Cap planned to save graduates hundreds of pounds
The government plans to cap soaring interest rates on student loans, which could save graduates hundreds of pounds.
Last month, it was revealed that by September 2022, the interest rate on student loans would drop from 4.5% to 12% due to rising inflation.
In real terms, this would mean a young high-income graduate with an outstanding loan balance of £50,000 would be saddled with £3,000 of extra interest between September 2022 and February 2023.
The higher interest rate will increase the amount of debt graduates will have to pay off, but will not affect their monthly repayments.
While the the diary i reported that the government plans to cap the interest rate, it is not yet clear what the cap will look like.
Ben Waltmann, senior research economist at the Institute for Fiscal Studies (IFS), said: “We said that [the government] should intervene or change their policy. If they do it now to avoid that spike, I think that’s great news.
From September 2023, the student loan system will change radically. Some graduates will face a £100,000 bill for their degrees which they won’t finish paying off until retirement age.
This is due to changes to the window in which students repay their loans and when they begin to do so. You can read more about it here.
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