Student loans are scary. Even just taking enough to cover tuition means you'll have racked up almost £30,000 in loans by the time you graduate.

Worse, interest is applied to them even while you're studying.

So in theory it's great news that the interest charged on them is coming down.

MoneySavingExpert.com founder Martin Lewis said: "Millions of students and recent graduates will smile when they hear the news that student loan interest rates will almost certainly be cut in September, to a headline rate of 5.4% from 6.3%.

"Many are petrified when they see their loan statement grow by so much each month."

Mirror Money calculations show that at the lower rate, a graduate will see their bills fall at least £252 compared to the current charges, with final bills as much as £41,671 lower after 30 years.

There's just one small problem – you won't actually see your monthly payments drop as a result.

"For great swathes of students, this cut in interest rates is only a psychological benefit," Martin said.

"What you repay is based on earnings, not what you owe."

Why the interest rate almost never matters

Unlike a normal loan, if you don't clear your student loan nothing bad happens.

No marks on your credit report, no debt collectors, no possibility of being declared bankrupt.

You pay the same back each month whether you owe £1,000 or £100,000 and if you don't clear it in 30 years whatever's left at the end of that time is simply wiped out.

"It's estimated only the highest earning 17% of graduates will clear the loan in full within the time, which means they’re the only ones who’ll pay all the interest added – the rest will pay less," Martin Lewis said.

"A few won’t repay anything at all, as they never earn over the threshold, many won’t repay any interest as they don’t repay enough to clear their original borrowing, and many more will pay some interest, but less than inflation. For most of these the cut in interest won’t have any impact."

People who started university in the past 7 years pay 9% of the money they earn over £25,725 back each year, while people who went to university before that see 9% of money over £18,935 deducted.

The only change to that is if you manage to clear the loan.

So, if you're one of the lucky – high earning – graduates who makes enough money they will clear their loans, then the lower interest rates mean you'll be debt free sooner.

But for everyone else, there's no practical impact to the change.

"So even though 5.4% sounds high, you can’t compare it to other types of personal finance and say 'the rate is higher I'd be better to borrow elsewhere to pay it off," Martin said.

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