Question to the Department for Education:

To ask the Secretary of State for Education, what assessment she has made of the prevalence of outstanding student loan balances increasing despite repayments being made as a result of high interest charges; and whether her Department is taking steps to review student loan interest rates to ensure excessive financial burdens are not imposed on borrowers.

As education is a devolved issue, the following response outlines the student finance system in England only.

Interest rates on student loans do not affect monthly repayments made by borrowers. Repayments are based on earnings above the applicable repayment threshold, not on amount borrowed or the rate of interest. As such, some borrowers will see their balance increasing at certain times despite making regular repayments to their student loan.

Student loans have very different terms and conditions to commercial loans. Unlike commercial unsecured personal loans, student loans are available to all eligible students regardless of their background or financial history. Student loans also carry significant protections for borrowers. For instance, monthly repayments are based only on earnings, and 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, 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.