Student loan interest rates set to rise to 6.3%

By Julia Atherley

From September, students will see interest rates on student loans rise from 6.1% to 6.3% in line with inflation.

The rise follows an increase in the Retail Price Index to 3.3% from 3.1% in March 2017.

"Absurdly high interest rates are only a small part of student debt problem – which already leaves students from disadvantaged backgrounds with up to £50,000 of debt, most of which is never paid off.”

Students starting or continuing their studies in September 2018 will be charged the 6.3% interest rate from then until the April after their graduation.

For graduates, the interest rate can vary from 3.3% to 6.3% depending on their earnings. This change will not affect graduates’ monthly repayments but will see a difference in how long it takes to pay loans off.

A spokesman for the Department for Education stated, "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."

This increase in interest comes after the government rose the threshold for paying back student loans from annual salaries of £21,000 to £25,000.

NUS vice-president Amatey Doku told the BBC, "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.

"Absurdly high interest rates are only a small part of student debt problem – which already leaves students from disadvantaged backgrounds with up to £50,000 of debt, most of which is never paid off.”

Photograph: Business Durham via Flickr

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