This statistics publication provides forecasts for higher education and further education student loans in England. These include forecasts of student loan borrower entrant numbers, student loan outlay and student loan repayments.
The forecasts are based on models developed by the Department for Education (DfE), details of quality and methodology are provided in the methodology document accompanying this publication.
Student loan forecasts for England
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Correction to entrant borrower headline and related narrative, and additional data guidance information added.
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Introduction
This statistics publication provides forecasts for higher education and further education student loans in England. These include forecasts of student numbers, student loan outlay and student loan repayments. Only income-contingent student loans issued to English domiciled students studying in the UK or EU domiciled students studying in England are included. The forecasts are based on models developed by the Department for Education (DfE), details of quality and methodology are provided in the methodology document accompanying this publication.
This is the sixth in an annual series of statistics publications on student loan forecasts. It covers forecasts produced during the 2021-22 financial year, primarily covering the period 2021-22 to 2026-27.
We welcome feedback on this publication and the forecasts presented within it at he.modelling@education.gov.uk.
Headline facts and figures - 2021-22
On average, full-time undergraduate higher education borrowers are expected to take out loans for three years and, for those starting in academic year 2021/22, borrow on average £42,000 over the course of their studies. While most borrowers will repay at least some of their loan, the income contingent nature of the loans means only 20% of full-time undergraduate higher education borrowers starting a course in 2021-22 are expected to repay their loan in full.
In total £20.0 billion was issued in 2021-22 (as published by the Student Loans Company (opens in a new tab)). This was composed of: 93% Plan 2 full-time higher education loans, 4% Master’s loans, 2% Plan 2 part-time higher education loans, 1% Advanced Learner Loans, <1% Doctoral Loans.
Total student loan outlay is forecast to increase by 21% between 2021-22 and 2026-27 to £24.2billion in nominal terms. This is mainly driven by increases in full-time undergraduate loan outlay, partly reflecting increases in average loan amounts (which rise by 10% between 2021/22 and 2026/27) and increasing loan-borrowing entrants.
Total undergraduate loan-borrowing entrants are expected to grow by 5.2% over the forecast period, from 580,000 in academic year 2020/21 to 610,000 in academic year 2026/27. This is largely driven by forecasted growth in the 18-year-old population from 2021/22.
As loan repayments depend on borrower’s income and borrowers are only liable to repay for a fixed number of years, Government does not expect all loans to be repaid in full and expects to subsidise a proportion of student loans.
Of the loans issued in financial year 2021-22, the government is forecast to subsidise:
- 44% of Plan 2 full-time higher education loans (53% in 2020-21)
- 33% of Plan 2 part-time higher education loans (46% in 2020-21)
- 55% of Advanced Learner Loans (67% in 2020-21)
- 0% of Master’s loans (0% in 2020-21)
Loan subsidy forecasts for financial year 2021-22 do not include changes to plan 2 repayment terms (announced (opens in a new tab) in February 2022) for which legislation has not yet been passed. Where legislation is expected in 2022-23 the impacts are only included from 2022-23 onwards.
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Average borrowing per student
The average forecast loan outlay per undergraduate per year is displayed in Table 1.1. Full-time undergraduate students are forecast to borrow on average £15,080 per academic year in 2021/22. Students may take out a tuition fee loan, a maintenance loan or both. On average £8,850 is borrowed in tuition fee loans and £7,340 in maintenance loans. In future years the amount borrowed for higher education undergraduate loans is expected to rise in line with OBR forecast RPIx figures for the first quarter of the calendar year after the start of the academic year, apart from borrowing for tuition fee loans up to 2024/25. Maximum tuition fees are frozen up to 2024/25, however providers who charge below maximum fees may increase their fees up to the maximum. This is expected to drive small increases in average tuition fee loan borrowing up to 2024/25.
By 2026/27 full time students’ average borrowing per year is expected to rise to £16,660 (up 10% on 2021/22), which is mainly driven by higher borrowing in maintenance loans (up 12% on 2021/22, to £8,220). Maximum tuition fee loans are expected increase to £9,430 (up 7% on 2020/21). This is less than the increase in maintenance loans since maximum tuition fees are expected to remain frozen until 2024/25.
Students studying part time are expected to borrow on average £4,260 in academic year 2021/22 and we expect this to rise by 16% to £4,940 in academic year 2026/27. The average part-time fee loan is forecasted to be £3,830 in academic year 2021/22, while average part-time maintenance loan is forecasted to be £5,060. Tuition fees for part-time study are generally lower than for full-time study, resulting in lower tuition fee loans. Unlike full-time undergraduate students, the majority of part-time students only take out tuition fee loans, this is why the average total part-time loan is only slightly higher than the average fee loan.
