The Manx government is to cap interest rates for student loans at 3.5%.

Awards provide students with support with tuition fees in addition to maintenance grants and disabled students’ allowances.

The interest rates for student awards is currently the Bank of England’s base interest rate plus 2% which is set to be amended.

It comes as the Bank of England’s base interest rate has continued to increase, with the most recent base rate being increased to 5% last Thursday (June 22).

In 2020 the base rate was only 0.1%, with the student award interest being 2.1% which, in 2022 increased to 1.25%, with the student award interest rate being 3.25%.

The Department of Education, Sport and Culture said: ‘The department regularly reviews these regulations and has been following the increase in the Bank of England’s base rate.

‘The department understands that the cost of living and inflation has increased over the last two years and with the Bank of England’s base rate increasing and impacting interest rates on loans, which is why the department has capped the interest at a maximum of 3.5% or the Bank of England’s Base rate, whichever is lesser.

‘This will ensure that a student who takes up the student loan with the department, will be able to understand the maximum interest rate which will be applied each year on July 1, or if the Bank of England’s base rate falls the student will see a reduction in the amount of interest applied.’

‘The 2023 amendments were submitted to Tynwald for approval on June 20, 2023.’

In the sitting, a regulation was amended so that the interest rate for student awards would be capped.

Graduate Phillip Collins believes that not enough is being done to incentivise younger residents to return to the island.

The 30-year-old from St John’s said: ‘I have been a recipient of the student award scheme, the actual scheme and student loan has been extremely beneficial and has allowed me to access higher education where otherwise I wouldn’t have been able to. For that I applaud the Isle of Man Government.

‘However, the cost of living in the island is really bad. You only need to look at the price for rent to see that.

‘The government wants to increase the population and re-balance it, but I don’t think that there is enough incentive for graduates to return to the island.

‘I think both a lack of opportunity, and the fact that the island is so expensive means that a lot of people go to university and don’t return.

‘There is also the issue, as revealed in 2020, that 50% of students do not pay back their loans.

‘It is good if the government capped the interest rate, but even if it is capped for student awards it is a lot of money.

‘With the rent prices, cost of living and inflation, it is a struggle living in the island as a young person.

‘That feels disconnected to the Isle of Man government’s plan to attract more young people.’