Students appear to be paying a heavy price for the UK’s inflation surge after the Brexit vote, which will drive the interest rate on their loans up by a third to 6.1%.
The rise in inflation, driven by a decline in the value of the pound since June, means #students will be charged substantially more interest on their loans, despite the fact that many other consumers are benefiting from record low interest rates. Personal loans from high street banks have rates starting at 2.8%, while five-year fixed-rate mortgages are available from 1.29%.
Student loan interest rates are tied to March’s retail price inflation figure, published on Tuesday. At the moment, new starters and current students are charged 4.6% – the March 2016 RPI figure of 1.6%, plus 3% – on their loans. But from September this will rise to 6.1%, made up of the March 2017 figure of 3.1%, plus 3%.
As a result current students and a sizeable number of graduates will see the interest rate on their student loan jump to more than 24 times the official Bank of England base rate.
Those who took out their student loan on or after 1 September 2012 and who have now graduated will from this autumn be charged between 3.1% and 6.1%, depending on their income.
Students are also paying the price for being tied to the RPI rate, which is typically higher than the consumer prices index figure and is now relatively little-used. The latest CPI inflation figure for March was 2.3%.