Interest Rate On Student Loans Cut To 1.5 Per Cent

Fri, 27 Mar 2009

Students in the UK have benefited from a further cut in the interest rate on their loans, which now stands at just 1.5 per cent.

The cut, which took effect on March 6 2009, is the third reduction in as many months and comes in response to recent cuts in the Bank of England Base Rate .

The student loan repayment rate was slashed from 3.8 per cent to 3.0 per cent in December 2008, and again to 2.5 per cent in January.

Interest charged on student loans in the UK is fixed each year in September, according to the rate of inflation as measured by the retail prices index (RPI) in March.

The Base Rate fell from 4.5 per cent to 3.0 per cent in November 2008 and to 2.0 per cent in December. Further reductions in January (1.5 per cent) and again at the beginning of March, to 0.5 per cent, prompted the rate charged to graduates to fall again, to just 1.5 per cent.

However, the recent cuts will not be of benefit to all. The interest rate for student loans taken out earlier than September 1998 is simply based on RPI in March, and will therefore remain at 3.8 per cent until 31 August 2009.
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