This is the claim by the Financial Times who said that student loans totalling £800 million has been partly responsible for the increase in unsecured loans.

The Student Loans Company (SLC) is now paying directly to universities for first year students and second year students to help cover tuition fees since they were introduced in 2006.

The Student Loans Company said that two payments are made to universities each year, one in February and the second one in May. An SLC spokesperson said, “We will see a similar rise in unsecured lending on that date for the same reason. The two cohorts are now getting the loans and the amount will rise again next year by a third after which it will plateau. That will be it because you start the natural process of rotation where everyone is doing three year degrees. We will climb to a plateau next year, it is the expectation.”

The SLC also revealed that they were ‘almost certainly' receiving the maximum numbers of eligible people taking up their offer of tuition fee loans. Each entitled student, a number in the region of one million undergraduates, will receive £2,000 a year to pay towards tuition fees which can be as much as £3,070.

However, the loans taken on by students is leading to three out of four graduates still amassing debts even after they have started their first job. Only a quarter of people leaving university with a degree are earning enough money to reduce their debts because of the high inflation figure the government is using to set student loan interest rates.

The government denied this claim, saying that students were only paying back in real terms, what they had borrowed. The average graduate is earning £18,000, and is paying back £219 a year on a £10,300 debt. However, the amount of interest added to account for inflation stands at £489.

Shadow University's Secretary, David Willets MP said, “Ministers claim student loans are interest free. But that is not the case in practice. The interest rate on student loans is over twice as high as the official inflation rate. Three quarters of new graduates in work are seeing their student loans continue to grow. They are getting into more and more debt. For the majority of this group, half of all new graduates, their loans are increasing even though they are making repayments to the Student Loans Company. Only the top 25 per cent of graduates in work are earning enough to see their debts fall.”

President of the National Union of Students, Gemma Tumelty said, “Graduates are already struggling to pay off thousands of pounds of debt and these huge increases in repayment rates are making things even worse. We have continually urged the government to review this unfair system and these figures only strengthen our case.”