Student loan interest rates to rise
June 30, 2007
It has been a bad week for students in terms of finances this week. Earlier in the week HSBC announced that it would be scrapping its facility for students that leave university this year to pay off their overdraft over a three year period without interest.
Instead the bank plans to charge nearly ten percent on the overdraft when students graduate unless they open an upgraded account that will set them back nearly ten pounds a month, in which case the three year interest free period will still be offered.
And as a double whammy the government has now announced that the interest rates on students loans is to double from September, rising from 2.4 percent to 4.8 percent, which means further adverse financial implications for graduates that have to start paying off their student loan. The interest will start to accumulate on the loans as soon as the money is paid out, and like any other loan, will continue to accrue until the loan is repaid.
Repayments on student loans begin in the April following the student’s graduation, providing the student is earning at least fifteen thousand pounds a year by that time. Based on the average student loan of twelve thousand pounds the new interest rate will mean that nearly six hundred pounds will be added if no repayments are made, whereas on the previous interest rate this equated to under three hundred pounds.
Concern has already been raised recently with regards to the high levels of debt that students are getting themselves into even before they have graduated, and with these additional interest rates and overdraft fees when they leave university students could find it increasingly difficult to try and clear the debt that they accumulate through going to university.
Alan Wright
30th June 2007
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