TUC issues warning on rates for student loans

Thu, 21 Apr 2011

The Trades Union Congress (TUC) has warned that graduates will have to pay back thousands of pounds more than expected because of the move by the coalition government to change how the interest rate for student loans is calculated.

The national trade union centre said the decision to move the rate from the consumer prices index (CPI) to the retail prices index (RPI) would mean a graduate that was on an average salary, and had a student loan of GBP25,000, would take an extra two years to pay off the loan, as well as having to pay an extra GBP4,800.

They also stated that those graduates who were on a lower wage, or had a higher level of loan, or even took a break from their career to look after children, would have to re-pay even more.

It is also possible that using the RPI could mean even higher costs for the next generation of students, because the Education Bill that is currently working its way through parliament has a clause that allows ministers to charge a commercial rate of interest, 3 per cent in addition to the RPI, on future student loans.

The TUC have also complained about the move by the government to using the lower CPI for working out increases to benefits including pensions, jobseekers allowance, tax credits and tax thresholds .
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