Labour caps interest rates on student loans

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Labour has capped the interest rate on plan 2 and plan 3 student loans at 6%, after facing months of lobbying to change the repayment process. The limit comes into effect in September. This will shield graduates from the worst of the Iran war’s economic fallout, but does nothing fundamental to change a system that sees them accumulate increasing debts. People with plan 2 student loans attended university between 2012 and 2023 and pay back 9% of their salary over £29,385. Interest is currently added to their loans at the retail price of inflation plus up to 3%, depending on their salary. In February RPI was 3.6%. The result is that most borrowers’ repayments are less than the amount of interest they are incurring. Capping interest at 6% means their debt will still grow, just at a lower rate if inflation increases sharply.