Students: Loans
The question
To ask the Secretary of State for Education, what assessment she has made of the fairness of calculating student loan interest at RPI rather than CPI.
Answered by Josh MacAlister
Interest rates are set in legislation in reference to the Retail Price Index (RPI) from the previous March, not the Consumer Price Index (CPI), and are applied annually on 1 September until 31 August. This ensures that over a period of years, interest rates on student loans have been consistently linked to a widely recognised and adopted measure of inflation.
The Office for National Statistics has undertaken a substantial programme of work over the past two years to enhance how inflation is measured. The Office for Budget Responsibility has confirmed that, from 2030 at the earliest, movements in RPI will be aligned with CPI as viewed here: https://obr.uk/box/the-long-run-difference-between-rpi-and-cpi-inflation/.
A full equality impact assessment of how the student loan reforms may affect graduates, including detail on changes to average lifetime repayments under Plan 5, was produced and published in February 2022 and can be found here: https://www.gov.uk/government/publications/higher-education-reform-equality-impact-assessment.
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