Further cut in student loan repayment rate
Reduction in interest rate from 2.5% to 1.5%
Students and recent graduates will again benefit from recent cuts in Bank of England Base Rate as the interest charged on student loans, which was cut from 3.8% to 3.0% in December 2008, and 2.5% in January, will be further reduced to 1.5% from 6 March 2009.
Interest on student loans (income contingent loans from the Student Loans Company) is normally fixed in September each year, according to the rate of inflation as measured by the retail prices index (RPI) in March. In 2008 the new rate was 3.8%, which marked a welcome reduction from the previous year’s rate of 4.8%.
Exceptionally, the rate was further reduced in December 2008 in response to a big cut in Bank of England Base Rate. This fell from 4.5% to 3.0% in November 2008 and to 2.0% in December. The December rate cut prompted the Student Loans Company to revise the interest rate it charges as this cannot be more than 1% higher than Bank of England Base rate. This was the first time that this formula was lower than RPI. In January a further cut in Base Rate, to 1.5%, caused the rate charged to graduates to fall again, to 2.5%. Further reductions in Base Rate, which fell to 0.5% on March 5th, have caused a new cut in the rate charged on student loans- to 1.5% from 6 March 2009.
Not all loans to be cheaper
While current students and recent graduates will benefit from the recent cuts, student loans taken out earlier than September 1998 are not affected. The interest rate for these is simply based on RPI in March, so will stay at 3.8% until 31 August 2009.
For further details contact the Student Loans Company on 0870 240 6298 if your course began during or after 1998 or 0870 242 2211 if your course began before 1998.
For advice on student bank accounts see http://www.which.co.uk/reviews-ns/student-bank-accounts/index.jsp