Question to the Department for Education:

To ask the Secretary of State for Education, what estimate she has made of how many and what proportion of graduates in each plan will repay their (a) undergraduate and (b) post graduate loans.

Information on the proportion of graduates in each plan that will repay their (a) undergraduate and (b) post graduate loans, can be found in the ‘Student loan forecasts for England’ annual statistics publication here: https://explore-education-statistics.service.gov.uk/data-tables/permalink/92168d82-7f22-4d01-d6a4-08dbca2fee12.

The system for setting interest rates on student loans is set out in the Education (Student Loans) (Repayment) Regulations 2009, as amended. Interest rates are applied in relation to the Retail Price Index (RPI). The RPI is determined by the RPI figure for the March prior to the applicable period for new interest rates. In addition, the government, by law, must cap maximum student loan rates to ensure the interest rate charged on the loan is in line with market rates for comparable unsecured personal loans. From 1 September 2023 to 30 November 2023, the maximum interest rate has been set at 7.3% for Plan 2 and Plan 5 undergraduate student loans, and postgraduate student loans, to take into account recent increases in the prevailing market rate. From the 2023/24 academic year, student loan borrowers starting new courses will benefit from interest rates of RPI only. This change ensures that, under the new Plan 5 loan terms, new borrowers will not repay more than they originally borrowed, when adjusted for inflation.

Student loans have very different terms and conditions to commercial loans set with reference to the Bank of England base rate. Unlike commercial unsecured personal loans, student loans are available to all eligible students regardless of their background or financial history. The loans carry significant protections for borrowers. Monthly repayments are based on earnings above the relevant threshold, not on interest rate or amount borrowed. If a borrower’s income drops, so does the amount they repay. If income is below the relevant repayment threshold, or a borrower is not earning, then they do not have to make repayments at all. Any outstanding debt, including interest accrued, is written off after the loan term ends (or in case of death or disability) at no detriment to the borrower. The government is not aware of any commercial loans that offer such protections.

The student finance and funding system must provide value for money for all of society at a time of rising costs. It is important that we have a sustainable student finance system, that is fair to students and fair to taxpayers. The department will continue to keep the terms of the student finance system under review to ensure that they keep delivering value for money for both students and taxpayers.