Student loan interest rates after 2012 are based on the retail price index, with the rise in the RPI in March meaning that the most recent graduates in England and Wales will be charged 9% from September, from the current interest rate of 1.5%. The IFS analysis found that higher-paid graduates would be more directly affected by the increase, as they were more likely to repay their entire loan within 30 years of graduation. Other graduates would find that any outstanding balance would be eliminated after 30 years. Highly paid graduates – those who earn more than 49 49,130 a year – are charged an additional three percentage points (versus low earnings), so their loan rates will increase from 4.5% to 12%. Those who have student loans of .000 50,000 will accumulate additional debts of 000 3,000 until March 2023, when the interest rates will be revised. Ben Waltmann, a senior research economist at IFS, said: “If the government does not change the way student loan rates are set, there will be sharp fluctuations in interest rates over the next three years. “The maximum percentage will reach 12% from September 2022 to February 2023 and a low of about zero between September 2024 and March 2025. “There is no good financial reason for this. Student loan interest rates should be low and stable, reflecting the cost of borrowing by the government itself. “The government urgently needs to adjust the way the interest rate ceiling works to avoid a significant rise in September.” The National Student Union said the increases were “violent” and could add thousands of pounds to postgraduate loans at a time when many were struggling. “Students are not cash cows and we can not continue to bear the brunt of this government’s backlash that has left millions exposed to hardship,” said Hillary Gyebi-Ababio, NUS’s vice president for higher education. wants the government to reverse the changes. Bridget Phillipson, the shadow education secretary, said the increases were another symptom of the cost-of-living crisis. “As working-class graduates struggle with rising prices and the chancellor’s growing tax burden, rising interest rates risk putting more pressure on them,” he said. A spokesman for the Ministry of Education said that student loans differed from commercial loans, with repayments being linked to income, not interest rates or amounts borrowed. They stressed that borrowers earning less than 27 27,275 a year before taxes did not repay. “The IFS report makes it clear that interest rate changes have a limited long-term impact on repayments and the Office of Budget Responsibility predicts that the RPI will be below 3% in 2024,” the DfE spokesman said. “Regardless, the government has reduced interest rates for new borrowers, so from 2023-24, graduates will never have to repay more than they borrowed in real terms.” The recent review of student loans by the government will extend payments from 40 to 40 years from 2023 and bring lower starting limits for repayments that are likely to cost lower- and middle-income graduates an extra .000 30,000 over their lifetime. . Students who start classes in 2023 to 2024 and earn .000 50,000 or more will save around .000 20,000 compared to the current loan system due to lower interest rates. Nick Hillman, director of the Institute for Higher Education Policy, said: “One modest thing the government could do immediately to ease the situation would be to move to a more respectful measure of inflation. “Four years ago, the Office for National Statistics said that the RPI was a bad measure of inflation and should not be used in public policy. “Now would be a good time to look again at its use for student loans.”
