Student Loan Help I am so Confused

mark1988_2

Hi Everyone,


I am Mark i am a 20 year old, currently in my 3rd year placement from uni. I am looking for some help, i have just got my student loan anual statement through the post and have just seen the interest rates and the amount i am paying each month:eek: I have been saving the student loan in a bank account and have been topping it up with my the money i earn from my part time job and it has now got quite a large some of money.


However currently the student loan is charging 5.2% per month on the money i have borrowed but my savings average around 4.9%.

I need the money in the bank account as i want to have enough money to make a deposit on a house and get a mortgage when i leave uni. But is it worth the cost of the repayments that i am going to have to make.

I am intrested to know what people think, should i just pay it all back and then keep the money that will be left over?? however this amount of money will not provide me with a big enough deposit for a mortgage


Thanks for all your help,
Mark,
xxx.

[Deleted User]

Hi Mark,
Are you sure the student loan is accumulating 5.2% interest monthly? I'm also a student and the interest is in line with inflation on my loan. I'm not sure what the current rate of inflation is but I'm pretty sure it's not that high (correct me if I'm wrong).

LucyTheDwarf

Short term it sounds disastrous! But long term, hopefully inflation will drop back to the BoE's target of 2%, which will reduce the cost of your loan - and finger's crossed interest rates will be a little higher than 2% then!

atypical

The current rate of interest on all student loans is 3.8%. Due to change on 1st September 2009, and it'll most likely go down.

Keep the money! If your savings average 4.9% me thinks it'd be wise to move the money elsewhere.

sheilanick

The interest rate charged on student loans is linked to the rate of inflation, based on the Retail Prices Index.
The interest rate for student loans applies from 1 September to 31 August each year. From 1 September 2008 to 31 August 2009, the rate is 3.8 per cent.
Taking inflation into account, the value of the amount you pay back will be more or less the same as the value of the amount you borrow - no one makes any profit on the loan.
Interest accrues on your loan until it has been repaid in full.

So you are better off to hold on to your savings, especially in the current climate where borrowing is so tight.

agsnu

It hasn't been over 5% since 1991. See http://www.slc.co.uk/statistics/facts%20and%20%20figures/previous_interest_rates.html

mark1988_2

Hi,

Yep sorry i can see now that i put a decimal point in the wrong place when working out the interest rate is 3.462% at the moment. As you said the rate of this is linked to inflation, as inflation is increasing rather rapidly at the moment you can see my concerns!!!! Especially as my monthly interst rate charges have increased by £29.29p from there lowest in sep 07 to highest in august 08!!!!!!!!!!!!! Is it just me being overly concerned???????

atypical

I think I'm right in saying that everyone expects inflation to decrease. In fact: "The Bank of England has predicted that inflation on the RPI (the wider measure which includes mortgage payments [and student loans]) will slip below zero sometime next year."

Keep the money, it'd be really hard for you not to be able to earn more than the loan costs.

mark1988_2

Thanks everyone your thought have been really helpful

thanks again
mark
xxx