Students warned of rise in maximum interest rates on loans
Maximum interest rates on student loans are set to rise this autumn.
From this September, students will pay up to 6.3%, after a rise in the Retail Prices Index (RPI) – a measure of inflation, compared to the same point last year.
The increase comes amid continued concerns about the debt burden on students and high interest rates on loans, as well as whether students are receiving value for money.
A review of higher education, formally announced by Theresa May in February, is due to examine the role of interest rates on student loans.
Ministers insisted that the change in interest rate will have no impact on monthly repayments and that few people are likely to be affected.
It was announced today that RPI stood at 3.3% in March, down from 3.6% in February.
But interest rates on student loans are set each March for the following September – the start of the academic year – and in March 2017, RPI was 3.1% – meaning there has been a year-on-year increase.
The change affects students in England, Wales and Northern Ireland.
Students can get Government-backed loans to cover the cost of their tuition fees – which stand at up to £9,250 a year in England, as well as to help with living costs.
Those at university this autumn will be charged interest of 6.3% – RPI plus 3% while they are studying.
After they graduate, interest is charged on a sliding scale, with those earning over £45,000 paying the maximum of 6.3%.
Graduates do not have to begin repaying their loans until they are earning £25,000, and those earning under this amount are charged interest of 3.3%.
A Department for Education spokesman said that the Government’s decision to raise the repayment threshold to £25,000 from £21,000 will save 600,000 graduates up to £360 a year.
“This change in interest rate will make no impact on a borrowers’ monthly repayments and very few people are likely to be affected by the increase,” he said.
“Once the loans are in repayment, only borrowers earning over £45,000 are charged the maximum rate. This ensures that they make a fair contribution to the system.
“The Government’s review of post-18 education and funding is also under way and will look at how students and taxpayers are getting value for money, including the role of interest rates.”
Shadow education secretary Angela Rayner said: “The latest rise in RPI means that hundreds of thousands of students will be seeing the unjustifiably high interest rates on their student debt rise once again, to an eye-watering 6.3%.
“Students are graduating with over £50,000 in debt, and face these interest rates from the moment they begin their courses, causing their debt to skyrocket during their time at university, when they cannot even begin to pay it back.
“As a direct result of the choices made by Tory ministers, those interests rates will now rise once again.”
Copyright (c) Press Association Ltd. 2018, All Rights Reserved. Picture (c) Dominic Lipinski / PA Wire.
