UK student debt has reached new heights, with interest rates almost doubling those set by the Bank of England.
Official figures reveal that Rishi Sunak’s government has more than doubled its revenue from student loan interest, raising concerns about the financial burden on graduates. Can this trend be reversed?
- UK student loan interest reached a record £4.8bn in the year ending March. Despite the government’s interest rate cap, highlighting a growing debt crisis for students.
- The average debt for students starting their courses in 2021-22 is forecasted to be £45,800, with only 20% expected to fully repay their loans, contributing to the £180bn of outstanding loans.
- Critics argue that the escalating student debt is widening the financial divide between generations and socioeconomic backgrounds, disproportionately affecting low-income students.
- Experts, like Ben Waltmann from the Institute for Fiscal Studies, call for stable, low interest rates that reflect the government’s borrowing costs to ease the financial burden on students and promote a more equitable higher education system.
In response to the highest inflation levels in 40 years, the UK government, under Chancellor Rishi Sunak, capped the interest rate on student loans in England and Wales at 6.3% last autumn. The interest rate has gone up to 6.9% and will rise to 7.3% in June. This matches rates from banks for personal loans. Even though the government tried to help students with living costs, interest rates still increased.
Students who started in 2021-22 will owe about £45,800 when they finish, and only 20% will pay it all back. Each year, England loans nearly £20bn to 1.5 million students, and the total outstanding loans are now over £180bn.
The increasing debt levels faced by students have raised concerns among critics. The latter argue that the escalating debt is widening the financial divide between generations and socioeconomic backgrounds. Students with less money face more debt issues than those from richer families who get financial help.
Economist Ben Waltmann thinks post-2012 loan interest rates are too high. He states that students need and want stable situation when borrowing costs. By addressing the issue of high interest rates, the government can potentially ease the financial burden faced by students. Moreover, the governement can promote a more equitable higher education system.
UK student debt interest hit a record £4.8bn last year, over twice the amount from the year before. Despite the government’s cap on interest rates, the financial burden on students continues to grow, raising concerns about the widening financial divide among different generations and income levels. Experts call for stable, low interest rates to mitigate the impact of soaring student debt on society.
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