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Students: Loans

Volume 485: debated on Tuesday 16 December 2008

To ask the Secretary of State for Innovation, Universities and Skills how many students were in receipt of reduced student loans due to the availability of means-tested NHS bursaries in each of the last five years. (242427)

Students who attend NHS funded degree courses in: medicine or dentistry (from year 5 on the undergraduate course and year 2 on the postgraduate course), chiropody (including podiatry), dietetics, occupational therapy, orthoptics, physiotherapy, prosthetics and orthotics, radiography, audiology, speech and language therapy; dental hygiene or dental therapy; nursing or midwifery are eligible for a non-repayable means-tested NHS bursary, which can be supplemented by a reduced maintenance loan.

The reduced maintenance loan is not income assessed but the amount is dependent on location of study.

The following table shows the number of English domiciled students who have received a reduced maintenance loan.

Academic Year

Number of students

2004/05

23,600

2005/06

25,400

2006/07

28,500

2007/08

31,900

Note: Table includes students who may have suspended or withdrawn from their course. Figures for 2003/04 are unavailable.

To ask the Secretary of State for Innovation, Universities and Skills if he will consider reducing the interest rate applied to student loans to mirror the recent reduction in the Bank of England base rate; and if he will make a statement. (243376)

The legislative provisions for income contingent repayment student loans require that the rate of interest must: (i) be no higher than is necessary to maintain the value of the loan in real terms; and (ii) not exceed 1 per cent. above the highest of the base rates of a specified group of banks1 (the ‘low interest cap’). The interest rate is normally set every September to equal the retail prices index for the previous March—currently 3.8 per cent. Following the reduction in the Bank of England base rate by the Monetary Policy Committee on 4 December 2008, all the specified banks have reduced their base rates to 2 per cent. and the low interest cap comes into play. The Student Loans Company (SLC) have therefore reduced the interest rate for income contingent loans from 3.8 per cent. to 3 per cent. with effect from 5 December 2008 until further notice. The SLC have published this information on their website and in national newspapers.

The interest rate for loans taken out before 1998 (known as ‘mortgage style loans’) is not affected as these loans are governed by different legislation.

1 Bank of England; Bank of Scotland; Barclays Bank plc; Clydesdale Bank plc; Co-operative Bank plc; Coutts and Co.; HSBC Bank plc; Lloyds TSB Bank plc; Natwest Bank plc; the Royal Bank of Scotland plc.