Students Delivered Debt Blow

Tue, 21 Jul 2009

The government has added to the debt worries of students by revealing that the five year repayment holiday on student loans is to be scrapped. Students starting degrees last year were offered an optional five year repayment break after graduation to ease the burden of their debts and encourage them to save to buy a first home . However, this scheme is now being scrapped to help the government fund 10,000 extra university places, most of which would be for maths and science based subjects.

Student loans have typically been seen as a cheap form of credit, though interest rates have fluctuated wildly on the loans of late. At the start of the 2007/08 academic year, student loans were accompanied by an interest rate of just 2.4 per cent, though the government announced the rate was to be doubled to 4.8 per cent midway through that academic year. Linked to inflation, students have seen interest rates plummet and their repayments shrink, to the point that students should have technically been earning interest on their debts as the UK entered a deflationary state, before new legislation was introduced to prevent this anomaly.

Experts fear that the level of debt taken on by students could spiral out of control if they take out expensive forms of credit such as credit cards .
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