Student loan interest query.

dsand

If R.P.I drops below 1% in March how does this affect student interest rates in September 2009.

Lokolo

Below 1%? Then the rate goes to that. It is already less than 1%, its currently at 0.9%

If it falls below 0%? No idea. Can't say for sure as I suspect the government will step in.

rb10

Lokolo wrote: »

If it falls below 0%? No idea. Can't say for sure as I suspect the government will step in.

According to Martin's email, the loan rate would be negative if RPI was negative in March. About half way down at http://www.moneysavingexpert.com/tips/31-12-2008/

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.

Lokolo

And you really think the government are going to allow that? I can't see it personally lol.

soolin

Lokolo wrote: »

And you really think the government are going to allow that? I can't see it personally lol.

I'm afraid I tend to agree. I can't honestly see the Government letting these loans go too cheaply, whatever the original promises. I fully expect my children to have interest accruing well into the 3-5% band regardless of actual rates.

atypical

soolin wrote: »

I fully expect my children to have interest accruing well into the 3-5% band regardless of actual rates.

It's already currently out of that band, with the rate being 2.5%. In March it should match the RPI rate which is currently 0.9%.

Have hope! Although it seems unlikely I sure hope it goes negative especially since the money is currently averaging 5.63% for me

phlash

atypical wrote: »

It's already currently out of that band, with the rate being 2.5%. In March it should match the RPI rate which is currently 0.9%.

Have hope! Although it seems unlikely I sure hope it goes negative especially since the money is currently averaging 5.63% for me

It's actually 3.8% at the moment as of September 2008 to Sep 2009.

farso

phlash wrote: »

It's actually 3.8% at the moment as of September 2008 to Sep 2009.

RPI index for december was 0.9%, despite christmas sales.

I tend to agree, the government want to see a return from their money given to the students. The interest rate will never go negative, which is criminal really.... How do the expect the more estute ones of us to make a profit from the student loan then?!?! :P

whitfreak

phlash wrote: »

It's actually 3.8% at the moment as of September 2008 to Sep 2009.

On the "new" style loans there is a collar not allowing the interest rate to be more than the banks interest rate +1%, hence the current 2.5%.

If your on the old style fixed term morgate ones (pre 1998 I think) then this collar doesnt exisit. Then the interest rate is still March RPI applied in September.

rb10

Lokolo wrote: »

And you really think the government are going to allow that? I can't see it personally lol.

No, I too would be very surprised if they didn't introduce a new clause or find one hidden somewhere in the depths of the law! I was just repeating what Martin said in his email.