The interest rate on student loans in England and Wales is to be capped at 6.3% in September. But the Institute for Fiscal Studies said it does "nothing at all to protect current students".
The rate had been had been due to rise from the current 4.5% and capped at 7.3%, reports the BBC. The latest announcement caps it at the lower rate with England's universities minister Andrea Jenkyns saying it is intended to offer "reassurance" to students amid rising living costs.
It does not change the amount that borrowers repay each month - it changes the total amount that they owe. And an expert from the IFS said the change would do "nothing to protect current students".
Ben Waltmann, senior research economist at the IFS, said: "Only the minority of, mostly high-earning, graduates set to pay off their loans in full will ever actually benefit from this," he said. "Importantly, this does nothing at all to protect current students from the rising cost of living. Unless the government changes course, students from the poorest families will be at least £100 out of pocket - per month."
Ms Jenkyns said: "Back in June, we used predicted market rates to bring forward the announcement of a cap on student loan interest rates down from an expected 12% and we are now reducing the interest rate on student loans further to 6.3%, the rate applying today, to align with the most recent data on market rates. For those starting higher education in September 2023 and any students considering that next step at the moment, we have cut future interest rates so that no new graduate will ever again have to pay back more than they have borrowed in real terms.”