Undergraduate students often take out loans for several years, usually related to the length of their course. The average full-time undergraduate student will take out 3 years of student loans, as shown in 'Table 14: Average length of funding per higher education undergraduate student’ which can be found in the ‘Explore data and files’ section of this release. Full-time undergraduate students starting in 2021/22 are forecast to borrow on average £42,000 over the course of their studies, as displayed in Table 1.3. This rises to £46,830 for those starting in 2026/27 due to the increases in maximum tuition fees from 2025/26 onwards and a rise in maintenance loan caps in line with forecast inflation.
Just over half of part-time undergraduate students expected to take a loan only in one year, with a further 26% taking out two or three years of loans. Part-time undergraduate students starting in 2021/22 will borrow £10,530 on average over the course of their studies. This rises to £11,920 for students starting in 2026/27. The increase is driven by expected rise in tuition fee loans and, to a smaller degree, by the annual uprating of maintenance loans.
The amount borrowed varies depending on the number of years students take out funding for. Students starting in academic year 2021/22 and taking funding for 2 years of full-time study are expected to take out £31,180 on average while full-time students taking funding for 4 years are expected to borrow £60,550. Part-time students starting in academic year 2021/22 and taking funding for 2 years of study are expected to borrow £8,860 on average while those taking funding for 4 years are expected to borrow £17,150 on average.
Students accrue interest on their loans whilst in study. For undergraduate students the interest rate during study usually varies depending on when they first started their studies. The final loan balance when students enter repayment will be higher than the total loan amount borrowed.
Average repayments per student
On average undergraduate higher education borrowers starting their studies in 2021/22 are forecast to enter repayment with an average debt of £45,800, equivalent to £37,100 in 21-22 prices. This debt is composed of loan outlay borrowed and interest accumulated during study. The average undergraduate loan borrower is not expected to repay this loan in full and instead has some loan debt written off after 30 years. Over the course of their loan term they are expected to repay on average 70% of the loan outlay borrowed (in real terms), at a total of £23,000 in repayments in 21-22 prices.
As student loan repayments are income contingent the amount of loan debt repaid varies with earnings. How repayment varies can be explored through grouping student loan borrowers into ten equal sized groups (deciles) depending on their forecast lifetime income. We’ll refer to these groups as:
- Lowest lifetime earners (Decile 1): these individuals earn less than 90% of other loan borrowers over their lifetime
- Low lifetime earners (Deciles 2 to 4): among loan borrowers these individuals earn more than the lowest earners but less than the top 60% of lifetime earners
- Middle lifetime earners (Deciles 5 and 6): among loan borrowers these individuals earn more than the low earners, but less than the top 40% of lifetime earners
- Higher lifetime earners (Deciles 7 to 9): among loan borrowers these individuals earn more than all bar the top 10% of lifetime earners.
- Highest lifetime earners (Decile 10): these individuals have lifetime earnings in the top 10% of all loan borrowers.
These deciles do not align with earnings deciles for the population in general. On average graduates have higher earnings than non-graduates, therefore the lowest 10% of lifetime earners amongst loan borrowers are likely to have higher average lifetime earnings than the lowest 10% of lifetime earners among the general population.
Among borrowers starting study in 2021/22, those forecast to have lower lifetime earnings repay considerably less than average (£3,100 in lifetime repayments, 10% of loan outlay borrowed, for those in the lowest 10% of lifetime earnings) while borrowers in higher lifetime earnings deciles repay substantially more than average (£48,700 in lifetime repayments in 21-22 prices for those in the highest 10% of lifetime earners).
The highest earners (deciles 9 and 10) are expected to repay their loans in full, in under 30 years, and to repay more than they borrowed (over 100% of their loan outlay in real terms). This is because they also repay accrued interest (which for undergraduate borrowers entering study in AY21/22 may vary between RPI and RPI+3% over the loan term).
The proportion of loan outlay repaid in real terms, in Table 1.4, is not calculated in the same way as the loan subsidy by government in each financial year. Loan outlay repaid in real terms considers the total amount of borrowing undertaken by a specific cohort of entrants, rather than subsidy on loans issued in one financial year (which will include multiple years of entrants). This difference is especially pronounced for the 21/22 cohort of entrants as reform of repayment terms (announced February 2022 (opens in a new tab)), which significantly reduces loan subsidy, are only recognised in estimated loan subsidy from FY22-23, part way through their course of study.
