UK: Interest Rate for Pre-2012 Income Contingent Student Loans to Increase to 3.25%

United Kingdom Europe Higher Education News by Erudera News Oct 21, 2022

student loan forgiveness, student debt, university debt

The United Kingdom’s Department for Education (DfE) has announced an increase to 3.25 percent for the current interest rate for pre-2012 income contingent (ICR) student loans.

The move has been announced in a press release issued by the DfE on Thursday, October 20, explaining that since September 22, 2022, the Bank Base Rate changed to 2.25 percent, in line with this, the interest rate for pre-2012 ICR loans will increase to 3.25 percent.

Pre-2012 income contingent (ICR) student loans have an interest rate of either RPI (from the March prior to September when the new interest rates are implemented) or the Bank Base Rate + one percent, whichever is the lower (this is known as the “low-interest cap”),” the press release points out.

Student loans in the UK are handled by the Student Loan Company (SLC), which is a non-profit making government-owned organization and an executive non-departmental public body funded by the Department for Education.

There are several different types of loans for college and university students in the UK, and each of them has a different plan type for the repayment of the borrowed money.

While in most world countries, the repayment of student loans is mainly based on the amount borrowed and the period of time needed to repay the loan, in the UK, repayment depends on the person’s income.

You repay nine percent of your income above the repayment threshold for your plan type. If you’re not working or your income is below the threshold, you won’t make any repayments,” the SLC explains.

Students are allowed to make extra repayments of the loan any time they want, and the loan does not appear on their credit file, which means that their credit rating is not affected.

On October 7, Student Loan Company revealed that an amount of £2.6 billion has been distributed in the form of loans to 1.1 million students in the first term of the 22/23 academic year.

According to data from a report published by the UK Parliament’s House of Commons Library, there are almost £20 billion loaned to around 1.5 million students in England each year, while the government foresees that the value of outstanding loans will reach about £460 billion by the mid-2040s, calculated with 2021‑22 prices.

Regarding EU students, the report published by the House of Commons Library shows that at the end of 2021-22, the total publicly owned debt for English university and college students and EU students studying in England had reached £181.6 billion.

>> Requirements to Study in The UK

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