Latest News & Blog
Have your say on current issues

Millions of students and graduates are no longer presented with interest-free loans as new borrowing rates play into effect.

The Student Loans Company has announced that graduates who took out a loan after 1998 will be charged interest of 1.5% during the year to August 31 2011. This interest rate may change, as it is linked to the rates charged by high street banks, but can go no higher than 4.4% during the course of the year.

The interest rate on loans taken out before 1998 will be 4.4% from 1 September 2010 to 31 August 2011, as interest for these is linked solely to the Retail Price Index (RPI).

This could be very bad news for recent Graduates looking for employment and struggling with debts. Aaron Porter, president of the National Union of Students, is dismayed at the decision saying that "many students will be hit by hundreds being added to their debt at a time when youth unemployment is at nearly one million is further demonstration that the current system of funding is broken."

 Figures show that in the UK, there are around 3.3 million people who took out a loan after 1998 and still have outstanding balances, while there are around 355,000 who took out a loan before 1998 and still owe money.

During the past year, the interest rate on post-1998 loans was 0%, while on pre-1998 loans it was -0.4%. However, despite the increase, student loans remain one of the cheapest ways to borrow money in the UK.

Alana Fitzpatrick, money analyst at MoneySaving Expert.com, said: “Due to the inflation link, student loans are the cheapest form of borrowing you’ll get, there’s no real cost as the most interest you’ll pay matches the rate of inflation. “This means if you have an outstanding student loan, as well as more expensive debts from banks or credit cards, it’s much cheaper to pay the latter off first.”

.

< Prev		Next >