Inflation sees student loan rates hiked - Loans - News - Moneyfacts

News News brings you the latest financial & economic news & reviews of the best products in the UK by our team of money experts.

Inflation sees student loan rates hiked

Inflation sees student loan rates hiked

Category: Loans

Updated: 29/04/2010
First Published: 22/04/2010

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.
Many former students face far higher repayment rates on their loans as a result of the sharp spike in inflation.

With savers lamenting an increase in the Consumer Price Index rate of inflation to 3.4% earlier this week, it is now the turn of students to suffer.

The interest rates for graduates that took out a loan before 1998 are based on the Retail Prices Index (RPI) inflation rate that is reported each March.

As such, those that are paying a rate of -0.4% (the inflation figure reported last March) are now faced with paying 4.4% interest on their student loans.

The new rates, which are expected to be confirmed formally by the government, will come into effect from September.

"Some graduates who are currently paying a 0% interest rate on their loans will be disappointed to see their interest rate grow to over 4% later on this year," commented Darren Cook, spokesperson for

"With a variable rate of interest, you need to balance the peaks with the troughs. But an interest rate of 4.4% is still one of the cheapest forms of finance around."

Graduates that took out a loan after 1998 will continue to pay interest that is equal to the base rate of interest plus 1% or the RPI, depending on which measure is the lowest.

At present, people with these loans are paying interest of 0% as the Student Loan Company ruled that negative interest rates would not apply to them.

If the base rate was to remain at 0.5%, graduates with these loans would pay an interest rate of 1.5%.

Find out more regarding Student loans or Compare graduate loans

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

Related Articles

Blue Monday hits nation’s finances

Today has been dubbed Blue Monday – the most depressing day of the year – and considering how many people could be battling with their finances this month, it’s little wonder.

Calls to make the loans market clearer

At first glance the personal loans market may seem simple enough, but get into the nitty gritty and it can be anything but. As a result, some are calling for action to make the market clearer and fairer for all.

Get the cheapest ever personal loan!

Have you woken up with a financial hangover after the festivities? Perhaps you’ve got big plans for the year ahead, or maybe you need a new car? Well, whatever your reasons for needing a loan, you can now snap one up for the cheapest ever rate!