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Confused about interest rates on student loans

I was looking for how the interest rate on students loans is determined, and what i found from the direct.gov website was that:

''The rate will be the lower of the Retail Price Index (RPI) in March 2010, or 1 per cent above the highest base rate of a nominated group of banks.''

I know this is for last years loans, but i assume interest rates this year will be based on the same principles. And going by RPI - which is at the moment at 5.5% - does that mean 2011/2012 loans will have an interest at 5.5%?

which for a student loan is quite alot compared to last years 1.5%...

Anyway i was wondering if this is actually how it works?/whether base rate is lower that RPI because that interest rate is pretty high for students.
Original post by Trujillo

Original post by Trujillo
I was looking for how the interest rate on students loans is determined, and what i found from the direct.gov website was that:

''The rate will be the lower of the Retail Price Index (RPI) in March 2010, or 1 per cent above the highest base rate of a nominated group of banks.''

I know this is for last years loans, but i assume interest rates this year will be based on the same principles. And going by RPI - which is at the moment at 5.5% - does that mean 2011/2012 loans will have an interest at 5.5%?

which for a student loan is quite alot compared to last years 1.5%...

Anyway i was wondering if this is actually how it works?/whether base rate is lower that RPI because that interest rate is pretty high for students.


Base rate as set by the Bank of England is currently 0.5%, but it could well rise in the not-too-distant future - the rate is considered each month. I can't see it rising to an extent that base rate +1% exceeds RPI any time soon, though.
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Trujillo
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Original post by Illusionary
Base rate as set by the Bank of England is currently 0.5%, but it could well rise in the not-too-distant future - the rate is considered each month. I can't see it rising to an extent that base rate +1% exceeds RPI any time soon, though.


Ah thanks!! ok so its based on bank of england base rates.. do you think its likely to rise to around 3% mark in the next 3 years?
Original post by Trujillo

Original post by Trujillo
Ah thanks!! ok so its based on bank of england base rates.. do you think its likely to rise to around 3% mark in the next 3 years?

Looking that far ahead, it's really hard to say - certainly I wouldn't want to try to make any sort of forecast. You can try searching for "UK base rate forecast" on Google to see what's being reported, if you like? Remember that the interest will apply throughout the lifetime of the loan, not just the time while you're a student.

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