Borrowers starting their studies in 2023/24 will take out loans under different repayment terms (known as Plan 5) to those starting in 2021/22 (who repay under Plan 2). Plan 5 loans have a lower repayment threshold (£25,000 up to and including FY2026-27) than Plan 2 loans (£27,295 up to and including FY2024-25) and a longer repayment term (40 years) than Plan 2 loans (30 years) but a lower interest rate (RPI+0%) than Plan 2 loans (RPI+3% during study, variable between RPI+0% and RPI+3% after study).
On average undergraduate higher education borrowers starting their studies in 2023/24 are forecast to enter repayment with an average debt of £43,400, equivalent to £31,100 in 21-22 prices. This debt is composed of loan outlay borrowed and interest accumulated during study. Whilst the 23/24 starting cohort will on average borrow more than the 21/22 starting cohort, their debt on entering repayment is lower than the average debt of the 21/22 cohort due to the lower in-study interest rate on Plan 5 loans.
The median undergraduate loan borrower starting study in 2023/24 is expected to repay their loan debt in full over around 30 years, and on average 74% of loan outlay is expected to be repaid (in real terms). Average lifetime repayments for undergraduate loan borrowers starting in 2023/24 are £23,200 in 21-22 prices.
Borrowers in the 23/24 cohort (plan 5 loans) have similar patterns of lifetime repayments as the 21/22 cohort (plan 2 loans), in that average lifetime repayments increase with lifetime earnings decile. However, the lowest earners in the 23/24 cohort repay more over their lifetime than the lowest earners in the 21/22 cohort, due to lower repayment thresholds and longer loan terms. The highest earners in the 23/24 cohort repay less than the highest earners in the 21/22 cohort, as they accrue less interest, due to lower interest rates and lower repayment thresholds, and are therefore expected to pay off their loans more quickly.
Unlike borrowers in the 21/22 cohort, the 23/24 cohort are not expected to repay substantially more than they borrowed in real terms. This is because Plan 5 loans accrue interest at a rate linked to inflation. Currently the highest earners who repay their loan in full may pay marginally more than borrowed in real terms. This is because loan interest is assumed to be based on a lagged measure of inflation, which may be slightly out of sync with in-year inflation. Interest rates for AY23/24 have not yet been announced, and depending on the interest rate set, these borrowers may see the opposite effect of never repaying more than they borrowed in real terms. Interest rate caps based on prevailing market loan rates may also depress interest rates further for these borrowers.
Cashflows
The number of undergraduate loan-borrowing entrants are forecast to grow over the upcoming years. This is largely driven by forecasted growth in the 18-year-old population from 2021/22, because the 18-year-old population accounts for approximately 50% of the students who enter university each year.
Total undergraduate loan-borrowing entrants are expected to grow by 5.2% over the forecast period, from 580,000 in academic year 2020/21 to 610,000 in academic year 2026/27. Post-graduate loan borrowing entrants are forecast to decrease from 93,000 in academic year 2020/21 to 87,000 in academic year 2026/27. This represents an expectation that the pandemic-related growth in postgraduate loan take-up in 2020/21 has only been a single year shock, and growth has since returned to pre-pandemic trends for England-domiciles. As student finance support is discontinued from 2021/22 for most EU nationals, a significant drop in EU-domiciled loan recipient entrant numbers is estimated from 2021/22 onwards.
Additional information on forecasted student loan borrowers is published in ‘Table 2a: Forecasted number of students receiving loans, by loan product’ and can be found in the ’Explore data and files' section of the release.
Total student loan outlay is forecast to increase from £20.0billion in 2021-22 to £24.2billion in 2026-27 in nominal terms.
No Plan 1 loan outlay is forecast as these loans are only available to students who started their courses prior to 2012.
The annual growth of entrant borrowers and the rise in average loan amounts due to annual loan uprating drive the increase of full-time undergraduate outlay from £18.5billion in 2021-22 to £22.5billion in 2026-27. Students entering study from 2023/24 will repay the loans they borrow under Plan 5 repayment terms. In 2023-24 22% of full-time undergraduate outlay is expected to be borrowed under Plan 5 repayment terms, rising to 95% of full-time undergraduate outlay in 2026-27.
The decrease in Plan 3 postgraduate master’s loan outlay between 2021-22 and 2022-23 is driven by a forecasted decline in EU-domiciled entrants (due to the discontinuation of student finance from 2021/22 for most EU nationals) and England-domiciled entrants (due to a return to pre-pandemic growth trend)
Additional information on historic student loan outlay is published in ‘Table 1: Historical student loan outlay and forecast student loan outlay, by loan product’ and can be found in the ’Explore data and files' section of the release.
Cost to taxpayer
As student loan repayments are income contingent Government expects to subsidise a proportion of student loans. The RAB (Resource, Accounting and Budgeting) charge is the estimated cost to Government of providing a subsidy for the student finance system. It is the proportion of loan outlay issued each year which is not expected to be repaid, when future repayments are valued in present terms using the HMT discount rate. For more information about the HMT discount rate, see the methodology document.
