Graduates and students in the UK would reportedly be required to pay an interest of up to 12% on their student loans this fall, the Institute for Fiscal Studies (IFS) claimed Wednesday. The British research institute added that the rate will likely drop in March 2023, when the rate of interest would be capped at a lower level.
The IFS also stated while that interest rates would be in a whirlwind for the time being, the long-term implications on repayments will be minimal.
Meanwhile, the rate will be set at a relatively low level for students entering degree programs in 2023.
For the ones who are currently attending university in England, the interest rate on the student loan is calculated by adding up to 3% to the retail price index (RPI) inflation measure.
The RPI figure, which was validated on Wednesday, determines the rate of interest for the next academic year, which will increase from 4.5% this year to 12% starting September of 2022.
It is the highest rate witnessed since tuition fees in universities across England were increased to £9,000 in 2012.
Hillary Gyebi-Ababio, National Union of Students, stated that upping the maximum student loan interest rates to 12% will dissuade a large number of students from attending university, and therefore will cause unprecedented uncertainty for the millions of graduate students already recouping their debts, with several thousand pounds already added to their debt sheets.
According to the IFS, a fresh graduate earning over £49,130 per year will pay £3,000 in interest within six months on a balance of approximately £50,000.
Meanwhile, a lower-earning grad student would see the interest rate go up from 1.5% to more than 9%.
Which means, for a graduate earning less than £27,295 per year, six months of higher rates will cost around £2,300 in interest.
Supposedly, this latest rate hike would be a short, yet sharp spike on graduate’s sides as a limit outlined in the new law on student loans within England would be going in effect next year, on March 2023, approximately six months following the increase.
Source credit: https://www.bbc.com/news/education-61088025