Minister announces 12-month cap on student loan interest rates
Education Minister Jeremy Miles has announced that the government intends to cap the interest rate charged to Welsh students on their loans from next September.
The 12-months cap is subject to the introduction of new regulations being made and is being put in place protect students from high interest rates on their loans, which have increased as result of high levels of inflation.
The rate of inflation which determines the interest charged on certain student loans reached 9% in the year to March 2022 and interest rates are expected to rise to up to 12% from September 2022.
In a written statement, the minister said: “The Welsh Government must ensure that rates do not exceed the prevailing market rate and has taken action three times in the last 10 months to cap the rate on loans and protect students.”
In order to ensure that rates do not reach 12%, an interest rate cap will be applied from September 2022, set set at the forecast rate of market interest for the 2022/23 academic year, which is 7.3%.
The cap will apply to the rate on loans taken out by undergraduate students since 2012, and by postgraduate students and further measures may be applied if the prevailing market rate continues to be below student loan interest rates.
Changes to interest rates do not change monthly student loan repayments, which are charged as a fixed proportion of income.
Loan repayments are income contingent, and students repay their loan only if they earn above a threshold, and remaining debts are written off after thirty years.
Mr Miles added: “Living costs should never be a barrier to studying at university, which is why the Welsh Government provides the most generous living costs grants in the UK.
“Welsh students have less to repay on average than their English peers. The Welsh Government also provides a debt write-off of up to £1,500 for each borrower entering repayment, a scheme unique in the UK.”
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