The Ministry of Education stated that the maximum rate from September will be set at 7.3% instead of the 12% that would have reached by September, based on previous data on inflation plus 3%. The DfE said the change meant that a borrower’s accumulated interest in England and Wales with a student loan balance of £ 45,000 would be reduced by around £ 180 a month compared to 12% interest rates. Reducing the maximum interest rate will mainly benefit wealthier graduates, according to the Institute for Financial Studies (IFS), because they are more likely to repay their entire loan within 30 years of graduation. Other graduates have any outstanding balance after 30 years. The maximum interest rate is currently levied on loans to graduates receiving more than 49 49,000 a year, but the change in DfE means that all graduates will be charged the same 7.3% – a sharp increase from the current 1.5 % charged on their loans. earning £ 27,000 or less. “I want to make sure that this does not change the monthly repayment rate for the borrowers and we have promoted this announcement to provide greater clarity and calm to the graduates,” said Michelle Donelan, Minister of Education for England. Monthly student loan repayments are calculated based on income and not on interest rates or loan amount. Graduates pay 9% of their income above a repayment threshold of £ 27,295 per year. Subscribe to the First Edition, our free daily newsletter – every morning at 7 p.m. BST IFS’s Ben Waltmann said: “We said in April that the current policy on student loan interest rates was deeply flawed and would lead to a graduate interest rate train. It is wonderful to see that as we suggested, the government has decided to take steps to avoid the amusement park train. “However, for most graduates this announcement will have little or no effect on their repayments. “Most of them with undergraduate loans will probably never repay their loans in full, so the interest rate never affects their repayments.” But Larissa Kennedy, president of the National Student Union of the United Kingdom, said the new rates would continue to be “hard high” for many graduates. “Ministers should give priority to providing urgent cost-of-living support here and now. “We hear from students who do not have the financial means to continue taking the bus,” he said.
