Student loan interest rates to be capped at 6.3% from September

The interest rate on student loans in Wales and England is to be capped at 6.3% from September.

The rate had been due to go up to 7.3%.

The Welsh Government’s confirmed it will match the cap announced by the UK Government today.

The change won’t affect graduates’ monthly repayments but will have an impact on the total amount they owe

The change affects students with Plan 2 (undergraduate) and Plan 3 (postgraduate) loans.

The UK government said it intervened in June to protect borrowers in response to the rise in the rate of RPI due to global economic pressures which meant student loan borrowers faced a 12% interest rate in September.

“To provide reassurance for student loan borrowers on Plan 2 (undergraduate) and Plan 3 (Postgraduate) loans, the UK Government used predicted market rates to bring forward a cap on interest rates to a maximum of 7.3%. The actual market rate is now 6.3%, so the cap has been reduced to this figure.” The UK Government said.

“By setting an interest rate of 6.3% rather than the expected 12% this will bring down the student loan interest rates by the largest amount on record and will mean, for example, a borrower with a student loan balance of £45,000 would reduce their accumulating interest by around £210 per month compared to 12% interest rates. This is on the total value of the loan, as monthly repayments do not change.” The UK Government said.

A spokesperson for the Student Loans Company said:

“The change in interest rates is automatically applied so customers don’t need to take any action. We encourage customers to use SLC’s online repayment service to regularly check their loan balance and repayment information, as well as ensure their contact information is up-to-date.”

For new students from August 2023, student finance will be put on a more sustainable footing. Student loan interest rates will be reduced so that they will not, in real terms, repay more than they borrow.