Plan One loans see interest rate fall as coronavirus shakes financial markets
Interest rates on pre-2012 student loans have dropped from 1.75 per cent to 1.1 per cent to reflect a cut to the Bank of England’s base rate amid the coronavirus pandemic.
Graduates paying back their Plan One loans, which were available to students before tuition fees were tripled to £9,000 in 2012, will see interest rates fall from 1.75 per cent to 1.1 per cent from 7 April, the Student Loans Company confirmed on 26 March.
It follows a drop in the bank of England’s base rate from 0.25 per cent to 0.1 per cent on 19 March. The bank cut its base rate in response to growing financial instability as the world grapples with the fallout from the ongoing coronavirus pandemic.
Interest rates for Plan Two loans are not affected because they are linked to the retail price index (RPI) measure of inflation rather than the Bank of England’s base rate. While they are studying, students who have taken out Plan Two loans—those who began studying in 2012 and later—pay an interest rate of 5.4 per cent, which is RPI plus 3 per cent. Once students graduate, interest rates can vary depending on income.
The repayment threshold for Plan One loans will increase from £18,935 to £19,390 on 6 April.