An aerial view of Oxford University in the UK. Many student loan borrowers attending Oxford this Fall can expect to see a 6.1% interest rate on loans.
Beginning in the Fall of the 2017-2018 academic year, many students in the UK will be forced to take on student loans that carry a 6.1 percent interest rate, a rather high rate compared to previous student loan interest rates in the UK.
The decision to keep the 6.1 percent interest rate was confirmed by the Student Loans Company, the UK Government’s Department of Education owned student loan provider.
The abnormally high interest rate activating in September was met with much opposition from a variety of organizations in the UK. Such opposition led many to believe that the government would eventually limit interest rate increases on student loans for this upcoming academic year.
In early July, a report released by the Institute for Fiscal Studies (IFS) estimated that student loan borrowers in the UK would graduate from college with an average of more than £50,000 in student loan debt because of the 6.1 percent interest rate. That same report found that the interest rate increase would drive the yearly cost of attendance up to £9,250 for each student. Previously, the cost per year was £9,000 in 2012 and £3,000 in 2016.
Further, The Russell Group, an organization representing 24 of the UK’s most prestigious universities, published a blog in late July that urged the government to reevaluate the 6.1 percent interest rate on student loans. Dr. Tim Bradshaw, the Acting Director of the group, called the interest rate “very high” and “out of touch,” especially since inflation has started to return.
Despite the opposition, it is now confirmed that the UK government and Department of Education will push forward with the 6.1 percent student loan interest rate.
Previously, the student loan interest rate in the UK was at 4.6 percent. While the new interest rate will apply to all incoming students, it will also apply to former students who have studied in the UK since tuition fees were raised from £9,000 in 2012.
The new interest rate was calculated through the inflation rate by using the retail prices index in March and then adding an extra 3 percent.
A spokeswoman from the UK’s Department of Education had the following to say: "As has always been the case, borrowers will only ever pay back what they can afford so no-one will see monthly repayments rise and only the highest earners will pay the top rate of interest."
The UK’s education authority also said that their high-interest student loans offer protections not available from other lenders. For example, students using the government loans will not be required to repay the loans if their income is below £21,000, and the remaining balance will be forgiven after 30 years.
The student loan debt situation in the UK has become more serious in recent times. In June, The Student Loan Report reported new data data that found the collective student loan debt in the UK rose above £100 billion for the first time in the country’s history.
Image Copyright © Dave Price