Students: Loans

Business, Innovation and Skills written question – answered on 9th September 2013.

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Photo of Chuka Umunna Chuka Umunna Shadow Secretary of State for Business, Innovation and Skills

To ask the Secretary of State for Business, Innovation and Skills what estimate he has made of the potential value to the public purse of raising interest rates on existing student loans.

Photo of David Willetts David Willetts Minister of State (Universities and Science)

The Education (Student Loans) (Repayment) Regulations set out the terms and conditions of both pre-2012 and post-2012 income contingent student loans schemes. We have no plans to change how the rates of interest charged on student loans are determined.

Raising the interest rate for the existing post-2012 student loan scheme might not increase the value of the loan book because it may provide an incentive for students to borrow less and to repay earlier than required. Moreover, charging higher interest rates could mean that the loans become subject to regulation under consumer credit legislation, which would necessitate a wholesale review of how student loans operate.

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