To ask the Secretary of State for Education, what assessment he has made of the potential merits of freezing the interest on student loans while university education is disrupted by the covid-19 pandemic.
The system for setting interest rates on student loans is set out in The Education (Student Loans) (Repayment) Regulations 2009, as amended.
The current system protects borrowers if they see a reduction in their income. Repayments are made based on a borrower’s monthly or weekly income, not the interest rate or amount borrowed, and no repayments are made for earnings below the repayment thresholds. Repayments are calculated as a fixed percentage of earnings above the relevant repayment threshold. Any outstanding debt is written off at the end of the loan term with no detriment to the borrower.
If, at the end of the year, the borrower’s total income is below the annual threshold, they may reclaim any repayments from the Student Loans Company made during that year.