Student Loans: Interest Rates

Lord Hunt of Kings Heath Excerpts

Monday 11th September 2017 Lords Chamber

Asked by

[Lord Hunt of Kings Heath]

To ask Her Majesty’s Government whether they plan to reduce the 6.1% rate of interest to be charged on student loan debt from September 2017; and if so, how.

[Viscount Younger of Leckie (Con)]

My Lords, student loan interest rates vary with income: 6.1% is the maximum rate, and many students will be charged less than this. Borrowers in repayment who earn under £21,000 pay 3.1%. Borrowers are protected, and repayments are linked to income, not interest rates or the amount borrowed. Our student finance system ensures the costs are split fairly between graduates and the taxpayer, and does this while helping more young people to go into higher education than ever before.

[Lord Hunt of Kings Heath (Lab)]

My Lords, the noble Viscount failed to mention that the moment a student gets to university, the 6.1% rate applies to them. At the end of three years, it has been estimated that the average interest added, at 6.1%, will be £5,800. Why are the Government determined to put students into even more debt than they are now? Why is RPI being used as the rate of inflation when the Government themselves have rejected RPI when it comes to benefits and pensions? Indeed, it is only students and railway passengers who are penalised by the use of RPI. When will the Government get real and review the rate of interest, as a first stage towards reform of our university fee system?

[Viscount Younger of Leckie]

My Lords, the details of the scheme continue to be kept under review, but the student loan system is working well. The Government’s reforms to the undergraduate student finance system have ensured that it is financially sustainable for the taxpayer in the long term, while enabling those with the talent to benefit from a higher education to do so. Young people from the poorest areas are 43% more likely to go to university than they were in 2009-10. This is a very good step in the right direction.