September 2022 Student Loan Interest Rate Cap Announcement!
From September 2022, the government will cap student loan interest rates for current student loan borrowers to protect them from a rise in inflation.
A rise in the rate of RPI due to global economic pressures meant student loan borrowers faced a 12% interest rate in September so the government has intervened and capped interest rates to a maximum of 7.3% to protect graduates.
This action is intended to provide reassurance for student loan borrowers on Plan 2 (undergraduate) and Plan 3 (Postgraduate) loans.
What is a Plan 2 and Plan 3 student loan?
Plan 2 student loans includes anyone who took out a student loan for an undergraduate, Level 4/5, and/or PGCE course beginning on or after 1 September 2012, as well as Advanced Learner Loan borrowers.
Plan 3 loans are postgraduate loans.
These changes do not change the monthly repayment amount for borrowers.
Monthly student loan repayments are calculated by income rather than interest rates or the amount borrowed. Unlike for commercials loans, repayments will stop for any borrowers who earn below the relevant repayment threshold.
Not going into Higher Education This Year?
The government announced in February that they will be reducing interest rates for new borrowers.
From academic year 2023/24, new graduates will not, in real terms, repay more than they borrow.
Check out the government announcement on GOV.UK and read the post on the DfE Education Hub pages for much more information on this interest rate change and answers to potential questions you may have.