Student Loan Interest Rates to Rise- Is Uni Worth It?
- Loans will have up to 6.3% interest
- Graduates face over £50,000 of debts
- Will affect students going to university in autumn this year
- Is university worth it?
The interest rates on student loans are set to rise this autumn.
From this September, students will pay up to 6.3%, after a rise in the Retail Prices Index (RPI), compared to the same point last year.
The increase comes amid continued concerns about the debt burden on students and high interest rates on student loans, as well as whether students are receiving value for money.
It was even proposed last year that some students from poorer homes should be able to go to university for free, to help them be in less debt when they graduate.
There will also be a review of higher education which will examine the role of interest rates on student loans, and see if they can be reduced.
Minister have insisted that this hike in interest rate will have no impact on monthly repayments for the majority, and only a few people will be affected.
A spokesperson for the Department for Education said, “This change in interest rate will make no impact on a borrower’ monthly repayments, and very few people are likely to be affected by the increase.
“Once the loans are in repayment, only borrowers earning over £45,000 are charged the maximum rate.
“This ensures that they make a fair contribution to the system.”
This change will affect students in England, Wales, and Northern Ireland- but not Scotland where university is free.
Those heading to university this autumn will be charged interest of 6.3%- which is RPI plus 3% while they are studying.
After they graduate, interest is charged on a sliding scale, with those earning over £45,000 paying the maximum of 6.3%
Graduates do not have to start repaying loans until they are earning over £25,000, and those earning under this amount are charged interest of 3.3%
The change has been met with criticism from the opposition.
Angela Rayner, Shadow Education Secretary, said, “The latest rise in RPI means that hundred of thousands of students will be seeing the unjustifiably high interest rates on their student debt rise once again, to an eye-watering 6.3%
“Students are graduating with over £50,000 in debt, and face these interest rates from the moment they begin their courses, causing their debt to skyrocket during their time at university, when they cannot even begin to pay it back.”
Tuition fees hugely rose in 2012, going from a maximum of £3,000, to a maximum of £9,000.
This caused a significant drop in student numbers, going from 342,000 in 2011, before the rise, to 272,000 in 2017 according to UCAS.
Since then, many students do not feel that going to university is worth the debt.
A student member of the Latest Deals money saving community said, “Being in my final year, I can say that I don’t think it’s worth the fees. Last year I learnt a lot more about my specialist subject through sourcing talks with industry professionals outside of uni-which I had to pay for!
“I feel I’m in a cycle at the moment that just isn’t worth the money and stress I’m putting into it.”
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Personally I didn't feel my degree was worth the money - and that was before the big hikes. Everything taught could have been Google'd, and most of the time we were just given a reading list. Non-technical subjects (such as mine) are just not worth the price. But I do understand that what you're really paying for is the job. Unfortunately, and to their misfortune, lazy employers use a degree as a benchmark in the recruitment process. It's just such an easy way to sort candidates into a good pile and a bad pile. There needs to be work done to re-educate employers that degrees aren't the bees-knees and other work experiences should take greater precedent.
Just as a heads-up to any students reading this... if you skipped university, lived at home and worked instead, you might be able to save £50,000 in 3 years.
If you invested that into a standard index fund, 6% compounded growth over 45 years (by the time you retire) would be £688,230. That's without you doing anything.