Student loan interest rates capped at 7.3%

The government has confirmed that student loan interest rates will remain at 7.3% from September. A rise in the rate of RPI due to global economic pressures would otherwise have resulted in a 12% interest rate.

Confirmation on interest rates is usually made in August but the government has brought the decision forward based on predicted rates to provide reassurance for student loan borrowers on plan 2 (undergraduate) and plan 3 (postgraduate) loans.

As a result a borrower with a student loan balance of £45 000 would reduce their accumulating interest by around £180 a month compared to 12% interest rates. This is on the total value of the loan as monthly repayments do not change.

Monthly student loan repayments are calculated by income rather than interest rates or the amount borrowed and are collected through the tax system.

For future borrowers ...