Altmann: Let grads use auto-enrolment contributions to pay off debts

Graduates auto-enrolled into pensions should be allowed to use their employers’ contributions to pay off their debts, Ros Altmann, director-general of Saga, said.

UK students starting courses in 2012 could face average debts of £53,000 by the time they graduate, according to the Push University Guide, published today.

Annual average debts have risen 6.4% in the past year to £5,680, it said.

The problem of student debt will be exacerbated by the government's removal of the cap on tuition fees, allowing universities to charge up to £9,000 per year for teaching.

"The problem with pensions is that once the money is in, it is locked in for decades. For young people, that is a very off-putting thought," said Altmann.

"However, if they do not save in a pension, they lose the employer contribution. I believe that most advisers would suggest repaying debts before locking money away.

"Students should be given the option of being auto-enrolled into a student debt repayment plan as well as a pension and they can then choose."

Altmann added the government should decide whether or not to grant tax relief on student debt repayment plans.