Fresh graduates met with hidden student loan charges

15/07/2011

As a result of the huge interest rates on new university loans, it is likely that the average middle-class student will owe £6,000 more on the day they graduate than they originally borrowed at the start of their three year degree.

This is because from the moment they are given the first portion of funds for their studies, the debt will have an interest rate which is three percentage points above inflation.

It has also been said that the interest rate makes student loans more expensive than many loans from high street banks.

This revelation comes alongside recent announcements that as of September 2012, tuition fees will increase from £3290 to £9,000 a year at many universities.

All students enrolled in university will qualify for either a loan or a grant to cover the costs, depending on their circumstances.

This means that a substantial number of UK students will become victims of the loans’ hidden charges.

Ian Mulheirn of the Social Market Foundation think-tank told the Daily Mail: “The headline figure of £9,000 a year for tuition fees is deeply misleading. With punishing interest rates this high, and kicking in so early, it is more like they’ve increased from £3,000 to £12,000.”

The loan interest rates whilst students are in university will be calculated as the inflation, as measured by the retail price index (RPI), plus three percentage points.

After leaving university, interest rates on the loan will be dependent on the graduate’s earnings. As an example, for earnings between £21,000 and £41,000 the interest rate gradually rises to three percentage points above RPI.

And whilst students do not begin repayments on their loans until they begin earning at least £21,000, interest at the rate of RPI will be racked up.

Tags; Debt Management and Banking, Income Worries and Debt, Current UK Economy, Recent Graduate Debt,

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