The interest rate for student loans in Wales will rise from the current 4.5% to 7.3% this autumn amid accusations that students are being used as "cash cows". Earlier this year the Institute for Fiscal Studies said the interest rate would rise to a massive 12% - but the Welsh Government will follow England and cap the rise at 7.3% for 12 months.
In a Written Statement the Welsh Government said it "will continue to protect students from high interest rates on their loans, rates which are a result of high levels of inflation."
NUS UK President Larissa Kennedy said the interest rate figures, though cut, was still "cruelly high". Students have been impacted by the cost of living and "aren't cash cows", she added.
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The rate of inflation determines the interest charged on certain student loans. The Welsh Government said it must ensure that rates do not exceed the prevailing market rate and has taken action three times in the last 10 months to cap the rate on loans.
"In order to ensure that rates do not reach 12%, an interest rate cap will be applied from September 2022. The cap will be set at the forecast rate of market interest for the 2022/23 academic year, which is 7.3%.
"The rate on loans taken out by undergraduate students since 2012, and by postgraduate students, will be capped at 7.3% between 1 September 2022 and 31 August 2023. Further rate caps may be applied if the prevailing market rate continues to be below student loan interest rates."
Changes to interest rates do not change monthly student loan repayments, which are charged as a fixed proportion of income. Loan repayments depend on income. Students repay their loan only if they earn above a threshold, and remaining debts are written off after 30 years.
"Living costs should never be a barrier to studying at university, which is why the Welsh Government provides the most generous living costs grants in the UK. Welsh students have less to repay on average than their English peers. The Welsh Government also provides a debt write-off of up to £1,500 for each borrower entering repayment, a scheme unique in the UK," the Written Statement added .
It is calculated that the change means the accumulated interest of a borrower in Wales and England with a student loan balance of £45,000, would fall by about £180 a month compared with 12% interest rates.
