Fear of 12% interest on student loans will put many off university, top Tories warn

theguardian.com:

Senior Tories are sounding the alarm over the “outrageous” interest rates to be applied to student loans later this year, after warnings that some graduates will soon be hit with rates of up to 12%.

In the latest sign of party unease over the effects of high inflation, former ministers and MPs are calling for the government to step in and prevent the increases. They say some young people who have the ability to take up a university place will be put off by the idea of repaying a large, expensive debt for years.

It is understood that ministers are now examining the issue of the temporary interest spike, which could see some higher-earning graduates facing thousands of pounds in extra debt. Two former Tory ministers who used to oversee university policy told the Observer that they believed action was needed. One, former business secretary and universities minister Greg Clark, said the high rates risked deterring graduates from getting the skills that were badly needed.

“A 12% interest rate on student loans is an outrageous charge that the government must prevent from happening,” he said. “It is a breach of what students expected – that interest on loans would be no higher than market rates. And it risks frightening off new students from entering higher education, even in courses like science and engineering, at a time when the economy desperately needs these skills. When conditions are turbulent the government needs to be agile in taking quick action to head off unintended consequences.”

Under present plans, English and Welsh graduates who took out a student loan after 2012, and earn more than £49,130 a year, face the 12% maximum income rate. That is because the rate is linked to the current RPI inflation rate. Their current