It's time for a Future Learning Fund – and not just more student loan debt

But if we’re serious about empowering young people, it’s time we looked beyond the student loan system.

In England, the average graduate leaves university with over £45,000 in student debt. The total student loan book has now reached £206 billion, with the government projecting it will exceed £300 billion by the mid-2040s. And yet, most people don’t really understand how student finance works.

We call it a “loan,” but in reality, it behaves more like a graduate tax. You only start repaying once you earn above a threshold (currently £25,000 for Plan 5 students), and any unpaid balance is wiped after 40 years. For most graduates, especially those on average incomes, they’ll never repay it all.

The problem is, we’ve failed to explain this clearly. Young people hear “debt” and carry the psychological weight of it. Parents panic about how their children will manage. And those who choose not to attend university receive none of the financial support, despite facing many of the same costs, from housing and transport to training and job-hunting.

It’s time for something new. A system that reflects real life, not just one version of it.

That’s why I’m proposing the Future Learning Fund.

Every child born in the UK would be given a savings account at birth, seeded with £500 from the government, with an extra top-up for low-income households. Family, friends and even employers could contribute each year, with matched government contributions for those on lower incomes.

At 18, the young person could use the fund for any meaningful next step: tuition fees, apprenticeships, starting a business, buying a laptop, moving into a new job or city – even a deposit for their first home. And if they don’t use it by 25, the money could be rolled into a pension or Lifetime ISA to support their long-term financial wellbeing.

This is not about handouts. It’s about giving every young person a small stake in their future and the flexibility to use it in a way that suits them. It encourages saving, sparks financial literacy early, and removes some of the pressure around making the “right” choice at 18.

And yes, it would cost around £400 million a year, but for context, the government already spends billions annually subsidising student loans. Recent data suggests more than 70% of graduates will never fully repay their loan, meaning the government effectively writes off huge amounts of the balance. That’s a lot of money spent inefficiently, and often in ways that benefit higher earners most.

We’ve done something like this before. The Child Trust Fund, launched in 2005, gave every child a small nest egg at birth. While it had its flaws and was scrapped in 2011, the principle remains powerful: start early, and you build a generation that’s more equipped and more confident, with money.

The Future Learning Fund would take that concept further: with more flexibility, broader access, and a clear focus on building opportunity rather than debt.

Because money should open doors, not weigh people down.

Let’s give every young person a fairer shot. Not just at education, but at choice, security, and self-belief.

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Abi Foster is LBC's personal finance expert and can be found here.

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