Student loan interest rates in England and Wales will be reduced to 6.3 per cent in September, the Department for Education (DfE) has announced.
It is a further reduction, after the government announced in June that the student loan interest rates were to be reduced from 12 per cent to 7.3 per cent.
The move is an attempt to protect borrowers from rising inflation rates amid the rising cost of living.
Inflation is currently at 9.4 per cent, a 40-year high. The Bank of England last week announced a 0.5 percentage point increase in interest rates, its largest leap in 27 years, as it tries to bring inflation back under control.
Minister of Skills, Further and Higher Education Andrea Jenkyns, said the new cap was being introduced “to align with the most recent data on market rates”.
A representative for the Student Loans Company said borrowers did not need to do anything in light of the change, as it would be automatically applied.
The change applies to those on undergraduate (Plan 2) and postgraduate (Plan 3) loans.
The new rates will reduce student loan interest rates by the largest amount on record, the DfE said.
Someone with a student loan balance of £45,000 would reduce their accumulating interest by about £210 per month under the newly announced rates, compared with 12 per cent interest rates, the department said.
This reduction is on the total value of the loan, as monthly repayments do not change.
“We understand that many people are worried about the impact of rising prices and we want to reassure people that we are stepping up to provide support where we can,” Ms Jenkyns said.
“Back in June, we used predicted market rates to bring forward the announcement of a cap on student loan interest rates down from an expected 12 per cent and we are now reducing the interest rate on student loans further to 6.3 per cent, the rate applying today, to align with the most recent data on market rates.
“For those starting higher education in September 2023, and any students considering that next step at the moment, we have cut future interest rates so that no new graduate will ever again have to pay back more than they have borrowed in real terms.”
A Student Loans Company representative 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.”
