Students: Loans
The question
To ask the Secretary of State for Education, what assessment her Department has made of the potential merits of a 0% interest rate for student loans for the study of specific courses.
Answered by Janet Daby
Student loans are subject to interest to ensure that those who can afford to do so contribute to the full cost of their degree, irrespective of the subject studied. The student loan system has significant borrower protections, and the government has not made an assessment of the impact of making interest rates dependent on the course studied.
Interest rates on student loans do not affect monthly repayments made by borrowers. Regular repayments are based on a fixed percentage of earnings above the applicable student loan repayment threshold, not on amount borrowed or the rate of interest. If a borrower’s income drops, so does the amount they repay. If income is below the relevant student loan repayment threshold, or a borrower is not earning, then they do not have to make repayments at all. Any outstanding debt, including interest built up, is written off after the loan term ends, or in case of death or disability, at no detriment to the borrower.
Interest rates are set annually in relation to the Retail Price Index (RPI). The government caps maximum student loan rates when needed to ensure that student loan interest rates do not exceed market rates for comparable unsecured personal loans.
The government is determined that the higher education funding system should deliver for our economy, for universities, and for students. The department is considering the system and will continue to engage with stakeholders on this.
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