Student Loan Interest 7.3% Cap

The Government has confirmed that the student loan rate in England will be capped for the Autumn onwards at 7.3%.

Student loan interest rates are now set by the old RPI inflation rate in April of the current year.  RPI in April was 11% and the Institute of Fiscal Studies (IFS) had predicted the student loan rate to be 12%pa.

Higher Education Minister Michelle Donelan made the announcement to cap the rate early rather than waiting until the usual August announcement to give ‘peace of mind to graduates’.

That said, we are sure that student union groups may not be that happy.

Comment

We suggest the government wants to encourage students to pay off their student loans sooner rather than later.  For a long time, student loan rates have been too low and there has been little pressure to repay.  Things are changing, the government needs to either be making some money or at least ‘breaking even’ on loans made.  The economy is struggling, covid-19 dent needs to be paid for and students as well as taxpayers need to share the burden.

The rate increase will not be popular but make no mistake, all lenders and borrowers have been a ‘pointer’ as where interest rates on our own loans, credit cards and mortgages are heading.