30/01/2006 15:31:00
Increasing numbers of graduates are declaring bankruptcy because they cannot meet their student loan repayments, new figures show.
Data from the Student Loan Company shows that since student loans came into force, 4,000 students have declared bankruptcy, with a similar number insolvent and unable to meet repayments.
Last year, 899 graduates filed for bankruptcy, up from 276 in 2002, 97 in 1998 and just eight in 1992.
The average student now graduates with debts of £12,000, although student campaigners predict this will rocket from next year as £3,000 top-up fees come into force.
Campaigners warn that such debt levels have far-reaching implications for both individual borrowers and wider society.
Edward Davey, the Liberal Democrat education spokesman, warned that the housing market could crumble as graduates are unable to afford their first home. He also predicted that the public and voluntary sector could lose out as young people feel obliged to take high paying jobs.
"This debt is a millstone around people's necks which will have a dramatic impact on students and society. These young people are starting their careers with one arm tied behind their backs," Mr Davey said.
The National Union of Students confirmed the level of anxiety, saying that increased numbers of students are seeking counselling for debt concerns.
It was reported previously that many new graduates were voluntarily declaring themselves bankrupt as a way to effectively clear their student loan. The government has since closed this loophole, however, and student loans are now exempt from bankruptcy legislation.
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