Press Release: Cost of student loans doubles in just one year
New analysis by the Conservative Party has shown that that the interest on graduate debt has doubled since March last year, thanks to rising inflation.
This is because student loan interest is charged at the rate of RPI inflation in the previous March. Recent rises in inflation mean that the current interest rate is 4.8%. This is double last year’s interest rate, which was 2.4%.
The interest accumulated on a typical student debt of £11,659 has therefore gone up from £277, to £554 today.
David Willetts said:
“New graduates are finding it harder than ever to cope financially. They are being squeezed from all sides.
“The interest they are being charged has doubled since last year. But ministers are silent on the matter.
“It will take longer than ever for new graduates to pay off their debts because of Labour’s mismanagement of the economy.”
Notes to editors
1. The inflation measure used when calculating interest on student loans is much higher than the standard inflation rate. The Government’s common measure of inflation is the Consumer Prices Index (CPI), which is currently 2.5%. But the interest for student loans is based on the Retail Prices Index (RPI), which is generally higher. Currently, the interest on student loans is based on the RPI in March 2007, which was 4.8%. The interest for last year is based on the RPI in March 2006, which was 2.4%.
2. The average debt for a graduate student in England in 2007/08 was £11,659 (Push Student Debt Survey 2007/08). The interest charge (4.8%) on this amount is £554. In comparison, the interest charge (2.4%) for the previous year was only £277.