Students at the University of East Anglia protest against the privatisation of tuition feesRoger Blackwell

Unsurprisingly, the government’s proposal to allow universities to add an extra £250 to their annual tuition fees has caused some consternation. But student loans are in fact already being increased in far more subtle ways.

Did you know that the interest rate on student loans is linked not with the Consumer Price Index (CPI) measure of inflation, but the Retail Price Index (RPI)?

RPI is generally higher and more volatile than CPI, but CPI better describes most people’s real experience of inflation. So increases in graduates’ debt repayments race ahead of the prices those graduates pay and the wages they receive.

Analysis by the Trade Union Congress (TUC) in 2011 found that a student loan of £25,000 held by a graduate making £40,000 a year would cost £4,800 more to repay as a result.

The interest rate of student loans does not change month by month, as RPI does: it is fixed annually according to the measure of RPI in March of each year. In other words, a lot depends on there being a normal rate of inflation in that month.

In 2016, students’ luck ran out: an increase of 0.7 percentage points in RPI to 1.6 per cent effectively raised debt repayments by three-quarters.

To make matters worse, in 2012 the government introduced a new system, in which the interest rate on a student loan was the level of RPI, plus as much as 3 per cent on top of that.

So after the repayments hike this year, graduates earning more than £41,000 found themselves paying an interest rate of 4.6 per cent.

Recently, a different aspect of the repayments system has come under scrutiny.

The government has reneged on a pledge to raise the income threshold at which repayments begin, currently £21,000, in line with inflation. This means that graduates will be required to pay the rate on an ever-larger amount of their income.

By 2021, graduates earning over £21,000 a year will be paying £306 more annually than they do now.

The price of the government maximising short-term revenues through this kind of fiddling with the interest rate, however, is that a lot of debt will end up being written off entirely.

The major advantage of government-provided student loans over commercial loans is that the remainder of a government-provided loan will be cancelled automatically thirty years after the borrower first becomes eligible to start repayments.

The upshot of this is that 45p of every £1 the government lends is expected never to be repaid. Students will probably fail to muster up much sympathy for its plight.