The huge interest rate rise for student loans explained...

A ‘brutal’ interest rate rise could deter those from less well-off backgrounds from going to university, warns the National Union of Students. Education editor ABBIE WIGHTWICK reports

GRADUATES from Wales and England are about to be hit by a “brutal” 12% rise in interest rates on their student loans.

The rise applies to loans taken out since 2012 and will cost graduates an extra £2,200 to £3,000 between September this year and March 2023 depending on how much they earn, the Institute for Fiscal Studies calculated.

Interest rates on student loans taken out since 2012 are based on the retail price index plus 3%, with the 9% rise in RPI in March meaning it will soar from the current interest rate of 1.5% to 12% for the highest-earning graduates next September, the IFS said. Interest rates for graduates earning less than £49,000 a year are set to rise from 1.5% to 9%.

An NUS spokesman estimated recent graduates on more than £49,000 would pay £3,000 in interest on a balance of £50,000 over six months from September 2022 to March 2023. Recent graduates earning less than £49,000 will see interest rates on their student loans increase from the current 1.5% to 9%, incurring about £2,300 interest in the same period. Changes to repaying student loans are coming in from 2023-24.

A Welsh Government spokesman said: “I can confirm that the situation is exactly the same for Welsh borrowers (of student loans). Welsh and English borrowers are on the same loan terms.”

NUS Wales President Becky Ricketts warned the rise would discourage young people from less well-off backgrounds from going to university.

“These figures are brutal. By increasing the maximum interest rate on student loans to 12% the UK Government is deterring the most disadvantaged students from going to university. This will also cause great uncertainty for the millions of graduates who are already repaying their loans in the midst of a cost-of-living crisis.

“This is another example of a decision being made at Westminster that the Welsh Government can do nothing about.

“Education is supposed to be devolved to Wales, but so many decisions that impact the lives of students and graduates still sit with ministers in England. Wales has a history of progressive education policy, but the Welsh Government needs to seek the powers to do things radically differently to show Westminster the way