Student loans are locking a generation out of homeownership - MPs can no longer ignore this
For a generation of graduates, student loans are not just a line on a payslip. They are a barrier to owning a home, writes Richard Dana
The student loan crisis has finally reached Westminster. The Treasury Committee’s new inquiry into student loans and the taxation of graduates is welcome - and long overdue. But if this debate is going to lead to meaningful change, it must confront a crucial, often overlooked consequence: the impact of student debt on mortgage affordability. Because for millions of aspiring homeowners, student loans aren’t just an abstract policy problem. They are a direct barrier to getting on the housing ladder.
Listen to this article
Over the past decade, the terms of student finance have shifted dramatically. Graduates now routinely leave university with debts exceeding £50,000. They face interest rates above inflation, frozen repayment thresholds, and repayment rates that push marginal tax levels as high as 51% for some earners.
This is no longer a manageable “graduate contribution”. It is a long-term financial burden that shapes life choices well into people’s 30s and 40s. And nowhere is that more visible than in the housing market.
Tembo’s data shows that student loan repayments can reduce mortgage affordability by between £20,000 and £30,000, depending on the repayment plan. In a market where the average first-time buyer home costs around £300,000, that’s not marginal - it’s game-changing.
It can mean the difference between buying and renting. Between putting down roots or staying stuck.
Lenders assess affordability based on monthly outgoings. Student loan repayments, deducted at source, directly reduce what buyers can borrow. The higher the repayment, the lower the mortgage offer.
At the same time, graduates are often paying significantly more interest on their student debt than they would on a mortgage. Today, many could secure a mortgage at rates around 3.7%, yet student loan interest can exceed 6%.
That mismatch is hard to justify. And harder still for young professionals trying to build a future.
What we are seeing in practice is a hidden tax on aspiration. One that delays homeownership, widens generational inequality, and undermines the very economic mobility higher education is meant to support.
Yet despite ongoing political debate about how to help first-time buyers, from planning reform to deposit schemes, student loans are rarely part of the conversation.
That needs to change.
If Parliament is serious about tackling the housing crisis, it cannot ignore one of the most significant financial pressures facing would-be buyers.
The Treasury Committee’s inquiry is an opportunity to take a more joined-up view — to recognise that student finance policy and housing policy are deeply interconnected.
This doesn’t necessarily mean writing off debt or overhauling the system overnight. But it does mean acknowledging the real-world consequences of current policy, and exploring solutions that ease the burden where it matters most.
That could include factoring student loan repayments more intelligently into mortgage affordability assessments, reviewing interest rates, or reconsidering how repayments interact with other financial commitments.
Above all, it means recognising a simple truth: for a generation of graduates, student loans are not just a line on a payslip. They are a barrier to owning a home.
If we want to unlock homeownership, we must start by addressing that.
________________
Richard Dana is the CEO of Tembo.
LBC Opinion provides a platform for diverse opinions on current affairs and matters of public interest.
The views expressed are those of the authors and do not necessarily reflect the official LBC position.
To contact us email opinion@lbc.co.uk