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Former students face up to higher interest rates

Former students face up to higher interest rates

Category: Banking

Updated: 02/09/2010
First Published: 02/09/2010

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

While thousands of new students are embarking on a new chapter in their lives, many graduates are facing up to higher repayments on their student loans.

This comes after many former students enjoyed a year in which interest was charged at 0%, while others actually saw their debts shrink.

Those that took out a loan after 1998 will pay interest of 1.5% for the next 12 months, as their repayments are calculated by whichever is lowest from the Retail Prices Index (RPI) in March or base rate (0.5%) plus 1%.

Graduates will be hoping that the base rate will not be increased at a too dramatic rate in the coming months, as any rise would be reflected in their interest repayments.

This year, the RPI was 4.4% in March, the rate that graduates that took out a loan before 1998 will pay for the next 12 months.

It marks the end of something of an interest-free holiday enjoyed by former students over the last year.

Those who had a post 1998 loan had been paying no interest on their loans, while pre 1998 graduates saw the amount they owe fall because of a -0.4% interest rate.

The new rates come as thousands of future graduates begin university life, many of whom will rack up huge amounts of debt.

Research conducted by university guide Push recently found that debt levels are projected to reach £25,000 for this year's intake.

With such financial pressures, it is vital that students find the right account.'s recent guide to student accounts can be found here:

It is also worth checking the Moneyfacts Best Buy tables for a full overview of the student accounts the market has to offer.

Compare student accounts

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