Interest Rates on Student Loans To Rise


The Retail Price Index (RPI) figure is checked annually every March to calculate the rate of interest on student loans. This March RPI was 1.6% – an increase from the previous 0.9%.

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However, the actual interest rate varies dependant on when the loan was issued. There are three different types of student loan and the rates for each are:

  1. Post-2012 Student Loans

    The interest on these loans is calculated as RPI plus 3%. So, the new rate will be 4.6% instead of 3.9%.

    However, this rate is for those who graduated before summer 2015. Those graduating after have a sliding scale for the interest rate so anyone earning over £21,000 p.a. will be charged interest at 1.6% rising to 4.6% for those earning over £41,000 p.a.

  2. 1998-2011 Student Loans

    These loans are at the same rate as the RPI, unless the Bank of England base rate (currently 0.25%) is more than 1% lower than the RPI – then it is capped to 1.25%. So, it used to be 0.9% but from September will rise to 1.25%.

  3. Pre-1998 Student Loans

    These loans don’t get the same cap benefit, so from September the rate will rise to 1.6 percent.

The repayment threshold for repaying pre-2012 loans is currently £17,495 and will rise to £17,775 next April. Post-2012 loans have had their threshold for repayment frozen at £21,000 until at least April 2021.

If you would like information and advice on saving for future university fees, please contact us >>

Written by Sam Gulley | Financial Planning Consultant

Sam joined Mantle Financial Planning in 2009 having previously been with Alexander Forbes and HSBC bank. Read more >>

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