Around 390,000 graduates with outstanding student loans will see their interest rates turn negative in a move which will reduce debts over time even without repayments.
The UK's current period of Retail Prices Index (RPI) deflation will see the interest rate payable on student loans taken out before 1998 plunge to minus 0.4% - the first time the interest rate has turned negative since the Government-subsidised loan service was launched.
The Student Loans Company resets the interest rate payable every September 1, based on the level of RPI inflation in March of that year.
RPI turned negative for the first time in almost 50 years in March, plunging from zero to minus 0.4% as the recession bore down on the UK.
This will be good news for pre-1998 students with debts still outstanding and who have not yet reached the salary threshold for repayment, seeing their loans reduce without having to pay anything back.
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