For example, the Plan 5 full time higher education RAB charge in 2026-27 is forecast to be 23%, meaning that 23% of loan outlay issued for full-time higher education study under plan 5 repayment terms in 2026-27 is not expected to be repaid.
Positive RAB charges reflect the fact that while most borrowers will repay at least some of their loan, not all borrowers are expected to repay in full. This is because initial loan balances are large, borrowers are only required to make repayments above a set threshold, and unpaid balances are cancelled after 30 years for Plan 2 and Plan 3 loans, and 40 years for Plan 5 loans.
There is a significant decrease of in plan 2 RAB charges in 2022-23. This reflects changes to plan 2 repayment terms, announced (opens in a new tab) in February 2022, which maintained the plan 2 repayment threshold at £27,295 up to FY24-25, and changed linked increases in the repayment threshold in FY25-26 onwards to inflation rather than earnings growth. As legislation for this policy is expected in 2022-23 the impacts of the policy are only included from 2022-23 onwards.
From 2023-24 some loans, for new loan borrowers, will be issued under Plan 5 repayment terms. Plan 5 RAB charges are generally lower than for Plan 2. This reflects that loans issued under Plan 5 have longer repayment terms and lower repayment thresholds, and therefore a lower proportion of the outlay issued is not expected to be repaid in present terms.
Part-time students generally take out smaller total loans than full-time students, so are more likely to repay a higher proportion of their loan. The forecast RAB charge in 2026-27 for Plan 5 part-time students is 18%.
Since the last student loan forecasts release in June 2022 (opens in a new tab), l there have been revisions to the data, economic assumptions, policies and modelling methodology used within the student loan repayment and earnings models. These updates will all contribute to varying degrees to any changes over time in the forecast of figures such as RAB charge, stock charge and percentage of borrowers expected to fully repay their student loans. Current assumptions about the future student finance system are set out in the methodology document in the student loans earnings and repayments model chapter, while the assumptions about future tuition fee and maintenance loans are covered in the student loan outlay chapter.
Another way of considering the cost of the student loan system is through the transfer proportion. Conceptually the transfer proportion is the fraction of student loan outlay identified at loan inception as government expenditure, in recognition that this portion of the loan is unlikely to be repaid. It is used within the Office for National Statistics (ONS) public sector finance statistics
The transfer proportion differs from the RAB charge in the way future repayments are discounted to present values. The discounting of future repayments used for calculating the transfer proportion is based on the individual borrower’s interest rates, which vary across different loan products, rather than the HMT discount rate. This is why the transfer proportion can be lower or higher than the RAB charge for different loan products. This reflects the different use of the transfer proportion and RAB charges in government finances. Further information is available in the ONS discussion on the alternative valuations of future repayments.
Like the RAB charge, the transfer proportion is relatively stable across the forecast period. The forecast transfer proportion for Plan 5 full time loans in 2026-27 is 27%, meaning that 27% of loan outlay issued under Plan 5 terms in 2026-27 is identified at loan inception as government expenditure.
Whilst most borrowers are expected to repay at least some of their loan, many are not expected to repay in full.
Table 2.6 shows the proportion of students starting study in the 2021/22 and 2023/24 academic years that are forecast to fully repay their loans.
This is lowest for full-time higher education borrowers in the 2021/22 starting cohort at 20% as they will have the highest loan balances and will repay under plan 2 repayment terms. The remaining 80% will generally repay part of their loan balance, with some almost fully repaying. The proportion of plan 2 borrowers in the 2021/22 starting cohort expected to have repaid their loans in full has decreased compared to 2020/21 cohort forecast published in the last student loans forecasts release in June 2021.
Despite the 0% RAB charge, around 30% of master’s loan borrowers are expected not to fully repay their loan during their 30-year repayment term. In addition, these borrowers have interest rates fixed at RPI+3%. This may mean that the discounted repayments of some borrowers meet or exceed the total outlay provided, but do not fully pay off the interest accrued on the loan before the end of the repayment term.
Figure 3.1 shows the forecast outstanding student loan balance through to 2070-71. The outstanding balance on student loans is anticipated to reach a peak of around £459 billion in 2021-22 prices in the mid 2040s, at around the time that the first few cohorts of Plan 2 loan borrowers reach the end of their 30 year repayment terms and have any remaining loan balance cancelled. At this time, the nominal face value of the student loans would be approximately £912 billion. These projections are intended to give an indication of how the outstanding balance of student loans could grow if current policies and trends continue, but are inherently very uncertain given the length of time they project into the future.
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