United Kingdom: Department Of Education Caps Student Loan Interest Rate At 7.3% In Fall

Students will be protected from increasing inflation with a restriction on student loan interest rates beginning in September. Prior to this fall’s graduation and being subjected to interest rates of up to 12 percent, the Department of Education (DfE) established a maximum on student loan payback interest rates of 7.3 percent.

Last month, the Institute of Fiscal Studies issued a dire warning to graduates who graduated from college in the last decade that “eye-watering” increases in interest rates would boost maximum interest rates from 4.5 percent to 12 percent. DfE officials said those with $45,000 in student loan debt would save around $180 per month with the new ceiling in effect. Graduates who graduated after September 1, 2012, and who earn at least £27,295 a year, must begin repaying their student loans. The interest rate is based not only on how much they earn but also on the inflation rate, which is determined by the retail price index (RPI) for March of each year. This index has reached 9 percent as a result of pressures on the global economy. The government has set an interest rate ceiling on student loans to prevent them from rising beyond market rates, although this was not set to take effect until next year.

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