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Student debt cancels out higher graduate earnings incentive

Many graduates don't see supposed 'graduate premium' earnings, a new report says Credit: Reuters

Student debt payments wipe out the benefit of higher earnings for many graduates, a new report has found.

Campaigners behind the report say the "carrot" of higher graduate earnings which encourages people to study should not be used to justify increasing tuition fees.

The report by the Intergenerational Foundation focuses on tuition fees in England which are capped at £9,000 and paid back once graduates earn a certain amount of money.

It claims that the £100,000 lifetime graduate earnings premium is often used to justify increasing fees, but that other than Oxbridge, medical and dentistry graduates, many don't see this earnings premium.

It says that even if a student does achieve the premium over a lifetime - 45 years - it amounts to £2,222 before tax and NI payments, which is "not enough to cover the interest accruing" on the student loan.

Angus Hanton, co-founder of the Intergenerational Foundation, said: "Any politician that dangles the carrot of a graduate premium on future earnings to justify increases in student fees, interest rates on loans, or adjusting student loan repayment thresholds, should be challenged for gross mis-selling."