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Students: Loans

Volume 487: debated on Monday 9 February 2009

To ask the Secretary of State for Innovation, Universities and Skills what steps he is taking to ensure that those with student loans taken out before 1998 receive a reduction in interest rates. (254269)

The interest rate applicable to pre-1998 student loans is governed by the Education (Student Loans) Act 1990 and the Student Loans (Regulations) 1998 which set out that for the period between 1 September and the following 31 August the interest rate is the daily rate which results in an APR equal to the RPI (retail price index). The interest rate used is the RPI for the preceding March. Setting the interest rate in this way ensures that borrowers, over time, repay in real terms only as much as they borrowed. Moreover, if a borrower's income falls below £25,936 per annum, they can apply for their repayments to be deferred.