Students: Loans
The question
To ask the Secretary of State for Education, whether her Department has made an assessment of the potential merits of pausing accrued interest on Plan 2 student loans for graduates while on maternity leave.
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 2 terms have interest applied at a rate of Retail Price Index only when earnings are below the repayment threshold, such as while on statutory maternity leave, ensuring that the loan’s debt value will not grow in real terms. Additionally, borrowers earning under the repayment threshold are not required to make any repayments.
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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