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Student Debt Levels to Increase yet Further

Posted by Richard Ward in , ,

Image courtesy of Flickr, Creative Commons

Students are set to face a sudden increase in the interest rate applied to their tuition fees and maintenance loans.

The increase will impact millions of current and former students in England and Wales, with interest rates rising by around a third.

For students taking out loans since 2012, the applicable interest rate is based on the retail price index (RPI) measure of inflation in March, plus 3%.

The latest RPI was recorded at 3.1% compared to 1.6% last year and 0.9% in the year before. This will result in an increase rate charged on tuition fees and maintenance loans of 6.1%.

The resulting increase will lead to students facing higher costs before they've even graduated.

Students will also be impacted by an increase in tuition fees this year, with universities in England set to charge £9,250 per year.

The Intergenerational Foundation's latest report on tuition fee interest was dubbed "The Packhorse Generation", reflecting the increasing levels of debt that students face.

The foundation estimated that prior to the interest rate increase, students earning £41,000 per year will make repayments of £54,000 on tuition fees alone. Many students also take out loans to cover living costs, which place an additional financial burden on students.

The level of debt owed by students for tuition fee and maintenance loans rose to £76bn last year, compared with around £34bn in 2011.

Commenting on debt levels, the National Union of Student president, Malia Bouattia, said: "Graduates wanting to access the housing market, save and start pensions after university are already struggling to do so and this step will only disadvantage them further."

Ms Bouattia added that the rising levels of debt would "cast a long financial shadow over young people's lives."