With rising levels of debt casting a series financial shadow over young people's lives, the latest increase to student loan interest rates is more than a concern and begs the question, is going to Uni these days really worth the time or money?
An increase in inflation, exacerbated by the pound’s Brexit slide, means students will now pay more while others are benefitting from low borrowing rates. Put simply, the scale of debt owed by students for loans, tuition and maintenance has rocketed and the amount owed last year had reached £76 billion, compared with £34 billion in 2011.
Students will pay the heavy price as UK inflation surges, increasing the interest rate on their loans up by a third to 6.1 per cent. As a result, students will be charged substantially more interest on their loans and a sizeable number of graduates will see the interest rate on their student loan jump to more than 24 times the official Bank of England base rate.
The announcement that inflation, as measured by the retail prices index (RPI), was at 3.1 per cent in March means some students will be charged as much as 6.1 per cent on their loans taking effect from this September. Based on inflation in March last year, interest is currently accruing at up to 4.6 per cent, meaning September’s rise will be equivalent to a 33 per cent increase. The rate increase applies to people who started university after 2012.
Unfortunately, its the students who first had to pay fees of up to £9,000 a year, trebling the cost of attending university, and many are now expected never to pay off their full debts as loans expire after 30 years. The fact that borrowers who take out a mortgage or personal loan can fix their rates, but students can’t, is simply unfair because it’s the government who has linked student loan repayments to RPI, which is generally higher than CPI, and which even the ONS says is no longer a proper national statistic.
A Department for Education spokeswoman said: “Our student funding system is sustainable and fair, with affordable loan rates”. What a load of tosh! As if a hefty debt to the tune of £44,000 isn’t enough to contend with, graduates are struggling to access the housing market, save and start pensions and this increase will only disadvantage them further.
With new research finding that over a quarter of graduates (5.6 million people) are now regretting the time and money spent on their university education and a massive 9.7 million (45 per cent) saying internships and work placements are more valuable in their career than a university degree, are we likely to see a drop in the number of people going to Uni in the future?
While PM, Theresa May has said “there is no more important place to start than education” there is a growing concern that education across all levels is failing. Let’s face it, when you can get a personal loan available from the high street with interest rates as low as 2.8 per cent, students are being unfairly charged for government loans. No wonder Estelle Clarke, a legal advisor and board member for the Intergenerational Foundation think tank has said, “This is an inexcusable assault on the vulnerability of students with no alternative but to go along with the government’s student finance system”.