Student loan interest rates set to soar - what the changes mean for your repayments

manchestereveningnews.co.uk:

Graduates paying off their student loans are set to see interest rates soar this year, with the Institute for Fiscal Studies warning that students who took out a loan after 2012 are in for a "rollercoaster ride".

Based on the current Retail Price Index (RPI) inflation rates, the changes will see the maximum interest rate on loans rise from 4.5 per cent to an “eye-watering” 12 per cent for half a year for the highest earners - those earning £49,130 or more - while interest rates for low earners will rise from 1.5 per cent to 9 per cent, the IFS said.

This means that a high-earning recent graduate with a typical loan balance of £50,000 would incur £3,000 in interest over six months, a higher amount than a graduate earning three times the median salary for recent graduates would usually pay. READ MORE: "I've saved more than £400 shopping in second hand stores this year" However, the spike in interest rates is only temporary, the IFS said.

The maximum student loan rate is set to fall to around 7 per cent in March 2023, fluctuating between 7 per cent and 9 per cent for a year and a half, before then falling to around 0 per cent by September 24, and rising again to around 5 per cent in March 2025. “These wild swings in interest rates will arise from the combination of high inflation and an interest rate cap that takes half a year to come into operation," the IFS explained.