Student loans' interest rate set to rise

by Katarzyna Janiak

Students’ debts could increase dramatically following the predicted rise in student loan interest rates.

Almost four million students are indebted to the Student Loan Company (SLC), which bases its interest rates on the Retail Price Index (RPI).

The sudden rise in the RPI, the measure of inflation, from 0.4 per cent in March last year to 4.4 per cent this year could have a dramatic impact on the scale of students’ debts.

The SLC is reluctant to comment on the interest rates until the final outcome of the general election, however the National Union of Students (NUS) president-elect, Aaron Porter, is critical of the whole students’ loan scheme.

"Clearly the rise is just further proof that the current system is not working," he said.

"It is a bizarre system in which inflation in one month dictates interest rates over the whole year.”

No other option for students

Students already feel they have little choice when it comes to loans.

Anna Janiak, a BA Architecture graduate, admits that she doesn’t even think about the debt she is putting herself into.

“When I took out my loan I knew that I had two options. I either borrow the money or I will not be able to pay for my education at all," she said.

"If had to make a decision again I would still choose the SLC because I know there is no other option for students. And in the current situation we cannot really hope for the government sponsored higher education.”

The predicted increase in the interest rate is from 0 per cent to 1.5 per cent.

This would mean that students with maximum debt of £10,153 a year will be paying an extra £450 annually.

Despite the critique, student loans remain the most available and cheapest way of financing your education.

No other banks or institutions offer unsecured loans for interest rates less than seven per cent.