Aug
10
Student loan interest rates cut again due to market rates
Author: Chloe Smith, Updated: 10 August 2022 10:57
Today the government has announced cuts to student loan interest rates, while also making sure that in real terms no new graduate will pay back more than they have borrowed.
Student loan borrowers will be further protected from rising inflation rates with additional cuts to interest rates for those on Plan 2 and Plan 3 loans.
Student loan interest rates 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 rate of RPI due to global economic pressures which meant student loan borrowers faced a 12% interest rate in September.
To provide reassurance for student loan borrowers on Plan 2 (undergraduate) and Plan 3 (Postgraduate) loans, the government used predicted market rates to bring forward a cap on interest rates to a maximum of 7.3%. The actual 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 expected 12% this will bring down the student loan interest rates by the largest amount on record and will mean, for example, a borrower with a student loan balance of £45,000 would reduce their accumulating interest by around £210 per month compared to 12% interest rates. This is on the total value of the loan, as monthly repayments do not change.
The government is taking every opportunity to protect the public from the rising cost of living and global economic pressures.
The cap is automatically applied, so graduates do not need to take any action. We have also cut future interest rates so that from September 2023 no new graduate will have to pay back more than they have borrowed in real terms.
As MP for Norwich North, ensuring that our young people get the best possible start in life is one of my priorities. To find out more about what action I am taking both in Norwich and Westminster for this work, please visit: https://www.chloesmith.org.uk/myplan/children.
If constituents need to contact me on this matter, or any other issue, please do email me at chloe@chloesmith.org.uk or ring my constituency office on 01603 414756.
Chloe Smith