Student loan interest rate dives - graduate jobs

Interest rates on student loans will turn negative for around 390,000 graduates in a bid to reduce debts over time even without repayments.

Interest rates payable on student loans taken out before 1998 will plunge to minus 0.4% under the UK's current period of Retail Prices Index (RPI) deflation.

It is the first time the interest rate has turned negative since the Government-subsidised loan service was launched.

Based on the RPI inflation in March of that year, the interest rate payable is reset by the Student Loans Company every September.

In March, RPI turned negative for the first time in almost 50 years when it plunged from zero to minus 0.4% as the recession battered the UK into submission.

The news should put a smile on the face of pre-1998 students with debts still outstanding and who have not yet reached the salary threshold for repayment - their loans will reduce without them having to pay anything back.

Someone with £10,000 in outstanding debt will owe £9,960 at this point next year, according to Consumer website MoneySavingExpert.com.

The site hailed it as a "revolutionary day" for those that benefit.