Student record

Minister confirms further interest rate cut on student loans

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Photo Chris Ison PA Images

Education Minister Jeremy Miles has confirmed that student loan interest rates in Wales will be capped at a lower rate of 6.3% for three months from September 1, 2022.

Rates are being cut to protect borrowers against rising inflation rates amid the soaring cost of living.

The UK government announced in June that interest rates were to be cut from 12% to 7.3% in England and announced a further cut to 6.3% last month.

The change applies to undergraduate (plan 2) and postgraduate (plan 3) loans.

Confirming the latest reduction, Jeremy Miles said: ‘The Welsh Government will continue to protect students from high interest rates on their loans, rates which result from high levels of inflation.

“The rate of inflation which determines the interest charged on certain loans reached 9% in the year to March 2022. Interest rates would increase to 12% from September 2022 for a period of time. before rates are capped.

“The Welsh Government must ensure that rates do not exceed the prevailing market rate and has taken action on three occasions in the past year to cap loan rates and protect students.

“The rate of loans taken out by undergraduate students since 2012, and by postgraduate students, will be capped at 6.3% between September 1, 2022 and November 30, 2022.

“Further rate caps may be applied if the prevailing market rate continues to be lower than student loan interest rates after that date.”

New rates

The new rates will cut interest rates on student loans by the highest amount on record, the DfE said.

Someone with a student loan balance of £45,000 would reduce their accrued interest by around £210 a month under the newly announced rates from 12 per cent interest rates, the department added.

This reduction applies to the total value of the loan, as the monthly repayments do not change.

Students repay their loan only if they earn above the income threshold, and remaining debts are forgiven after thirty years.

Mr Miles added: ‘The cost of living should never be a barrier to university study, which is why the Welsh Government offers the most generous grants in the UK.

“Welsh students have less to repay on average than their English peers.

“The Welsh Government is also offering debt forgiveness of up to £1,500 for each borrower entering repayment, a scheme unique to the UK.”

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