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Students and graduates will face an “eye-watering” rise in interest rates on their loans of up to 6.3 per cent from this autumn.
From September, it is likely to go up from 6.1 per cent – after the retail prices index (RPI) , a measure of inflation, increased over the past year.
The RPI stood at 3.3 per cent last month, compared to 3.1 per cent in March 2017, figures show.
It comes amid continued concerns about the student debt burden and high interest rates on loans , as well as whether students are receiving value for money with university tuition fees.
Last year, ministers faced criticism when loan interest rates rose from 4.6 per cent to 6.1 per cent . But they now insist that the additional interest rate rise will have no impact on monthly repayments and that few people are likely to be affected.
However, Jake Butler, an expert at Save the Student’s money website, said that another rise will add more to “the pot of student loan debt”, which in turn has a psychological impact on students and graduates.
“Whilst the increase in interest is not as large as the jump we saw last year, it’s yet another increase on an already astronomical percentage,” he said. “It’s important that students and graduates remember that this increase in the interest will likely just add even more to the pot of student loan debt that they’ll end up never paying back.
“As I always say, this is more of a psychological issue than a monetary one.”
Angela Rayner, the shadow education secretary, said: “The latest rise in RPI means that hundreds of thousands of students will be seeing the unjustifiably high interest rates on their student debt rise once again, to an eye-watering 6.3 per cent.
“Students are graduating with over £50,000 in debt, and face these interest rates from the moment they begin their courses, causing their debt to skyrocket during their time at university, when they cannot even begin to pay it back. As a direct result of the choices made by Tory ministers, those interest rates will now rise once again.”
Students can get government-backed loans to cover the cost of their tuition fees – which stand at up to £9,250 a year in England, as well as to help with living costs.
Those at university this autumn will be charged interest of 6.3 per cent – RPI plus 3 per cent.
However, only graduates earning more than £45,000 will be hit by the full 6.3 per cent interest rate.
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EPA
South Korean policemen detain student protestors during a protest against South Korean President Park Geun-Hye outside the National Assembly in Seoul, South Korea. The protesters demanded that the parliament takes steps to impeach President Park Geun-Hye
EPA
Filipino demonstrators face off with anti-riot police during a protest near the US Embassy in Manila, Philippine
EPA
Hundreds of protesters including Indigenous People, students and militant groups marched towards the US Embassy to protest against the presence of US military troops and condemning the violent dispersal which left at least forty people hurt including twenty police officers and three people who were run over by a police van
EPA
A federal judge in Mexico has ordered that a once-fugitive police chief be held on charges of kidnapping in the disappearance of 43 students
A man holds up a photograph of a missing student with a caption reading 'We are missing 43,' during a meeting marking the 25-month anniversary of the disappearances of 43 students in the southern state of Guerrero, in Mexico City. A federal judge in Mexico has ordered that a once-fugitive police chief be held on charges of kidnapping in the disappearance of 43 students
AP
Miguel Perez, an intern student from the University of Puerto Rico School of Medicine, puts away his cell phone before walking into the operating room at the Dr. Isaac Gonzalez MartÌnez Oncological Hospital in San Juan, Puerto Rico. Once they complete their general surgery training, many residents are moving to the United States in search of better wages, one of the main factors linked to the current shortage of specialists in the Island
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PA wire
University students protest against President Nicolas Maduro, in Caracas, Venezuela. Masses of protesters jammed the streets of Venezuela's capital on the heels of a move by congress to open a political trial against Maduro, whose allies have blocked moves for a recall election
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University students protest against President Nicolas Maduro, in Caracas, Venezuela
AP
Thousands, most of them high school students, march during a demonstration in Madrid, Spain, on a one day strike to protest about the country's education law that increases the number of annual exams
AP
Students gather on the west mall to confront the Young Conservatives of Texas student organization over a controversial bake sale on The University of Texas campus in Austin, Texas. The Young Conservatives of Texas chapter at the University of Texas-Austin sparked the protest with an affirmative action bake sale. The club encouraged students to buy a cookie and talk about the disastrous policy that is affirmative action
