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Senior Conservative MPs have warned an “excessive” increase in interest rates on student loans could keep young people out of college.

Two former Tory ministers have called on the government to act immediately in an attempt to limit the rise amid fears some graduates could be affected by up to 12%.

Former business secretary Greg Clark told the Observer: “The 12% interest rate on student loans is an outrageous fee that the government must prevent from happening.

“It violates what students expect – that interest rates on loans will not be higher than market rates.

“And it risks putting new students into higher education, even in courses like science and engineering, at a time when the economy is in dire need of these skills, putting students at risk. scared.

“When conditions are chaotic, the government needs to be nimble in acting quickly to deal with unintended consequences.”

Chris Skidmore, a former universities minister under Boris Johnson, warned that the rise could put “young people off even thinking about university”.

“As a country, we cannot afford disadvantaged people not reaching their full potential because of the shadow of debt and interest rates,” he said.

In April, the Institute for Fiscal Studies (IFS) calculated that due to the current RPI inflation rate, the maximum interest rate on loans – paid by people earning £49,130 ​​or more – would rise. from the current level of 4.5% to an “attractive” 12% in half a year.

The IFS says interest rates for low-income earners will increase from 1.5% to 9%.

They add that this means a high-income fresh graduate with a typical loan balance of £50,000 will have to pay £3,000 in interest over six months, an amount higher than the average salary. on average that new graduates often pay three times as much.

The IFS said the maximum student loan interest rate was then set to fall around 7% by March 2023, fluctuating between 7% and 9% over a year and a half.

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