Posted 10 May 2022 - 10:00
Posted 10 May 2022 - 10:00
News
Student loan interest rises: nurses told ‘Don’t panic’
Institute for Fiscal Studies economist believes most nurses will not be affected because lower interest rates expected in the future will offset levels seen now
Institute for Fiscal Studies economist believes most nurses will not be affected because lower interest rates expected in the future will offset levels seen now
Student loan interest rates are rising at an ‘alarming’ rate but nurses do not need to panic as it is unlikely to affect them, a leading economist has said.
Soaring inflation saw the Retail Prices Index (RPI) hit 9% in March, which is expected to prompt a corresponding jump in student loan interest rates.
Most nurses will not pay off student loan in full, says economist
But senior research economist at the Institute for Fiscal Studies (IFS) Ben Waltmann told Nursing Standard: ‘The numbers may seem alarming but the key message for nurses is: “Don't panic”.
‘Future policy and economic developments are unpredictable, but it seems likely that most nurses will not pay off their student loans in full, so what happens to their loan balance will not matter for repayments.’
How interest rates will affect nurses’ student loans
Under the current terms for student loans, nursing staff on a Band 5 income of £27,295 or less pay interest in line with the RPI.
With the RPI at 9%, that means a newly qualified nurse on a starting salary of £25,655 with a typical £50,000 loan would incur interest of about £2,300 over 6 months, according to calculations by the IFS.
Nurses on higher salaries will pay up to an extra 3% interest on their student loans, depending on how much they earn.
Lower interest rates on the horizon
But Mr Waltmann said lower interest rates expected in the future will offset the levels seen now.
‘Even for those that do pay off in full, very high interest rates this year are set to be counterbalanced by very low interest rates later on,’ he added.
A legal limit on interest on student loans is set to be introduced by March 2023, which the IFS predicts will see interest rates drop to 7% in March 2023, before dropping to 0% from September 2024.
The IFS is calling for changes in the way student loan interest is calculated in a bid to prevent ‘wild swing’ over the next few years, which it warns could deter some from applying for courses.
Government comments on ‘real terms’ payments
The government has said it will look at how the cap operates. An announcement on interest rates is made in August every year.
A Department for Education spokesperson said: ‘For future students the government has cut interest rates, so from 2023-24, graduates will never have to pay back more than they borrowed in real terms.’
In other news