Students at the London School of Economics can now get used to 6.1 percent interest rates on student loans.
Just as expected, student loan interest rates in the United Kingdom rose to 6.1 percent today, September 1st, 2017.
A variety of factors led to the interest rate hike, but the main driving force was rising inflation in the UK. Student loan interest rates in the UK have been relatively low for some time, which is why this recent rise is hitting many students particularly hard.
The Student Loan Report has covered the student loan debt crisis in the UK quite extensively. Most recently, we covered a story regarding the British government confirming that there were no plans to reevaluate the 6.1 percent interest rate. The government in the UK assured everyone that student loan interest rates in the country would not be lowered, and that they would be hiked to 6.1 percent on September 1st. As it turns out, the government was not lying about their intentions.
That being said, the UK government did face extensive outside pressure to renege on their interest rate hike and either keep rates the same or decrease them.
In late July, the Russell Group, who represents 24 of the UK's most prestigious universities, issued a blog that pressured lawmakers to reevaluate the 6.1 percent interest rate. Dr. Tim Bradshaw characterized the interest rate hike as "very high" and "out of touch." In that same piece, Bradshaw also argued that the government in the UK should reconsider the £21,000 income threshold. The income threshold means that once a graduate starts making £21,000 a year, they must begin repaying their educational debt. Additionally, Dr. Bradshaw proposed that repayments should be made through a special arrangement that would take money out of the student debtor's salary, which would hypothetically reduce the tax burden on graduates.
Additionally, in early July, the Institute for Fiscal Studies (IFS) released a report that said students in the UK will begin graduating from a higher education institution with more than £50,000 in student loan debt on average. The same study indicated that students will now begin accumulating up to £5,800 in interest rate charges because of the 6.1 percent interest rate. The study also estimated that because of the new interest rate, the yearly cost of attendance will go up to £9,250 per year for each student. Previous levels included £9,000 in 2012 and £3,000 in 2006.
The student loan debt situation in the UK can certainly be characterized as a crisis at this point in time. In June, the Student Loan Report covered the story that found the collective student loan debt in the UK went above £100 billion for the first time in the country's history.
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