Who doesn't pay back - The characteristics of borrowers who make no progress in reducing their student loans Publications
This paper explores the characteristics of borrowers who have not made any progress in reducing their student loan balances. The paper complements a related paper, Paying off a student loan, which explores the progress to full repayment for Student Loan Scheme borrowers.
Author(s): Roger Smyth and Jamie Hyatt
Date Published: August 2005
About half of those who use the Student Loan Scheme manage to repay their loan completely in about eight years. Some borrowers, however, struggle to make any headway in repayment. The median repayment time for Student Loan Scheme borrowers who last studied in 1994 was around six and a half years; yet by the end of 2002, 23 percent of those borrowers still owed as much as, or more than, they owed when they left study. This paper explores the characteristics of borrowers who have not made any progress in reducing their student loan balances and hence, attempts to find some of the reasons for slow repayment.
The paper is designed to complement Paying off a student loan, a paper that explores the progress to full repayment.
The study found that:
- Those who leave study with a high loan balance are more likely to have made no progress than those with lower leaving balances. The median loan balance on leaving study was higher for the no progress group than for all borrowers.
- Completion of a qualification is a key driver of income and hence, of progress to repayment. Of those who had successfully completed a qualification, 29 percent had made no progress by the end of 2002, compared with 47 percent of those who left study without completing.
- Women are less likely than men to have made no progress to repayment, whether they completed or not. This is despite the fact that women have slightly higher loan balances on leaving study than men.
- The incidence of no progress is considerably higher among those who took certificates than among those who took bachelors degrees, when we control for completion status.
- The median income of no progress borrowers five years post study is around or lower than the repayment threshold so that it is likely that most of the no progress group would have made no compulsory repayments at all over their first five years post study.
- The exception is the group of no progress borrowers who were successful in completing a bachelors degree. Their incomes were significantly above other no progress borrowers.
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