Jeremy Miles MS, Minister for Education and Welsh Language
I made a statement on 5 September 2022 to confirm the intention to cap the interest rate charged to Welsh students on certain loans from September 2022 at 6.3% for a period of three months. This cap was also announced by the UK Government for English students.
I can now announce that the interest rate will be capped from 1 December 2022 for a further three months. The rate for these three months will be 6.5%.
The rate of inflation, which determines the interest charged on certain student loans, has risen significantly. Interest rates on these loans would have risen to up to 12% without the September cap. The Welsh Government must ensure that rates do not exceed the prevailing market rate and took action three times in 2021 to cap the rate on loans and protect students.
As prevailing market rates remain high, the rate on loans taken out by undergraduate students since 2012, and by postgraduate students, will be capped at 6.5% between 1 December 2022 and 28 February 2023. Further rate caps may be applied if the prevailing market rate continues to be below student loan interest rates after that date.
Changes to interest rates do not affect monthly student loan repayments, which are charged as a fixed proportion of income. Loan repayments are income contingent. Students repay their loan only if they earn above a threshold, and remaining debts are written off after thirty years.
Living costs should never be a barrier to studying at university, which is why the Welsh Government provides the most generous living costs grants in the UK. Welsh students have less to repay on average than their English peers. The Welsh Government also provides a debt write-off of up to £1,500 for each borrower entering repayment, a scheme unique in the UK.