Student borrowers will be further protected against rising inflation rates with additional interest rate reductions for Plan 2 and 3 loans.
Interest rates on student loans will now be capped at 6.3% from September 2022. The government intervened in June to protect borrowers in response to the rise in the RPI rate due to global economic pressures, which which meant that student borrowers faced an interest rate of 12%. September.
In order to reassure student borrowers on Plan 2 (undergraduate) and Plan 3 (postgraduate) loans, the government used predicted market rates to impose a cap on interest rates at a maximum of 7, 3%. The real market rate is now 6.3%, so the cap has been reduced to this figure.
By setting an interest rate of 6.3% rather than the planned 12%, it will lower interest rates on student loans by the highest amount ever and mean, for example, that a borrower with a student loan balance of £45,000 will reduce its accumulation. interest of around £210 per month against 12% interest rate. It is on the total value of the loan, as the monthly repayments do not change.
The government is seizing every opportunity to protect the public from the rising cost of living and global economic pressures.
Andrea Jenkyns, Minister for Higher and Higher Skills, said:
We understand that many people are concerned about the impact of rising prices and we want to reassure people that we are stepping in to provide support where we can.
In June, we used expected market rates to bring forward the announcement of a student loan interest rate cap from the expected 12% and are now reducing the student loan interest rate to 6 .3%, the rate applicable today, to align with the most recent data on market rates.
For those starting higher education in September 2023 and all students considering this next step at the moment, we have reduced future interest rates so that no new graduate will ever have to repay more than what he borrowed in real terms.
Monthly student loan repayments are based on income rather than interest rates or the amount borrowed. Unlike commercial loans, repayments will stop for all borrowers who earn below the relevant repayment threshold.
A spokesperson for the Student Loans Company said:
Changing interest rates are automatically applied so customers don’t have to do anything. We encourage customers to use SLC’s online repayment service to regularly check their loan balance and repayment information, as well as to ensure that their contact information is up-to-date.
For new students from August 2023, student funding will be put on a more sustainable basis. Interest rates on student loans will be reduced so that they do not repay, in real terms, more than they borrow.
In response to rising inflation, the government is providing support to households to help those struggling to increase their income to cover essentials. This includes providing eight million of the most vulnerable households this year with an additional £1,200 in aid, with all household electricity customers receiving at least £400. At the start of July, the National Insurance contribution threshold was raised, giving the typical worker a tax cut of up to £330 a year, and millions of low-income households have now received the first installment of their National Insurance payment. Cost of life.