Students: Loans
The question
To ask the Secretary of State for Education, whether she has made an assessment of the potential impact of changing the (i) interest rate, for example to CPI, for existing student loan borrowers and (ii) maximum period before student loans are written off for existing borrowers on the public finances.
Answered by Josh MacAlister
Reducing the interest rate charged to existing student loan borrowers would lead to reduced future repayments due to some borrowers paying off their loans faster, and therefore represent a cost to the public purse.
Increasing the maximum period before student loans are written off for existing borrowers would generate a saving for public finances due to additional repayments being made by borrowers who would otherwise have had their loans written off.
Plan 5 loans were introduced by the previous government for new undergraduate students starting courses from the 2023/24 academic year onwards and, compared to the Plan 2 loans they replaced, combine reduced interest rates with a ten year extension to the loan repayment term and a lower repayment threshold. Impacts were published here: https://www.gov.uk/government/publications/higher-education-reform-equality-impact-assessment.
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