Student loan interest rates have been cut another percentage point as the government tries to protect borrowers against rising inflation.
Rates will be reduced to 6.3% for students from England and Wales from September, the Department for Education (DfE) has announced.
The government announced in June that interest rates on student loans were to be cut from 12% to 7.3%.
Minister for More Advanced and Higher Skills Andrea Jenkyns said the new cap was being introduced “to align with the most recent market rate data”.
A spokesperson for the Student Loans Company said borrowers need not do anything in light of the change as it will be automatically applied.
The change applies to undergraduate (Plan 2) and postgraduate (Plan 3) loans.
The new rates will cut interest rates on student loans by the highest amount on record, the DfE said.
Someone with a student loan balance of £45,000 would reduce their accrued interest by around £210 a month under the newly announced rates from 12 per cent interest rates, the department added.
This reduction applies to the total value of the loan, as the monthly repayments do not change.
“We provide support where we can”
Ms Jenkyns said: “We understand that many people are concerned about the impact of rising prices and we want to reassure people that we are stepping in to provide support where we can.
“In June, we used expected market rates to bring forward the announcement of a cap on student loan interest rates from the expected 12% and are now reducing the interest rate on student loans to 6.3%, the rate that applies today, to align with the most recent data on market rates.
“For those starting graduate school in September 2023, and all students considering this next step at the moment, we have reduced future interest rates so that no new graduate will ever have to repay more than this that he borrowed in real terms.”
A spokesperson for the Student Loans Company said: “The change in interest rates is applied automatically so customers don’t need to take any action.
“We encourage customers to use SLC’s online repayment service to regularly check their loan balance and repayment information, as well as to ensure their contact information is up to date.”