Higher Interest Rates for Student Loan Payback


According to a report out today, graduate students may be required to pay back their tuition fee loans earlier and with higher interest rates due to the growing financial problems faced by many universities. The Russell Group of Universities, of which Southampton University is one of, has revealed that figures suggest they will face a £1.1bn deficit in finance by 2012-13. The stability of these top universities has been deemed “severely at risk”.

It has been well talked about that a rise in the cost of tuition fees may be in our future but another feasible option appears to be hastening the repayment methods in order to reduce the cost of government borrowing. The Russell Group has stated, regarding the issue of repayment rates on tuition fee loans which is currently 9% of the student’s earnings over £15,000 per year, that it is “a subsidy which imposes high costs on the government, and which exceeds the requirements of ensuring fair access to higher education”. A review on the matter is set to continue for the next couple of weeks.

Other options discussed for reducing the risk of a university funding crisis include; encouraging more international students, cutting back on staff, or altering the repayment scheme for loans.

With regard to Southampton University, cuts have already been seen in an attempt to avoid financial crisis.

These possible actions regarding student loans would affect a lot of students and may well put people off applying to university. Let us know if you think you would be able to start paying back your loans earlier and with a much higher rate of interest.


Discussion7 Comments

  1. avatar

    The travel centre was shut due to it losing money in the Union, it has nothing to do with University cuts.

    Chris Houghton

    Lucie – you’re absolutely right. The article has been amended.

  2. avatar

    Just a note on the interest on student loans. I am pretty sure it is currently pegged to RPI inflation which is only a couple of %. The 9% you quote is actually the automatic repayment (greater than 15000/yr) taken from your pay packet just like PAYE tax.

  3. avatar

    You’re right, thank you for pointing that out, I have amended that point to avoid any confusion.

    James Pipe

    I’m not sure you have because

    “regarding the issue of interest rates on tuition fee loans which is currently 9% of the student’s earnings over £15,000 per year”

    should be something like either:

    “regarding the issue of the repayment rate on tuition fee and maintenance loans which is currently 9% of the student’s earnings over £15,000 per year”


    “regarding the issue of interest rates on tuition fee and maintenance loans which is pegged to the current UK Retail Price Index of inflation (5.3%)”


  4. avatar

    Hopefully the new coalition can agree to reduce the number of places at university, ideally closing down a string of ex-polytechnics in order to distribute the same level of funding towards fewer, better institutions.

    Universities are relatively under-funded in this country and direct government funding isn’t going to happen now, so we have to choose between increasing fees and creating an elite based on ability to pay, or closing down the lesser institutions and recreating an elite based on ability to learn. It is only equitable that the latter is chosen.

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