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Student loan interest rate caps at 6.3%

students

This autumn, England and Wales will cap the interest rate on student loans at 6.3%.

To ‘align with the most recent data on market rates’ for loans, it is being changed from 4.5% to 7.3%.

In light of the rising cost of living, England’s university minister stated that she intended to ‘provide support.’

The Institute for Fiscal Studies, however, claimed that the modification did ‘nothing at all to protect current students.’

In December, the interest rates on student loans will be re-evaluated.

For students in England and Wales who are actively enrolled in university, the interest rate on loan is determined by adding 3% to the retail price index (RPI), a gauge of inflation that shows how quickly prices are rising.

The interest rate for the upcoming academic year was determined by the RPI figure that was confirmed in April. The Institute for Fiscal Studies (IFS) forecasted that starting in September this year, the maximum interest rate on student loans will increase from 4.5% to 12%.

To give graduates ‘peace of mind,’ the administration subsequently said in June that the rate would be set at 7.3%.

The interest rate for the upcoming academic year was determined by the RPI figure that was confirmed in April. The Institute for Fiscal Studies (IFS) forecasted that starting in September this year, the maximum interest rate on student loans will increase from 4.5% to 12%.

Universities Minister Andrea Jenkyns stated that the goal of the latest government action, which raises the maximum to 6.3%, is to give concerned students peace of mind.

She added, “We understand that many people are worried about the impact of rising prices and we want to reassure people that we are we are stepping up to provide support where we can.”

The Welsh government announced that it would do the same.

‘No protection’

The government’s announcement alters the overall amount borrowers owe, not the amount they pay back each month.

The majority of graduates’ repayments won’t be impacted by the most recent revision, according to Ben Waltmann, the senior research economist at the IFS.

He said, ‘Only a small percentage of graduates – mostly high earners – will ever genuinely profit from this,’ adding that it would lower the average student loan balance for recent grads by roughly £100 this autumn.

‘Importantly, this does nothing at all to protect current students from the rising cost of living.’

According to IFS data, the real-term value of maximum maintenance loans for students from the poorest families would reach its lowest point in seven years in the upcoming academic year.

In response to the study, Mr Waltmann stated, ‘Unless the government changes course, students from the poorest families will be at least £100 out of pocket – per month.’

FInance and Accounting Graduate who studied at Sheffield Hallam University just a handful of years ago.. Topped off with 20 years in the internet business and an avid follower of money matters and all things financial.
In my spare time I love anything aviation related and a variety of sports and outdoor pursuits.

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