The Spectator’s Notes | 2 July 2011

It is well known that, from next year, tuition fees will rise to a maximum of £9,000 per year.

It is well known that, from next year, tuition fees will rise to a maximum of £9,000 per year. What is less well known is that the loan rates, for most students, will also rise enormously. At present, the rate is 1 per cent over base rate. In future, for those students who hit the higher income threshold of £41,000 a year, it will be RPI plus 3 per cent (i.e., at present RPI, 8 per cent). This is a very high rate indeed (and with severe penalties for early repayment), so high that it is hard to understand why anyone would pay it, since the money could be borrowed more cheaply in other ways. The idea of this rate is that it should be a levy on the better-off to pay for the lower rates (RPI only) offered to those students who end up earning less than £21,000.