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Minister confirms new cut in student loan interest rates

05 Sep 2022 2 minute read
Photo Chris Ison PA Images

Education Minister Jeremy Miles has confirmed that student loan interest rates in Wales will be capped at a lower rate of 6.3% for three months from 1 September 2022.

Rates are being cut to protect borrowers from rising inflation rates amid the soaring cost of living.

The UK Government announced in June that interest rates were to be cut from 12% to 7.3% in England and last month announced a further reduction to 6.3%.

The change applies to those on undergraduate (Plan 2) and postgraduate (Plan 3) loans.

Confirming the latest cut, Jeremy Miles said: “The Welsh Government will continue to protect students from high interest rates on their loans, rates which are a result of high levels of inflation.

“The rate of inflation which determines the interest charged on certain loans reached 9% in the year to March 2022. Interest rates would rise to up to 12% from September 2022 for a period of time before rates are capped.

“The Welsh Government must ensure that rates do not exceed the prevailing market rate and has taken action three times in the last year to cap the rate on loans and protect students.

“The rate on loans taken out by undergraduate students since 2012, and by postgraduate students, will be capped at 6.3% between 1 September 2022 and 30 November 2022.

“Further rate caps may be applied if the prevailing market rate continues to be below student loan interest rates after that date.”

New rates

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 around £210 per month under the newly announced rates compared to 12% interest rates, the department added.

This reduction is on the total value of the loan, as monthly repayments do not change.

Students repay their loan only if they earn above am earnings 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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