Student Loan - Deflation?

gmang

Personally, I'd love a negative RPI this month, and the SLC finally paying me interest for a change. But this might be further bad news for the economy. There were 2 huge sales of student loans a few years back, one to a consortium of banks. These banks must have seen student loans as a safe (albeit low-return) investment. If these banks start paying out interest on loans they assumed would return 3-4% then surely that's less money they'll want to loan out to people to get the economy going again.

podge101

I have three student loans one from 1997, 1998 and 1999. Recently I had a letter from SLC stating a company called Link Financial will be takinf over my 1997 loan. Does anyone know if all the same government rules apply with this new company as so far I have deferred them every year?

JayScottGreenspan

Now RPI is -0.4% we will see what the SLC do.

There are three arguments as I see it:
1) The contract doesn't include a 0% interest collar.
2) It's a loan - of course the interest has to be >=0% - what are you, stupid?
3) The idea is to keep the debt in line with the retail price index. Suppose the index were quite volatile and three years annual figures were +8%, -4%, +3% if you took the annual changes in March, but +2%, +2%, +3% if you took them in June. Applying a 0% collar would unfairly penalise students in the former situation and push their debt ahead of the retail price index.

The banks seem to have gotten away with argument (2), though they haven't been challenged legally on this.

Which way will it go for student loans? If they do try to impose a 'collar', does anone know what the best way to mount a legal challenge would be?

PeterDuckett

Well if they do put a cap on the loan or other clause could i claim that i had been miss sold my loan on false pretensives

Ant85

Student loans are not like commercial loans. They are subsidised by Government and attract a low cost interest rate. This interest rate is based on the annual March Retail Price Index (RPI) or the highest base rate of a number of major banks plus 1%; whichever is lower.

To date, the RPI has always been the lower of the two. The reduced bank base rate plus 1% is now lower than the March 2008 RPI so we have presently adjusted the student loan rate to 2%.

The loan rate will be 0.4% from September

BruceyBonus

Ant85 wrote: »

The loan rate will be 0.4% from September

Why 0.4%
RPI is -0.4%

Ant85

BruceyBonus wrote: »

Why 0.4%
RPI is -0.4%

Because the rate is based on either the RPI or Interest rates PLUS 1%

JayScottGreenspan

I think they mean
Max(RPI, Highest major base rate + 1%)

as opposed to:
Max(RPI, Highest major base rate) + 1%

BruceyBonus

Ant85 wrote: »

Because the rate is based on either the RPI or Interest rates PLUS 1%

JayScottGreenspan is correct.
Even if it was RPI plus 1%, then -0.4% + 1% = 0.6%

Ant85

Yeah just spaz maths on my behalf