Graduates on England’s newest student loan plan could miss out on building more than half-a-million pounds in long-term wealth because of decades of repayments.
According to new analysis, a student leaving university with £50,000 of debt and earning £30,000 in their first job would repay almost £105,000 over the life of a Plan 5 loan.
That total includes about £56,000 in interest, comparison site Finder, which conducted the research, said.
If someone on the same salary path had no student debt and instead invested the equivalent of their annual repayment into the S&P 500, they could end the same period with around £572,000. This is assuming the index delivered its historic average annual return of 10 per cent.
The figures are likely to add to growing concern over the long-term cost of England’s student finance system, particularly after recent anger from borrowers over interest charges and how repayments can stretch across much of a working life.
Plan 5 applies to students who began university courses on or after August 2023. Borrowers start repaying once they earn more than £25,000 a year, with repayments set at 9 per cent of income above that threshold. Any remaining balance is written off after 40 years.
Some graduates are due to begin making repayments from April 2026.
Unlike older loan systems, Plan 5 was introduced as part of wider reforms designed to lower the earnings threshold for repayments and lengthen the repayment period for many graduates.
Critics argue that means more middle-earners will repay for longer, even if they never clear the full balance.
Finder’s modelling suggests the impact is still stark at lower salaries, as someone starting work on £25,000 and receiving annual pay rises of 3.4 per cent would repay around £95,000 over 40 years – including more than £82,000 in interest.
If the same sums were invested instead, that person could accumulate close to £473,000 over the same timeframe, it said.
The calculations assume a starting loan balance of £50,000 and a student loan interest rate of 3.2 per cent, reflecting the current rate for the 2025 to 2026 period.
The Government has previously said interest rates are linked to inflation rules and that balances are not the same as commercial debt because repayments depend on earnings rather than the total amount owed.
Ministers have also confirmed tuition fee limits remain capped in England unless changed through future policy decisions.
George Sweeney, investing expert at Finder, said the findings showed how repayments can affect graduates’ wider finances for decades.
He said: “People often focus on the cost of student loans and the debt it can get you in, but this research highlights how the high interest severely hinders people’s ability to invest and grow their wealth.
“Even investing small amounts regularly can make a massive difference over time thanks to compound interest. Instead, people are paying off a punitive loan for up to 40 years.
“Regardless of whether you’re paying off a loan or not, investing, or saving, any amount of money regularly is a fantastic habit to get into.”
One trick is to work out an amount you can afford to invest and do so immediately after pay day, he suggested.
He added: “This way you’re not tempted to spend it on something else. As this research shows, even small starting amounts can lead to big returns if you are consistent.”
It comes as the financial case for university is under closer scrutiny.
Research from the Centre for Economics and Business Research has found the average lifetime earnings premium between university graduates and higher-level apprentices has narrowed to 1.8 per cent.
That shift has intensified questions over whether taking on large debts for a degree still offers the clear financial advantage it once did, especially for students entering modestly paid professions.
