Total interest paid on student loan debt set to almost double in the next five years following interest rate hike
New analysis of official government projections published by the Labour Party shows that the total interest being racked up by graduates on their student loan debt is set to rise to £8.6 billion in 2024, an increase of £4.2 billion.
Figures published by the Department for Education on student loan repayments show that almost all the rise in accrued interest will come from the post-2012 undergraduate loans, with the total interest added to these debts set to more than double from £3.5 billion to £7.6 billion over the next five years.
The interest rate charged on student loans for undergraduates who began their studies after September 2012 is currently 6.3% – the Retail Price Index (RPI) plus 3%.
The Institute for Fiscal Studies has estimated that fewer than two in 10 graduates will fully pay back their student loans, with the taxpayer now set to pay for almost half of all debt taken out by students this year.
The government has also been criticised for selling off student loans at less than half their value, costing the taxpayer hundreds of millions of pounds.
Angela Rayner MP, Labour’s Shadow Education Secretary, said:
“A combination of sky-high tuition fees and soaring interest rates is pricing young people out of education and creating eye-watering debts for those who do go to university.
“Under the Tories and their broken student loan system, thousands of students are being burdened with vast levels of debt that they will never be able to repay.
“With almost half the cost of the current broken system being picked up by the taxpayer, the government should stop cooking the books and start being honest with the public about how we fund higher education.
“Labour will scrap tuition fees and restore maintenance grants for disadvantaged students so that access to education is a right for all, and everyone can reach their potential, regardless of their background.”