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Master’s graduates on minimum wage forced to repay student loans - THE TELEGRAPH
Graduates with master’s degrees are being forced to repay student loans while earning the minimum wage, according to new analysis.
Repayments begin when a graduate earns more than £21,000, which is below the £23,809 that can be earned by a person working full-time on the basic rate, the Times reported.
It means a part-time employee earning £21,000 would in theory be forced to make repayments despite earning less than minimum wage.
It follows a 10-year freeze on repayment thresholds – a policy critics have said is “failing students, government and wider society”.
The analysis also found that 37pc of courses now cost more than the master’s loan, which is £12,858. The average cost of a master’s course for 2025-26 is £13,071.
Master’s loans are paid off at a rate of 6pc above the threshold, with interest charged at 3pc plus the Retail Prices Index (RPI) rate of inflation. The current interest rate is 6.2pc.
According to recruitment website Indeed, one in four roles advertised to graduates pays minimum wage or only slightly higher.
A spokesman for student body the Russell Group Students’ Unions said: “Master’s graduates from Russell Group institutions are critical to building a highly skilled workforce, supporting economic growth and a thriving cultural sector. By burdening graduates with excessive debt and de facto taxation, the Government is creating an unfair system that actively deters people from pursuing higher study. The current loan repayment model is failing students, government, and wider society
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“We urge the Government to review the master’s loan repayment model and introduce a fairer system, with thresholds that reflect real wages and interest rates that are reasonable.”
According to the Government’s latest data, 2.9 million students were in higher education in 2023-24. A quarter of these – 725,000 – were studying a master’s or postgraduate course.
The average salary for a postgraduate in 2024 was £47,000 – £5,000 higher than for undergraduates.
However, postgraduates are struggling more than ever to find employment thanks to an economic slowdown. Business leaders have blamed the rise in employee National Insurance contributions which came into effect last April.
James Reed, of recruitment company Reed, told the Times that he had seen graduate openings drop from 180,000 to 55,000 in four years.
Alex Stanley, of the National Union of Students, said: “It is absolutely criminal that anyone earning minimum wage would have any of that money taken away from them. The minimum wage is already too low; in many parts of the country, it is simply not enough to live on. How the Government can justify keeping the master’s degree loan repayment threshold so low is unfathomable.
“On top of that, the earning premium that master’s degrees used to ensure just doesn’t exist anymore, many master’s graduates are working for minimum wage.”
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Henry Parkes, principal economist at IPPR, said: “Asking master’s graduates to start repaying their loans when they are only being paid the minimum wage is unreasonable and deeply unfair.
“The postgraduate loan system is clearly not fit for purpose when repayment thresholds lag so far behind the real cost of living and basic wage protections. Student finance should support people to progress, not push low-paid workers further behind.”
It comes after Rachel Reeves froze the salary threshold at which Plan 2 student loans must be repaid at £29,385 for three years. It means more workers will be dragged into making larger repayments than if the thresholds had risen in line with inflation.
Plan 2 loans apply to students who started courses between September 2012 and July 2023.
A Department for Education spokesman said: “The student finance system is heavily subsidised by government, and lower-earning graduates will always be protected, with any outstanding loan and interest cancelled at the end of the repayment term.
“It is right that those who are able to repay do so, and under this system, where repayments are determined by income not total borrowed, graduates earning some of the highest salaries in the country contribute more towards the repayment of their student loan than workers who did not attend university or graduates on the lowest salaries.”
