The student loan interest rate has been cut from 3.8 percent to 3 percent following a year that has seen bank interest rates tumble.
The cut of 0.8 percent, a move which has never been seen before, comes as a result of the Bank of England’s decision to drop its base rate to 2 percent.
Normally the student loan interest rate and the Bank of England base rate are independent of one another but income-contingent loans, which have been available to students since 1998, are now classed as “low interest loans.” One condition of this is that the student loan interest rate must not be higher than 1 percent above the highest base rate. Consequently, the Student Loans Company (SLC) have been forced to make the cut in order to redress the discrepancy between the two rates.
Students have been advised that the interest rate could change again in September depending on how the economy fares over the coming months. The SLC have also reminded students that the “mortgage-style” student loans taken out before 1998 are regulated differently and therefore their interest rate remains unchanged.