Student loan rates may drop after inflation rises

March's RPI inflation rate is usually used to calculate the following academic year's student loan interest rates, though this is subject to official confirmation later in the year.

The rate charged depends on when you first took out a loan (see the Should I Repay My Student Loan?, Student Checklist and Student Loans Mythbusting guides for help).

Many students and graduates are therefore likely to see no change, as those with loans taken out between 1998 and 2011 will either pay March's RPI or the base rate plus 1%, whichever is lower, from next September.

So unless the base rate, which is currently at 0.5%, unexpectedly rises, they will continue to pay 1.5%, though this will be capped during the next academic year at the 3.3% RPI level.

Students who have taken out loans since 2012 will pay RPI plus 3% in interest, so can expect to be paying 6.3% in interest, a reduction on 2012/13's figure of 6.6%.

Graduates still paying off a loan taken out before 1998 are likely to pay the RPI rate of 3.3%, down from 3.6%.

Inflation up

The Retail Prices Index (RPI) measure of inflation, which includes housing costs, rose to 3.3% in March, compared with 3.2% in February.

However, the Consumer Prices Index (CPI) rate of inflation remained at 2.8% in March, its highest figure since May last year.

The ONS says rising car insurance premiums also contributed to the increase in inflation last month.