Interest rate formula

Sections 2 and 87 of the Student Loan Scheme Act 1992; Student Loan Scheme (Interest Rates Formulas) Regulations 2006; Student Loan Scheme (Total Interest Rate) Regulations 2009

The formula used to set the student loan interest rate - which only affects overseas-based borrowers - has been moved from the Student Loan Scheme (Interest Rates Formulas) Regulations 2006 to the Student Loan Scheme Act 1992 to allow for a more streamlined process of setting the interest rate. The Student Loan Scheme (Interest Rates Formulas) Regulations 2006 and the Student Loan Scheme (Total Interest Rate) Regulations 2009 have been consequentially repealed.

The formula is:

• the average of the 10-year bond rate for the 5 years to December of the year before the interest rate will apply, rounded to 2 decimal places, plus 0.74%, with the result being rounded to 1 decimal place.

For example, the interest rate for the 2010-11 tax year has been based on the average of the 10-year bond rate for January 2005 to December 2009, plus 0.74%, resulting in an interest rate of 6.6% after rounding.

Application date

The amendments apply from 1 April 2010.