MPs urge Government to reconsider charging high interest rates on student loans

Posted On: 
18th February 2018

An influential group of MPs has urged the Government to reconsider charging high interest rates on student loans. 

High interest rates on student loans should be reconsidered, MPs have argued

In a new report, the Treasury Committee has questioned the justification for imposing above market rates on students, arguing that high-earning graduates could end up paying less under the current system.

The MPs also called on ministers to look at reintroducing maintenance grants for poorer students, warning that some may be “priced out of university” without extra support.     

The intervention comes ahead a major government review of university funding and student financing.

Committee Chair Nicky Morgan said: “The use of high interest rates on student loans is questionable. The Government has justified it on progressive grounds, but the Committee remains unconvinced as high-flying graduates may pay less than graduates on more modest earnings.

“No other persuasive explanation has been provided for why student loan interest rates should exceed those prevailing in the market, the Government’s own cost of borrowing, and the rate of inflation.

“The Government must reconsider the use of high interest rates on student loans as part of its review.

“The Government has said that maintenance loans aren’t intended to fully cover a student’s living costs.

“If a student can’t access additional sources of income, they may be priced out of university. The Government should assess the case for re-introducing maintenance grants to help remove barriers to access for potential students.”

The former education secretary added that ministers should “consider how to simplify the student loan system to ensure that student finance is more understandable”.