Question

To ask the Secretary of State for Business, Innovation and Skills, what plans the Government has to change the rate of interest on student loans (a) retrospectively for recent graduates and current students and (b) for future students during the current Parliament.

There are no plans to change the rate of interest on student loans retrospectively for recent graduates and current students.

The interest rates are reviewed annually and the rates set from 1^st September for the following 12 months. This is set out in the Education (Student Loans) (Repayment) Regulations. It is too early yet to say what the rate will be from September 2016.

For the pre-2012 scheme, the rate used is the March Retail Prices Index (RPI) figure which applies during the 12 month period commencing 1^st September. If, however, the base rate plus 1% across a specified group of banks is lower than RPI, then this lower rate will be applied instead.

For the post-2012 scheme, the rate is also set by reference to the March RPI figure (2.5%):

• RPI plus 3% is applied whilst the borrower is studying and up until the April after leaving their course;
• After April 2016, variable rates of interest dependent on the borrower’s income will apply for those in repayment. These range from RPI for those earning £21,000 or less to RPI plus 3% for those earning £41,000 or more; and
• Borrowers who lose touch with the SLC after they leave their course will be subject to an interest rate of RPI + 3%.