduates wanting to reduce the amount, it could be a waste of money, says the Institute of Fiscal Studies, because only 17% of graduates fully repay their student loans.
And Hargreaves Lansdown calculates that to fully repay the amount, students would need a graduate salary of £ 53,100 (assuming there are no career breaks and smooth salary increases) .
Sarah Coles, Personal Finance Analyst at Hargreaves Lansdown, said: “Students learn the hard way about debt.
“It’s worrying sending your kids to college to rack up tens of thousands of pounds in debt – and no one likes the idea that most will pay them off until their 50s. But by focusing on official student loans, we can end up wasting money – and overlook the real issue of student debt that accumulates along the way.
“Most graduates won’t come close to paying off their student loans until they are written off. However, many are so worried about carrying the debt that they are making additional repayments – in 2019/20, more than 10,000 of them started repaying before the deadline.
“For some people this will be a wise approach based on careful calculations, but for many there is a real risk that these extra payments will be a waste of money – because those debts will be written off anyway.”
See YourMoney.com Student loan dilemma: when to prepay for more information.