Student loans interest rate to rise in line with inflation

The BBC reports that students in England, Wales and Northern Ireland will face interest rates on their loans of up to 6.3%, following an increase in the Retail Prices Index (RPI) measure of inflation.

The rise from 6.1% currently will take effect from September for students and graduates under the 2012 fee scheme.

The increase comes as the government is conducting a review of post-18 education and funding.

Those starting or continuing at university this autumn will be charged interest of 6.3% – RPI at 3.3% plus 3% – from when they start studying, until the April after they graduate.

From that point, the loan becomes payable above a certain income threshold – which the government announced earlier this month is to be raised from £21,000 to £25,000.

The rise will not change individuals’ monthly repayments, as these are based on how much they earn. However, it could increase the total amount of debt for those paying back over the 30-year period.

What does the government say?

A spokesman for the Department for Education said: “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.

“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.”

NUS vice-president Amatey Doku said: “Interest rates at 6.3% represent an increase of 0.2 [percentage points], which, although a seemingly small degree, adds to the huge psychological burden that debt has on many students and graduates.”

Read more Student loans interest rate to rise in line with inflation

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