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%.
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:
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.
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%.
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.
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