Some students were shocked to learn of the recent hike in interest rates on their student loans, effective from 1st September 2007. The rate has doubled from 2.4% to 4.8%, based on ‘the rate of inflation and is adjusted each year in line with the Retail Prices Index (RPI)’, according to the Student Loan Company website.
Unfortunately for recipients, the change is based on the RPI as it stands in March, despite the fact that it was at a 16 year high – by July 2007 it stood at just 3.8%. It will remain set for the next year regardless of future fluctuations, further contributing to the massive financial burden with which many students emerge from university.
The number of students taking out loans has doubled in the past 12 years and consequently this is an issue that will impact on much of the student population. With the top up fee system fully operational, higher amounts are being borrowed, which is a particular concern for Jenny Smith, Welfare Officer, “It is disappointing that at a time when students are facing a dramatic rise in University fees that their loan repayments are also on the increase”. The soaring rates cast greater doubt over the ability of graduates to repay their mounting student debts. Despite this, many students returning this academic year were unaware of the altered rates on their student loans, resulting in additional resentment. Nationally, this has sparked action from individuals such as a University of East Anglia graduate who has recently founded the Interest Rates on Student Loans to Double group, because of his anger at the way in which changes were ‘carried out stealthily with little news coverage’.
Fortunately the interest rate for 2008/2009 is expected to decrease next September but for now students have little choice but to accept that their loans will be considerably more expensive this academic year.
by Sophia Hemsley