Donald Parish Jr, right, confronts Electrical and Computer Engineering senior Dewayne Perry over a controversial bake sale on The University of Texas campus in Austin, Texas. The Young Conservatives of Texas chapter at the University of Texas-Austin sparked the protest with an affirmative action bake sale. The club encouraged students to buy a cookie and talk about the disastrous policy that is affirmative action
AP
Brigham Young University announced that students who report sexual assault will no longer be investigated for possible violations of the Mormon-owned school's strict honor code that bans such things as alcohol use
AP
Students of secondary education march to protest against the final examinations and LOMCE (The Improvement Quality Education Law) law, after a call by trade unions, in Murcia, Spain
EPA
South African police have used stun grenades and rubber bullets to disperse hundreds of protesters who had marched to the parliament building to call for free university education, where the finance minister was giving a budget speech
AP
Police break up student protests outside the parliament in Cape Town, South Africa
Reuters
South African Policemen fire rubber bullets at student protestors in Cape Town, South Africa
AP
A student protestor is hit by a rubber bullet in Cape Town, South Africa
AP
An injured student is helped by colleagues during protest outside the parliament during South African Finance Minister Pravin Gordhan's medium term budget speech in Cape Town, South Africa
Reuters
Plaintiffs and bereaved families of elementary school students killed in the tsunami that followed a major earthquake in northeastern Japan in 2011, show banners that say 'victory in a suit filed with the Sendai District Court' in Sendai. A Japanese court ordered municipalities to pay $13.7 million dollars to families of school children who were swept away to their deaths by the 2011 tsunami
Getty
A group of student at Ewha Womans University calls for a thorough investigation into those involved in years of engagement with state affairs backstage by Choi Soon-sil, a personal confidante of South Korean President Park Geun-hye, at the school's front gate in Seoul, South Korea
EPA
Students raise placards during a strike action called by the student union, in Madrid against university entry exams
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Libyans throw a newly graduated student into a fountain as they celebrate during the graduation ceremony for students from the Faculty of Pharmacy at the Al-Arab University in the eastern Libyan city of Benghazi
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Libyans celebrate as they attend the graduation ceremony for students from the Faculty of Pharmacy at the Al-Arab University in the eastern Libyan city of Benghazi
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Libyans celebrate as they attend the graduation ceremony for students from the Faculty of Pharmacy at the Al-Arab University in the eastern Libyan city of Benghazi
Getty
Thousands of Thai Catholic students take part in mourning tributes and in singing the Thai Royal Anthem to honour late Thai King Bhumibol Adulyadej at Saint Dominic School in Bangkok, Thailand
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Students of Silpakorn University paint portraits of the late Thai King Bhumibol Adulyadej at the university campus in Bangkok
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A student of Silpakorn University paints a portrait of the late Thai King Bhumibol Adulyadej at the university campus in Bangkok
Getty
St Andrews University students take part in a foam fight known as Raisin Monday in the Lower College Lawn behind St Salvator's Quadrangle following the Raisin Weekend
PA wire
St Andrews University students take part in a foam fight known as Raisin Monday in the Lower College Lawn behind St Salvator's Quadrangle following the Raisin Weekend, an annual tradition where student 'parents' inflict tasks on the unfortunate first-years they have adopted as 'children' as part of a mentoring scheme
PA wire
Students at the Cuba's National Ballet School (ENB) in Havana, Cuba
Reuters
Students at the Cuba's National Ballet School (ENB) take part in a practice in Havana, Cuba
Reuters
Students at the Cuba's National Ballet School (ENB) wait in line to enter a classroom in Havana, Cuba
Reuters
A review of higher education , formally announced by Theresa May in February, is due to examine the role of interest rates on student loans.
A Department for Education spokesman said that the government’s decision to raise the repayment threshold to £25,000 from £21,000 will save 600,000 graduates up to £360 a year.
“This change in interest rate will make no impact on a borrowers’ monthly repayments and very few people are likely to be affected by the increase,” he said. “Once the loans are in repayment, only borrowers earning over £45,000 are charged the maximum rate. This ensures that they make a fair contribution to the system.
“The government’s review of post-18 education and funding is also under way and will look at how students and taxpayers are getting value for money, including the role of interest rates.”
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