Question to the Department for Education:

To ask the Secretary of State for Education, what steps his Department is taking to limit student loan interest payments.

The government has not yet decided on what interest rates will be applied to student loans from September 2022. The department will be considering all options over the coming months and will confirm in due course the rates to apply from 1 September.

Changes to student loan interest rates will not increase monthly student loan repayments. Monthly repayments are calculated as a fixed percentage of earnings above the relevant repayment threshold and do not change based on interest rates or the amount borrowed. 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. There are no commercial loans that offer this level of protection.

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. The government monitors student loan rates against the Bank of England’s data series for the effective interest rates on new and existing unsecured personal loans.

We announced in February that we will be reducing interest rates for new borrowers and so, from academic year 2023/24, new graduates will not, in real terms, repay more than they borrow. Alongside our wider reforms, this will help to make sure that students from all walks of life can continue to receive the highest-quality education from our world-leading HE sector.