End the rip-off rates on student loans, urge MPs
DEMANDS were growing last night for the Government to slash the ‘outrageous’ interest rates of up to 6.1 per cent levied on student loans.
Former ministers and MPs from across the political spectrum have called for a drastic overhaul of the controversial repayment system.
Chancellor Philip Hammond is being urged to use his next Budget to help students by at least replacing the outdated inflation measure used to set repayments – the Retail Prices Index (RPI) – with the historically lower Consumer Price Index (CPI). Its adoption could save students as much as £18,000 over their lifetimes, according to recent estimates.
But many critics argue that even this does not go far enough when maximum tuition fees have risen from £9,000 a year to £9,250, and average student debts are £50,800. Baroness Ros Altmann, a former pensions minister, said yesterday: ‘The interest rates are outrageous.
‘The Government can borrow at close to zero rates of interest and yet students are being stuck on paying 6 per cent. These are young people who haven’t even started on their courses, or had a chance to think about buying a house let alone save for a pension. I do think ministers will have to think again.’ She added: ‘Obviously CPI would help, anything that lowers the interest rate would help, but I think even CPI would still be quite a high rate.’
Former minister Robert Halfon, chairman of the education select committee, added: ‘I feel strongly that the interest rate burden is far too high and students are burdened with huge loans.
‘We must be sure students are getting value for money, and this is why interest rates must be lower, and excessive vice chancellor pay needs to be curtailed.’
The Institute for Fiscal Studies has warned that high earners could end up paying £40,000 over their lifetime in interest payments alone. It estimated that three- quarters of students are never likely to pay off their loans in full as their debts are the highest in the developed world.
Yesterday it was claimed the Prime Minister is looking at cutting interest rates on student loans in a bid to win back young voters who turned to Labour in the general elecpressure tion. A No 10 source described the newspaper report as ‘pure speculation’ last night but there is mounting anger among backbenchers.
Tory MP Christopher Chope, who has launched a private member’s bill to tackle the problem, said the 6.1 per cent rate was ‘just not fair’. He said: ‘We need to keep the on for a rethink on this. We need to show to young aspiring people that they’re not going to be penalised by having what are ridiculously high rates of interest on their outstanding student debt.
‘CPI would be preferable but the problem is bigger than that. The Treasury needs to get to grips with this sooner rather than later because it’s very difficult for young people.’
Sir Vince Cable, leader of the Liberal Democrats, accused the Government of ‘systematically letting down the young’.
He said: ‘Students are being charged interest at too high a rate, and when coupled with the assault on bursaries and the steep rise in living costs, many young people who would benefit from higher education could be priced out of university. The Government can’t continue to ignore the problem.’
Ian Austin, Labour MP and member of the education select committee until the election, called for the interest rate calculation to be changed to CPI.
He said: ‘The level of fees is scandalous and the interest rates add insult to injury.’
Theresa May’s close allies are increasingly voicing concerns over student debt and higher education.
Last month her former joint chief of staff Nick Timothy described higher education as an ‘unsustainable and ultimately pointless Ponzi scheme’ that burdens graduates with debt and needs radical reform.
Her most senior minister, First Secretary of State Damian Green, has suggested there may need to be a national debate on tuition fees.
‘Can’t ignore the problem’
POLICE have not been too busy to spend countless man-hours and huge sums of money on historic child sex inquiries into suspects who are long dead. They also found time – and some £ 40million – to investigate voicemail hacking claims against rogue journalists, which led to just two convictions.
But when businessman Jack whiteley presented his local force with crystal clear CCTV footage of thieves taking furniture worth £26,000 – complete with their van’s registration number – nothing was done.
Officers were ‘ unable to assist’, he was told, ‘as they are at saturation point’.
This paper has huge respect for the police. But haven’t their bosses’ priorities gone disastrously awry? PEGGED each September to the outdated retail Prices Index, which overstates inflation, interest rates on student loans are blatantly unfair. Indeed, some graduates now pay a usurious 6.1 per cent, costing them £18,000 more than if rates were set by the Consumer Prices Index. Last week, Chancellor Philip Hammond invited Tory MPs to suggest policies to help the young, in no more than 250 words. This paper has a five-word suggestion: ‘Peg student loans to CPI.’