Graduates face 12% student loan interest from September


Ben Waltmann, Senior Research Economist at IFS, said: “Unless the government changes the way interest on student loans is determined, there will be wild swings in the interest rate over the next three coming years. The maximum rate will reach a breathtaking 12% between September 2022 and February 2023 and a minimum of around zero between September 2024 and March 2025.

“There is no good economic reason for this. Interest rates on student loans should be low and stable, reflecting the government’s cost of borrowing. The government must urgently adjust the operation of the interest rate ceiling to avoid a significant spike in September.

It’s another blow for students, who are already being hit by a ‘stealth tax’ after the government froze the level at which loan repayments begin.

The Treasury plans to raise another £33billion from student loans over the next half-decade, after announcing that the salary threshold for repaying student loans in England would remain at £27,295 a year, £2,274 per month or £524 per week for the coming financial year.

Last week the IFS said students expecting to enter higher paying professions could save around £20,000 a year if they took a gap year and waited to join in 2023, when rates of interest will be reduced at the RPI rate only.

Meanwhile, graduates on low and middle incomes will face a lifetime loss of around £30,000 due to changes to reimbursement rules.


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