Students: Loans

Department for Education written question – answered on 26th September 2017.

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Photo of Bambos Charalambous Bambos Charalambous Labour, Enfield, Southgate

To ask the Secretary of State for Education, whether she plans to (a) cap or (b) reduce the interest rate applied to student loans.

Photo of Jo Johnson Jo Johnson Minister of State (Department for Education) (Universities and Science) (Joint with the Department for Business, Energy and Industrial Strategy), Minister of State (Department for Business, Energy and Industrial Strategy) (Universities and Science) (Joint with the Department for Education)

We have a world class student finance system, which has enabled record numbers of people to benefit from a university education. Latest UCAS data for 2017 shows more disadvantaged young people have been accepted to university than for the whole of the 2016 application cycle.

The student funding system removes financial barriers for anyone hoping to study, and is backed by the taxpayer. The interest rate on student loans remains significantly below the relevant Bank of England reference rate for unsecured personal lending. In addition, the repayment terms of student loans are significantly more favourable for the borrowers than commercial loans. Monthly repayments are linked to income and not to the amount borrowed or the interest rate. Borrowers earning less than the repayment threshold of £21,000 repay nothing at all. Loans are written off after 30 years with no detriment to the borrower, and student loans are available to all eligible students regardless of their previous financial history.

As with all Government policy, we continue to keep the detailed features of the system under review to ensure it remains fair and effective.

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