Student loan rates absurd, say MPs

The inflation measure used to set interest rates on student loans is "absurd", says a report from MPs.

The government uses RPI - the Retail Prices Index - which the Treasury Select Committee says is "flawed" and should be "abandoned".

The rise in that measure will push interest rates on student loans for tuition fees up to 6.3% in the autumn.

The Department for Education defended the continuing use of RPI, saying it provided "consistency over time".

Nicky Morgan, who chairs the committee, said the use of RPI for loan repayments, which "normally gives a higher rate of inflation", appears "grossly unfair".

'Punitive'
The DFE, responding to the MPs' criticism, acknowledged that "the flaws in the RPI measure of inflation are well understood", but said that a review of tuition fees and loans was currently under way and the outcome could not be "pre-judged".

This review is due to report in early 2019. And until then student loans will continue to be set using RPI.

This is despite an official warning about the use of RPI earlier this year from the national statistician, John Pullinger, who said: "We do not think it is a good measure of inflation and discourage its use."

source:www.bbc.com