The government will seize every opportunity to shield the public from rising living costs and global economic pressures. The government has taken unprecedented steps to bring the decision forward, based on predicted rates, in order to provide reassurance to student loan borrowers on Plan 2 (undergraduate) and Plan 3 (postgraduate) loans.

This is the largest scale reduction in student loan interest rates on record, and a borrower with a student loan balance of £45,000 would save around £180 per month in accumulating interest compared to 12 percent interest rates. This is based on the total loan amount, as monthly payments remain constant.

Michelle Donelan, Minister of Higher and Further Education, stated:

The government has always been clear that where it can help with rising prices, it will, and I will always strive for a fair deal for students, which is why we have reduced the interest rate on student loans from an expected 12 percent to a lower rate of 6%.

I want to reassure borrowers that the monthly repayment amount will not change, and we have made this announcement to provide greater clarity and peace of mind for graduates at this time.

We have cut future interest rates for those starting higher education in September 2023 and any students considering that next step right now, so that no new graduate will ever have to pay back more than they borrowed in real terms.

Monthly student loan payments are determined by income rather than interest rates or loan amount. Unlike commercial loans, repayments will be suspended for any borrowers who earn less than the applicable repayment threshold.

Student finance will be put on a more stable footing for future borrowers. Interest rates will be reduced, as announced in February, so that new graduates will not repay more than they borrow beginning in 2023/24. Along with broader higher education reforms, this will help ensure that students from all backgrounds continue to receive the highest-quality education from our world-leading higher education sector.

This is in addition to a £37 billion package of support to help people cope with rising living costs, including £400 off energy bills for all households, targeted support for vulnerable households for costs such as food and energy, and changes to Universal Credit, National Living Wage, and National Insurance thresholds to allow people to keep more of what they earn.