The government has announced that student loan rates will be capped at 6.3% from September 2022 to protect borrowers from rising inflation rates.
The rate on repayments had been predicted to rise from 4.5% to 12% by the Institute for Fiscal Studies, but in June, the government used predicted market rates to bring forward a cap on interest rates to 7.3%.
Interest rates still ‘cruelly high’
Former Higher Education Minister Michelle Donelan said the level of the cap would provide ‘peace of mind for graduates.’
However, NUS president Larissa Kennedy, argued that the interest rate figures were still ‘cruelly high.’
‘While some graduates might breathe a sigh of relief that the interest rate is no longer in double figures, ministers should be prioritising providing urgent cost-of-living support here and now,’ she said.
As the actual market rate is now 6.3%, the cap has been reduced to this figure. By setting an interest rate of 6.3% rather than the expected 12%, this will bring down the student loan interest rates ‘by the largest amount on record.’
Minister for Skills comments on student loan cap news
Minister for Skills, Further and Higher Education Andrea Jenkyns said: ‘We understand that many people are worried about the impact of rising prices and we want to reassure people that we are stepping up to provide support where we can.
‘For those starting higher education in September 2023 and any students considering that next step at the moment, we have cut future interest rates so that no new graduate will ever again have to pay back more than they have borrowed in real terms,’ Jenkyns continued.
Meanwhile, a spokesperson for the Student Loans Company said that the change in interest rates is automatically applied so customers do not need to take any action.
‘We encourage customers to use SLC’s online repayment service to regularly check their loan balance and repayment information, as well as ensure their contact information is up-to-date,’ they said.