Students set to see their debt interest jump by a third
STUDENTS and graduates will see the interest accrued on their degree debt jump by a up to a third this year when an expected hike in interest rates hits loan repayments.
Up to 6.1 per cent of the total amount borrowed to cover tuition fees and living costs will be added this September – an increase of about 33 per cent on last year.
The increase kicks in automatically because the student loan interest rates are linked to inflation.
The Department for Education said the rise will not bump up the monthly bill, meaning it will instead take students longer to fully repay their debt.
But the adjustment will mean £610 added for every £ 10,000 owed for some people.
It comes after the Government announced it wants to raise tuition fees again from £9,000 to £9,250 from this year. Yesterday, shadow education secretary Angela Rayner criticised the move, tweeting: ‘Student debt is sky-high as it is.’
Rates on loans taken out in England and Wales since 2012 are calculated using the retail prices index (RPI) for March.
The inflation measure, published yesterday, was 3.1 per cent, up from 1.6 per cent in March last year.
For students still at university and graduates now earning £41,000 or more, interest on top of their loan is set at the RPI plus 3 per cent, while those earning £21,000 or less add 1.6 per cent.
This means from the new academic year, a maximum of 6.1 per cent in interest will be added to the amount to be repaid. Last year, the maximum paid in interest was 4.6 per cent of that owed.
A Department for Education spokesman said: ‘Our student funding system is sustainable and fair, with affordable loan rates based on income.’
Students at university prior to 2012 will have the same rate of the RPI plus 1.25 per cent.
But they are instead faced with having their loans sold off by the Government as it seeks to privatise its vast debt pile.
Under the proposals, loans issued before 2012 will be sold – believed to be worth about £12 billion to the public purse.