Students: Loans
The question
To ask the Secretary of State for Education, what assessment she has made of the potential impact of student loan interest rates and repayment threshold freezes on (a) women, (b) disabled graduates and (c) graduates from lower socio-economic backgrounds.
Answered by Josh MacAlister
Interest accrues on loan balances until the loan has been repaid in full or cancelled, but interest rates do not impact monthly repayments made by borrowers.
Borrowers on Plan 5 student loans only accrue interest at Retail Price Index (RPI) (currently 3.2%) meaning graduates will not repay more than they borrow in real terms. Borrowers on Plan 2 terms have interest applied at RPI only if earnings fall below the repayment threshold, or when out of the labour market, such as with caring responsibilities, ensuring that the loan’s debt value will not grow in real terms. Additionally, borrowers, regardless of their plan, earning under the repayment threshold are not required to make repayments.
Graduates only begin repaying once their earnings exceed the earnings threshold, paying 9% of income above that level. If a graduate becomes disabled and permanently unfit for work, loan balances, including interest may be written off.
For all borrowers, any outstanding loan, including interest accrued, will be cancelled after the loan term ends, and debt is never passed on to family members or descendants.
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