Stephen Williams (Bristol West, Liberal Democrat)

To ask the Secretary of State for Innovation, Universities and Skills

(1) if he will review the interest rate charged on mortgage-style student loans in order to reduce the level of interest payments;

(2) what the interest rate on mortgage-style student loans has been in each year since 1998.

David Lammy (Minister of State (Higher Education & Intellectual Property), Department for Innovation, Universities and Skills; Tottenham, Labour)

The interest rate to be charged on mortgage-style student loans is set out in the Education (Student Loans) Act 1990 and the Education (Student Loans) Regulations 1998, which provide for a link to the retail price index (RPI). Specifically, the interest rate for an academic year is the annual movement in the RPI for the year to the previous March. Thus, the interest rate of 3.8 per cent. for the 2008/09 academic year reflects movements in the RPI for the year to March 2008.

The interest rate for the 2009/10 academic year, starting in September 2009, will reflect the RPI for the year to March 2009. Consistent application of the RPI meets the intention that, in fairness both to the borrower and to the taxpayer, over the lifetime of the loan, the borrower will repay in real terms no more than was borrowed.

The interest rates applicable to mortgage-style loans for each academic year since 1998 are as follows: