Graduates and students may face higher interest rates on their student loans following an unexpected increase in inflation rates.

Around three million graduated and students will be affected by the increase in interest rates from September this year.

The interest rate on a student loan is based on the level of Retail Prices Index (RPI) in March, which unexpectedly rose to 4.4% which will lead to an increase in student loan interest rates.

The level of interest levied on a student loan depends on when the loan was taken out. Those taken out pre-1998 will be based on the RPI level in March while those taken out post-1998 will be set at either the RPI or the Bank of England base rate, plus 1%, whichever happens to be lower.

Those with loans taken out pre-1998 are currently paying 0.4% since the RPI fell into negative figures for the first time in 50 years, while those with post-1998 loans have been paying 0%.

In September the interest rate could rise to 4.4% and 1.5% respectively, which is a big jump in interest rates either way.

Martin Lewis, from consumer site MoneySavingExpert.com commented: "Until September, student loans are at least interest free.

The last thing you should do if you have spare cash is to pay off the debt any more quickly than you planned to.

"Shove the money into a high interest easy access savings account, then if it comes to September and savings rates are still low, you should consider using the money you have saved to clear debt then."

"While 4.4% is not cheap, student loans are still the least expensive long-term debt you'll ever get." He added.