Changes to student loan payments will hit lower-earning graduates hardest, experts have warned.

Ben Waltmann, senior research economist at the Institute for Fiscal Studies (IFS) said changes which will see graduates start paying their loan back over a salary threshold of £25,000 from September 2023, will benefit high-earning graduates while increasing the cost of loans for lower earners.

Loan balances will now only be written off 40 years after repayments start, whereas currently graduates pay back over 30 years.

“These changes will transform the student loans system,” Mr Waltmann said.

“While under the current system, only around a quarter can expect to repay their loans in full, more than 60% can expect to repay under the new system,” he added.

He said this is partly due “to substantially higher lifetime repayments by students with low and middling earnings”, while the benefit of the changes to the taxpayer would be “modest” – with around £1 billion per cohort of university entrants.

The reform translates into a lifetime earnings loss of more than 1%, or more than a penny in each pound they will ever earn

The higher repayments by graduates on lower incomes would be “mostly offset” by lower repayments from high-earning graduates, he said.

IFS analysis shows the very top earners among graduates would see a gain of nearly £20,000 in 2022 terms as a result of changes, whereas those on lower to middle incomes would “stand to lose the most at around £19,000”.

They would still not pay off their student loan but would make repayments for 10 years longer and on a greater share of their earnings than under the current system.

The IFS said that as a percentage of lifetime earnings, the reforms affect borrowers with “lower middling earnings the most”.

Mr Waltmann added: “For them, the reform translates into a lifetime earnings loss of more than 1%, or more than a penny in each pound they will ever earn.”

The IFS also calculated that the reforms will hit women more than men.

Men will repay around £5,500 less on average towards their student loans under the new system, whereas women will pay £6,600 more, as women tend to spend more time out of the workforce and earn less than men on average, so will be unlikely to benefit from the lower interest rates introduced as part of the reforms.

Mr Waltmann said the new system is “more transparent” for students but this needs “to be weighed against its strong negative impact on lower-earning graduates”.

Analysis by London Economics found the changes mean “significant” increases for middle-income graduates, with both males and females in this bracket paying £4,700 and £9,400 more respectively.

Laura Suter, head of personal finance at AJ Bell, said: “Someone with a loan of £45,000 on a starting salary of £30,000 would pay off almost £31,000 under the current system, but that would rise by £40,000 to £71,500 under the new system.

“What’s more, assuming they leave university at the age of 21, they will be paying off £320 a month in their final year of the loan at the age of 61.”

“The impact of loans continuing for far longer will be dramatic on many people’s finances – any money they are paying towards loans each year is money they can’t put into pensions, longer-term savings or paying off the mortgage.”

Education Secretary Nadhim Zahawi told the Commons on Thursday that students starting in academic year September 2023 are expected to borrow an average of £39,300, adding: “We forecast that the average graduate will repay £25,300 in today’s prices over the course of their loan. How does that compare with the current system – £19,500 is what they would repay.”