Graduates saddled with £16,000 more student debt due to rigged Government interest rate
New House of Commons Library analysis shows that graduates’ face up to £16,000 more student debt because of the Government’s use of Retail Price Index to apply interest to their student loans.
RPI is forecast to be 1% higher over the next five years than Consumer Price Inflation, the alternative inflation measure. Using RPI to calculate the interest applied to student loans therefore increases the overall debt that graduates owe.
Recently the House of Lords Economic Committee launched an inquiry into whether “we should stop using the Retail Price Index.” This follows criticisms by the Governor of the Bank of England, who said it “has no merit” and called for its “deliberate and carefully timed” withdrawal. The Office of National Statistics also said RPI was a “very poor” measure.
The Government dropped use of the RPI measure for uprating the value of public sector pensions in 2011, leaving workers £650 a year worse off, but continues to use the measure to drive up student debt.
Peter Dowd MP, Labour’s Shadow Chief Secretary to the Treasury, said:
“The Conservatives are rigging interest rates to ramp up costs for students. It’s not enough that they’ve saddled graduates with an average of £50,000 in debt, they’re now charging an additional £16,000 on their loans.
“The Government is cherry picking inflation measures to maximise profits. They’ve used one measure to cut workers’ pensions and another to drive up student debt, simultaneously robbing the old and the young. They need to end this rip off and revert to the Consumer Price Index.
“The next Labour government will abolish tuition fees to ensure education is a right for all, not a privilege for a few.”