Millions of graduates will be forced to pay more interest on their student loans thanks to Brexit, it has been announced.
A rise in inflation following a post-Brexit slump in the pound means that students and graduates could see the amount of interest they pay soar to 6.1%.
The rise of almost a third, based on the retail price inflation figure (RPI), comes at a time when high street personal loans are available with interest rates as low as 2.8%.
Shadow education secretary Angela Rayner criticised the move, tweeting: “Student loan interest rate set to rise by a third after UK inflation surge. Student debt is sky high as it is...”
The change, set to be implemented in September, will hit students who started university following the 2012 tuition fee hike the hardest. This interest rate this group currently accrue is up to 4.6%.
While new starters and current students will be charged 6.1% interest on their student loans, recent graduates could pay anything from 3.1% to 6.1%.
This variation is due to the fact that student loan interest rates are calculated using RPI - which is now 3.1% - plus up to 3%, depending on earnings.
This means that graduates earning more than £41,000 will be charged the full interest amount of 6.1%, while those paid under £21,000 will be on a lower interest rate of 3.1%.
Jake Butler, operations director at money advice site Save the Student, said the increase was “worse than expected” and called for the system to be reassessed.
But he also advised students and graduates to take the figures “with a pinch of salt”.
Butler explained: “Students need to remember that it’s highly unlikely they’ll pay off their full loan debt before it’s wiped 30 years after their graduation and no repayments need to be made until they earn over £21,000 per year after graduation.
“So in reality, this increase is just adding to the massive amounts of accumulative student loan debt that the government will never see.”
But the money guru’s reassurance has not prevented many students and graduates from venting their anger about the change on social media.
As well as recent students, graduates who began university pre-1998 will see their student loan interest rates increase, from 1.6% to 3.1%, though the amount they earn before they have to repay their debt will also rise to £29,126.
Interest rates for those who started their degrees between 1998 and 2011 will not change in September, and will remain at 1.25%.
A spokesperson from the Department for Education defended the move.
They said: “Our student funding system is sustainable and fair, with affordable loan rates based on income. This means no individual will see their repayments rise as a result of interest rates increasing.
“Rates are set each year in September and are confirmed before then.”