Welcome £20m relief next month for Scots students
Good news with 1% drop in rates
Published:
MORE than £20million will be wiped off Scottish student debt next month thanks to a major cut in interest rates, the Press and Journal can reveal.
With economic misery hitting many families through record fuel costs and rising food prices, the Student Loan Company is about to announce a 1% drop in interest rates for the next 12 months.
Student debt in Scotland passed £2billion for the first time at the end of the last financial year and the announcement will save Scots more than £20million overnight.
Student loan interest rates are set by a UK Government formula that is based on the Retail Price Index (RPI) for March of the previous year.
The interest rate on student loans is now 4.8%, based on the RPI for March 2007.
The interest rate for the next year, beginning at the end of August, will drop to 3.8%, even though the RPI for June rose to 4.6%
North East MSP Richard Baker, a former president of the National Union of Students, said the cut would bring some welcome relief for those heavily in debt.
“The main reason that so many students are dropping out of our universities is because of the amount of debt they build up, and also the lack of money that they have to live on while they study,” he said.
Scotland’s outstanding balance of student loans stands at £2.05billion and the total amount loaned to higher-education students during the last financial year was £212.8million – a rise of 8% on the previous year.
The average outstanding balance was £5,550. Debtors include students still at college, those who have finished their education but have not yet made payments and those who have been making payments for years.
The figures do not include other types of borrowing such as bank loans or credit cards.
Chris Lamont, who is originally from Inverness, left the Robert Gordon University in Aberdeen with just under £18,000 worth of debt.
Last night, the 27-year-old freelance copywriter welcomed the reduction.
“This rate cut will save me £180, which will definitely be welcomed given the cost of everything else at the moment.”
However, Mr Lamont, who now lives in London, is concerned that the possibility of the UK economy heading towards recession could send student loan interest rates rocketing again.
“It is a big fear,” he said. “If the interest rate was to soar, then many students who are repaying their loans won’t even be covering the interest.”
The last time Britain was facing recession, in March 1990, student loan interest rates went as high as 9.8%.
The country edged closer towards recession last week as official figures revealed growth fell to just 0.2% between April and June.
Recession is defined as two consecutive quarters of negative growth.
