The increasing levels of student debt could reduce life options for UK graduates years after their graduation, say Liberal Democrats.

According to party spokesman Stephen Williams, swelling debt levels are affecting the lives of students decades after they graduate. The statement coincides with a study by GE Money, the financial services arm of General Electric which found that the number of young adults setting aside their pension savings had fallen.

However, GE Money said significant rise in student debt and the current market turmoil are to blame for the drop in pension savings among young people.

Reports suggest that students remain the worst group affected by rising inflation with figures from the National Union of Students showing that many undergraduates leave college with debts of up to £40,000.

Additionally, the research by GE Money found that less than a fifth of young adults aged 17-24 have pension savings. Many in this group who contribute to their pensions also do not believe that it will give them a decent income in retirement.

Lib Dems spokesman Stephen Williams said: "Students are facing unprecedented levels of debt, which will have a dramatic long-term effect on their ability to buy homes, start families and save for old age."

The Lib Dems further released new statistics which show that the total debt held by UK students had increased by £4billion and was now totalling £22 billion.