Students and borrowers in England are facing an uncertain period of repayment after a rise in interest rates brought a surge in the cost of their loans.
The Bank of England says the average interest rate on student loans will climb by more than half to 5.5% in 2019-20.
That means they could cost borrowers an extra £40,000 a year over the next five years.
Many borrowers have had to pay out £1.6bn in student loan repayments to date.
The average interest charge has already been pushed to 5%.
The cost of the first two years of student loans is already approaching £25,000, according to the Office for National Statistics.
A report from the Resolution Foundation says students are spending £12bn more on their debts than they have been for the past four years.
The biggest challenge for the government and the lenders is that the average student loan is about £30,000.
“The rate of inflation, the pace of the economy and the economic outlook are all at risk,” said Philip Booth, head of research at the Resolution foundation.
The average student debt has increased by £2,700 since 2007, and rising, to £26,000 by 2020. “
And the Bank of International Settlements expects inflation to remain below 2% over that same period.”
The average student debt has increased by £2,700 since 2007, and rising, to £26,000 by 2020.
Some lenders are now paying interest on loans of up to three years, and many are also adding a new category to the range of student debt, which now includes loans up to 10 years.
In March the Bank announced a change to the repayment rules to encourage students to use the full repayment terms, which will be phased in gradually.
It said borrowers were likely to be paid interest on a higher percentage of their loan balance than they were before.
The government has also proposed a scheme to encourage borrowers to pay down their student debt.
“Our approach to the debt is to give people a full and frank explanation of how they are going to pay it off and then give them a choice,” said Andrew Forrest, the chancellor.
But critics say the government is making the situation worse by continuing to raise interest rates.
“What is wrong with the way they have handled this?
They should be focusing on the fact that the interest rates are still higher than they should be,” said David Cunliffe, head honours student at Oxford University.
The rise in the average annual cost of a student loan has caused fears among lenders that borrowers could have to pay up to £70,000 to borrow at their normal rate of interest.
“It’s just so worrying, it’s so bad,” said Rachel Leckie, chief executive of the Higher Education Funding Council for England.
“There are many borrowers that are not getting the amount of repayments they were paying for last year.”
Student loans are an important part of a person’s life, and the amount is an essential component of paying back student loans.
They are a crucial source of income for many graduates and many parents of young people are keen to ensure they have the funds to repay the loans when they graduate.
They also provide financial stability to many students and have been used as an important way to save for their future.
The National Student Loan Scheme, which helps people pay back student loan debt, is currently in its second year.
It is estimated that it will raise £1bn over the course of the scheme.
The Government said that it was “concerned” that the increase in interest rate would increase the costs of student loan payments.
“This will cause some borrowers to lose out on the full value of their repayment,” said a spokesperson.
“While the government recognises the need to offer support for borrowers with outstanding loans, the rate of increase will continue to be at historic lows and will not change over time.”
Some people who have borrowed from the scheme said they were not happy with the increased interest rate.
“I am not happy that I have to borrow more money every year and pay more interest,” said one student.
“That’s not what I want.”
The Bank also said that some borrowers could end up with “higher rates” because of changes to their payment plans.
“These new repayment schemes will be introduced as part of our ongoing effort to increase repayment options and offer better financial advice to borrowers,” said the spokesperson.
The new rules will be rolled out over the coming months.
But the cost to the Government of the interest rate rises will not be fully offset by the reduced amount of funding that the government gives to the banks to help them repay loans.
“We believe the changes announced today will ensure that the new scheme works well for the public,” said an official from the Department for Business, Innovation and Skills.
“For now, we are taking this step in the right direction, so that the cost is reduced.”
In recent years the government has paid