Students and graduates more confident about money than ever

Graduates now think they will pay back their student debt in just over ten years.

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With A-level results day approaching on Thursday 15 August, many students and their parents will be looking forward to university with perhaps a hint of trepidation at the costs involved. However, university students and recent graduates are more optimistic than ever before about the time it will take them to pay back their student debt, according to research from the Association of Investment Companies (AIC)1.

Graduates2 now think they will have paid off their student debt 10.2 years after they graduated – the shortest time since records began in 2017, when the average estimate was 19.8 years. On average, graduates polled think they will have paid back their student debt in full by age 39, younger than ever before.

Clear debt

Graduates are more savvy about their loan too. Four-fifths of them (80%) say that they are aware of how interest on their student loan is calculated, up from 53% in 2019 and at the highest levels since the survey began.

Nearly half (49%) of graduates expect to repay their student loan fully, similar to 50% last year which was the highest level ever, up from only 13% in 2019.

Repay loan

Current students3 also estimate it will take them less time to pay off their student debt than they did in previous years. At 11.3 years after graduation, this is another record low.

Debt on graduation

Students are also savvier than their parents about how much debt they are likely to leave university with – although their estimate of £35,679 is still some way off the official figure4 of £45,600. The average estimate from parents5 with students at university, or planning to go, was just £32,166 – more than £13,000 short of the true figure.

“Today’s students and graduates are more confident about their finances, and expect to pay their debt off more quickly than we’ve seen in previous surveys.”

Nick Britton, Research Director of the Association of Investment Companies (AIC)

nick

As well as being more confident and knowledgeable about their finances, more graduates feel university is good value for money than ever before, 66% of those surveyed. Current students echo this sentiment, with a record 63% finding university good value for money – a sign that universities are shaking off the shadow of the Covid years.

Nick Britton, Research Director of the Association of Investment Companies (AIC), said: “Today’s students and graduates are more confident about their finances, and expect to pay their debt off more quickly than we’ve seen in previous surveys.

“What’s behind this increased confidence? Last year’s changes to student loan repayment thresholds, repayment terms and interest rates haven’t affected those who have already graduated, but they have led to plenty of media coverage which may have raised awareness among graduates. Four in five graduates now say they understand how interest on their loan is calculated – a record high.

“Another reason graduates expect to pay their loans off quicker is that wage inflation is pushing their salaries further over the repayment threshold. For example, a graduate earning £28,000 would repay £63 a year, but if they got a 5% pay rise to £29,400 they would be repaying £189 – three times as much. This could explain why graduates now think it will take only ten years to repay their loan in full – the lowest figure ever.”

Money worries haven’t gone away

A university education is still a formidable financial commitment for most people. A majority of current students considered not going to university at some point because of the cost. At 54% this figure has increased over time.

Among young people who are not at university and have no plans to go, not wanting to get into debt was the key reason, cited by 38% of non-students6. The second most common reason was that respondents felt tuition fees were too high (32%), while 29% cited the increasing cost of living.

Not surprisingly, students whose parents are from the social groups ABC1 are more confident their families can help with university costs (72%) than students from C2DE families (37%). But this gap is higher than it’s ever been before at 35%.

How investing can help

Investing modest sums every month for a child could add up to a considerable pot by the time that child turns 18. For example, a regular monthly investment of £50 in the average investment trust7 over the past 18 years would have left an investor with £30,668 – two-thirds of the average student debt on graduation.

Returns from investing £50 a month in the average investment trust

 

5 years

10 years

18 years

Total sum invested

£3,000

£6,000

£10,800

Value at end of period

£3,752

£9,713

£30,519

Source: theaic.co.uk / Morningstar (to 30/06/24).

For more information about how parents and grandparents are helping children with the costs of university, see our previous release, ‘Parents dig deep to support kids through university’.

If you want more information about this research, please contact the communications team.

 

- ENDS -

 

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Notes to editors

  1. Research commissioned by the AIC and conducted by Opinium. Student debt includes all types of debt accumulated when studying at university, including student loans, bank loans and money borrowed from friends and family. 
  2. In the graduates survey, Opinium polled 200 graduates aged between 21 and 35 who had completed their degree in the last five years. The sample was weighted to match previous years’ waves by age, gender, social grade and student status. The fieldwork was conducted between 31 May and 11 June 2024. 
  3. In the students survey, Opinium polled 1,000 students who are planning to attend university, or are currently at university. The sample was weighted to match previous years’ waves by age, gender, social grade and student status. The fieldwork was conducted between 31 May and 10 June 2024. 
  4. Forecast debt on graduation for a student starting their course in 2022/23. Source: House of Commons library (link). 
  5. In the parents survey, Opinium polled 1,000 UK adults with children aged 13 to 21 who have a child at university or expect to have a child at university. The fieldwork was conducted between 5 June and 17 June 2024.
  6. In the non-students survey, Opinium polled 300 students aged between 16 and 24 who have not been to university and don't plan to go. Fieldwork was conducted between 5 June and 18 June 2024.
  7. Source: theaic.co.uk / Morningstar. Returns to 30/06/24. Returns for the average investment trust are share price total returns excluding VCTs.
  8. The Association of Investment Companies (AIC) represents a broad range of investment trusts and VCTs, collectively known as investment companies. The AIC’s vision is for closed-ended investment companies to be understood and considered by every investor. The AIC has 329 members and the industry has total assets of approximately £277 billion.
  9. For more information about the AIC and investment trusts, visit the AIC’s website. 
  10. Disclaimer: The information contained in this press release does not constitute investment advice or personal recommendation and it is not an invitation or inducement to engage in investment activity. You should seek independent financial and, if appropriate, legal advice as to the suitability of any investment decision. Past performance is not a guide to future performance. The value of investment company shares, and the income from them, can fall as well as rise. You may not get back the full amount invested and, in some cases, nothing at all.
  11. To stop receiving AIC press releases, please contact the communications team.