The government has confirmed that the possibility of student loans falling to zero percent exists.

The question of possible developments if the RPI would turn negative was rather controversial point for many experts. Last month this stopped becoming a disputable question and became reality. The UK experienced the first deflation for almost 40 years.

For the present to calculate the interest rate payments on student loans the Retail Prices Index (RPI) figure is used. As it turned negative, now student loans interest rates are lower then RPI or the Bank of England Basic Rate +1 percent and in terms of constant prices the amounts students will be obliged to pay back significantly reduce. But this would only happen if the way student loans interest rate is calculated remains unchanged.

A spokesman for the department for Innovation, Universities and Skills said that an official announcement concerning the issue is planned to be made only after consultation with the Treasury. However it’s not necessary for the department to pass a resolution in the earliest possible timeframe as the interest rate referred to above becomes operational from 1st September 2009.