MINISTERS HAVE admitted that a third of graduates are not earning enough to pay back their student loans seven years after completing their degree.

MINISTERS HAVE admitted that a third of graduates are not earning enough to pay back their student loans seven years after completing their degree.

Recently released figures show that nearly 40,000 UK graduates are not yet earning over £15,000 a year, the threshold income for student loan repayments to begin.

These latest figures were released in response to a parliamentary question from the Liberal Democrats.

Stephen Williams, the LibDem shadow secretary for Innovation, Universities, and Skills expressed his concerns on the issue, saying: “As the financial crisis worsens the burden on new graduates is going to be even greater.”

Concern over repayments has coincided with evidence questioning the value for money of university degrees.

Research carried out by Professor Robin Naylor of Warwick University found that while the general salary return for degrees remains, this has become more variable, depending on the type of degree.

Meanwhile research from the University of Kent shows that in 2006, a third of graduates were working in jobs that did not require a degree, and earning less than fellow graduates who were using their degree.

A lack of openings for graduate jobs is likely to cause anxiety for students and loan providers. With the average student now racking up £20,000 of debt over the course of their degree, the rate of return on student loans remains slow.

The annual interest rate for student loans has doubled from 2.4 per cent in 2006 to 3.8 per cent for the new academic year.

The interest rate is pegged to inflation measured by the Retail Price Index.

News of the increase in interest prompted students to submit an e-petition to 10 Downing Street urging the government to peg interest rates according to the CPI, the government’s own measure inflation.

Unlike the RPI, the CPI excludes mortgage costs and would offer a more forgiving rate of interest on student loans.

While the government looks set to maintain their current measure of interest rates, the student finance system continues to face criticism.

The National Union of Students has called on the government to replace the current funding system with simpler, more centralised financial support for all UK students.

NUS President Wes Streeting has described the financial aid system as “broken”, saying that the current interest rate made a “myth” of the government’s promise to provide affordable higher education.