Student loans are part of the government’s financial support package for students in higher education in the UK. They are available to help students meet their expenses while they are studying. It is HMRC’s responsibility to collect repayments where the borrower is working in the UK. The Student Loans Company (SLC) is responsible for collecting the loans of borrowers outside the UK tax system.
The interest rates that will apply for the 2022-23 academic year were announced last month. Earlier in the summer, the government had announced that student loan borrowers faced a 12% interest rate from September 2022. The government announced in June that there would be a cap of 7.3% on student loan interest rates for current graduate borrowers to protect them from a rise in inflation. This interest rate was calculating using predicted market rates. The actual market rate reduced to 6.3%, so the cap has been lowered to this figure.
The 6.3% rate will apply to student loan borrowers on Plan 2 (undergraduate) and Plan 3 (Postgraduate) loans. This change will impact the total value of the loan, but there is no difference in the monthly repayments paid.
A spokesperson for the Student Loans Company said:
‘The change in interest rates is automatically applied so customers don’t need to take any action. We encourage customers to use SLC’s online repayment service to regularly check their loan balance and repayment information, as well as ensure their contact information is up-to-date.’
There are also new measures that will apply from 2023-24 to ensure that new graduates will not, in real terms, repay more than they borrow.