The Student Loan System is Now Completely Broken

2nd February 2026

Young people should think carefully — but not necessarily be put off.

UK student loans are very different from normal debt, and whether they're a problem depends a lot on future earnings, not on the headline amount borrowed.

How UK student loans actually work (the key facts)

You repay based on income, not the size of the loan

You only repay if you earn above a threshold (currently around £25-27k, depending on the plan).

Repayments are a fixed percentage of income above that threshold (usually 9%).

If your income falls, repayments fall automatically.

If you never earn above the threshold, you never repay.

This makes it more like an extra tax than a normal loan.

Most people will never repay the full amount

Because of:

Long repayment periods (30–40 years)

Interest rates linked to inflation

Income-based repayments

...many graduates will have some of the loan written off at the end.
For middle- and lower-earning graduates, this is expected and built into the system.

The real risk is for middle earners

The people who should think hardest are:

Those likely to earn moderate but steady salaries (e.g. teachers, nurses, many public-sector roles)

They:

Repay for decades

Often repay more in total than they borrowed

But don't earn enough to clear the loan early

Very high earners pay it off quickly.
Lower earners often repay little or nothing.

Reasons young people should pause and think[b]

High interest rates

Interest can be higher than inflation, especially under newer loan plans.

The balance can grow even while you’re repaying.

This can feel unfair and psychologically heavy, even if repayments are affordable.

[b]Long repayment periods

Loans now last up to 40 years.

That means repayments can affect:

Take-home pay

Mortgage affordability calculations

Long-term financial planning

Non-graduate alternatives are improving

Apprenticeships, higher technical qualifications and employer-funded routes now exist in many fields.

For some careers, these offer lower debt and similar outcomes.

Reasons not to panic or avoid university automatically

No upfront cost

You don’t need money to study — repayment risk is mostly shifted away from the individual.

No credit-score damage

Student loans don’t affect your credit rating.

Missing repayments isn’t possible — they’re taken automatically via PAYE.

Strong graduate earnings premium (on average)

Despite problems, graduates still earn more on average over a lifetime than non-graduates — though this varies hugely by subject and institution.

The most important question to ask

Not "How big is the loan?"
But:

“What am I likely to earn in this career, and is a degree the best route into it?”

That means thinking about:

Subject choice

University quality

Career outcomes

Alternatives like apprenticeships