In accordance with the requirements of the Consumer Credit Act 1974 the Student Loans Company (SLC) publishes details of the forthcoming change in the interest rate payable for Mortgage Style (MS) Student Loans before the new rate takes effect on 1 September each year. There is no similar requirement for advance notification for Income Contingent Repayment (ICR) Student Loans which have exemption from arrangements governing consumer credit agreements.
However, the SLC publishes notices of the change of interest rates affecting all student loan borrowers in national newspapers before 1 September each year. The change is also published on the SLC's and Government websites.
Borrowers with MS loans are individually informed of the change by the SLC and private sector debt owners before 1 September. This is important as a change in interest rate for these borrowers changes the payments they are required to make. Borrowers with ICR loans receive notification of the change with their annual statements. For the majority these are issued between September and December.
While any change in the interest rate applied adds to the overall balance of the outstanding loan it does not alter the income-related repayments of these borrowers.
[holding answer 20 March 2008]: Introducing repayment thresholds of £20,000, £30,000 and £41,225 with corresponding repayment rates of 5 per cent. 7.5 per cent. and 12 per cent. would have an estimated one-off resource cost of £2 billion (for existing loans) and on ongoing resource cost of £700 million per year (for new loans).
The income threshold is one of the main features of the income contingent loan scheme. This protects borrowers when they need it as they only pay their loan back once they earn over the threshold. Borrowers currently repay nothing until they earn over £15,000. This strikes the right balance, making payments affordable to the individual and student loans affordable to the public purse. We are committed to maintaining the repayment threshold at £15,000 until 2010 when we will review it.