Recent graduates are failing to pay off their University debt, because they are not earning enough to pay off their student loans.

According to the Liberal Democrats, 1 in 3 students who have left university since 1998 are not making repayments to their debt, which is nearly 400,000 graduates. The reason is because they are not earning above the required threshold, which stands at £15,000 per year. These figures are expected to rise in the near future, as the credit crunch puts stricter limits on the job prospects of future graduates.

Stephen Williams, Lib Dem spokesman for universities, commented: “As the financial crisis worsens the burden on new graduates is going to be even greater.”

The student loan system has been criticised by the president of the National Union of Students, Wes Streeting, who believes that there is a ‘myth’ that a student university loan is cheap to pay back. But there is now 4.8% added to the loans per year to offset inflation.