Student loan interest rate formula
Describes the formula for setting student loan interest rates for the 2006-07 and future tax years.
Section 87 of the Student Loan Scheme Act 1992 allows a formula to be made by regulation for setting the student loan interest rates.
the formula which has been made for setting the interest rates for the 2006-07 and future tax years is as follows:
- the five-year average of the ten-year bond rate to December in the year preceding the tax year to which the rate will apply (to two decimal places) plus a margin of 0.74 percent (to cover administration costs). This number is then rounded to the nearest decimal place and is the total interest rate;
- the interest adjustment rate is determined by the annual movement in the Consumer Price Index (excluding credit services) for the year to December preceding the tax year to which the rate will apply rounded to one decimal point.
- the base interest rate is the difference betwween the total interest rate and the interest adjustment rate.