STUDENT loan interest rates have jumped to a huge 5.3 per cent for thousands of people across the UK.

Don’t think of this as a student issue, it’s actually about outstanding loans for the four million-plus graduates in their 20s, 30s and 40s who haven’t cleared their debts.

With rates soaring, many are asking “if I’ve got spare cash, should I use it to pay off or reduce my student loan?”

There are two very different types of official student loan.

Every September the Student Loans Company’s sets new annual rates for both.

􀁥 Student BEFORE 1998. Your loan interest’s now 5.3 per cent (was 4.4 per cent). The rate is set annually, based solely on the prior March’s inflation rate (RPI).

Sadly, that was a big 5.3 per cent, so 320,000 graduates now pay £530 interest a year per £10,000 owed.

􀁥 Student FROM 1998 onwards.

The interest remains at its current 1.5 per cent rate, but that could change.

1. THEY HAVE NO ‘REAL COST’ OF BORROWING

Student loan interest is never more than the rate of inflation so there’s no real cost, as borrow enough to buy a shopping trolley’s worth of goods and you only repay whatever the same shopping trolley costs. This will change for new 2012 students.

2. IF YOU DON’T EARN ENOUGH, YOU DON’T NEED TO REPAY

Unlike commercial borrowing, you only have to repay if you’re earning over a set amount.

This applies even if you have started paying and then your income drops. For post 1998 loans you pay nine per cent of everything earned over £15,000 – for pre 1998 you only pay if you’re earning over £27,700 (though then you repay a hefty whack).

3. LOANS GET WIPED AFTER 25-35 YEARS (ISH)

For some it’s at age 50, 60 or 65, others 25-35 years after studying (look yours up at moneysaving expert.com/studentloanrepay).

Always ‘repay debts with savings’ is my standard mantra, but it’s not that easy with student loans, as they’re the cheapest long-term borrowing possible.

TV money guru Martin Lewis runs the consumer revenge website MoneySavingExpert.com
Ensure you get his weekly e-mail so you’re constantly saving money.