Question of the Week: Would student loans SHRINK if we had deflation? 30 December 2008 at 9:50PM in Money Saving Polls 1 reply 1.9K views

Former_MSE_Archna

Question of the Week: Would student loans SHRINK if we had deflation?

Answer: Yes. If the rate of inflation was negative in the month of March, then the student loan interest rate would match it from the following September, meaning the amount owed would SHRINK month by month.

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soco1

What's the betting they'll add a clause that sets a minimum cap of say 1.5 or 2%.

I'll owe about £18000 + interest when I finish at uni in June so any reduction in interest rates will be welcome as my loan is currently racking up around £50/mth.
Having said that I only took the loan to make capital repayments against my mortgage which only has about a year left on it. Then I'll still owe the same amount but at considerably less than the 5.59% I'm paying at the moment!
I was planning to pay off the loan by making payments equal to my mortgage payments but if there is a deflation situation then I'll hang on to my pennies.