Theresa May urged to cut interest rate for student loans
MPs from across the political spectrum have urged the prime minister to reduce the interest rate charged on student loans and bring back grants for the most disadvantaged students.
A report by the Commons Treasury Select Committee published last week called on May to change the formula for student loans, where students are charged interest rates of over six percent whilst they are studying. Most students face fees of £9,250 per year, and many also borrow thousands to help pay with rent and living costs, and so end up being charged hundreds of pounds in interest.
Commentators have described the 6.1% interest rate as “punitive” and accused the government of trying to profit from the young with the rate as high as some commercial loans or even loans for unemployed people. Whilst many students will never pay back the money they borrow, the prospect of debts hanging over the millennial generation for their lifetime is cause for concern.
The report also urges the government to reconsider the benefits of maintenance grants to help poorer students, with many young people put off the idea of university by the idea of mounting debts that regularly now reach of £50,000, with some entering the workforce with debts of nearly £70,000.
Under the current system, students form the poorest backgrounds are able to borrow more in maintenance support, but because this money is provided in the form of a loan and not a grant as in previous decades, it is those without a safety net of family money and from the most disadvantaged that are left with the highest debts.
Labour has pledged to scrap tuition fees entirely, and described the Conservative plans as a “desperate” ploy to win over younger voters, with recent polls showing Tory support amongst young people at the lowest level for decades.
Photograph by TeroVesalainen