Question to the Department for Education:

To ask the Secretary of State for Education, if she will make it her policy to cap student loan interest rates in line with the Bank of England base rate.

UK higher education (HE) creates opportunity, is an engine for growth in our economy and supports local communities. The department is committed to supporting the aspiration of every person who meets the requirements and wants to go to university, regardless of their background, where they live and their personal circumstances.

It is reasonable to ask graduates who benefit financially from HE to contribute towards the cost of their studies. Graduates can expect, on average, to earn around £100,000 more in their lifetime than someone who does not attend HE. The government is determined that the HE funding system should deliver for our economy, for universities and for students.

Student loans have very different terms and conditions to commercial loans and carry significant protections for borrowers. For lower earners who will not repay much of their loan, any outstanding debt, including interest built up, is written off at the end of the loan term (or in case of death or disability) with no detriment to the borrower. This government subsidy of student loans is a deliberate investment in our young people and the economy.

Student loans are subject to interest, set with reference to inflation, to ensure that those who can afford to do so contribute to the full cost of their degree. Interest rates do not impact monthly repayments made by student loan borrowers. Regular repayments are based on earnings above the repayment threshold, not on amount borrowed or interest rates. As an additional borrower protection, interest rates on loans taken out after 2012 are automatically capped by the prevailing market rate for comparable unsecured personal loans. This cap was triggered and protected borrowers during the recent spikes in inflation. Interest rates for undergraduate loans taken out before 2012 are also capped at the retail price index or the Bank of England base rate plus 1%, whichever is lower.