Post '98 Loan - if RPI is negative % in march09, will SLC reduce my loan from Sept09?

k993802

I posted this into the 'Help With Student Loans - HERE!' sticky thread and didn't get a reply so I'm seeing if anyone knows the answer in the main forum:


Hello all!

I have a Student Loans question that I hope someone would be kind enough to answer.

I took my student loan out 1999-2001 and have been repaying it since 2001.

My question is about the interest - As I understand it, the rate for the year september to september is the lower of the RPI or the base bank rate of x banks plus 1% at a date set in March.

Here's my question:

If in March09 the RPI is a negative percentage, say -0.5%, does that mean that from Sept09 to Sept10 the SLC will pay off -0.5% of my balance? (rather than add an interest charge if the March09 RPI was a positive percentage).

I hope that was clear enough - Anyone know the answer? - It would be amusing to have the SLC actually reducing the balance of my loan month on month for me!

Thanks in advance!

atypical

This has been discussed here at some length. The answer is no one knows.

Response from the Department for Innovation, Universities and Skills:
"We will take a decision on student loan interest rates at the appropriate time, should RPI go negative. This is one of many index-linked products across Government."

I don't see where the need to make a decision comes from. The interest rate, from what I know, has never been set by decision in the past but by independent figures.

PinkPig

atypical wrote: »

I don't see where the need to make a decision comes from. The interest rate, from what I know, has never been set by decision in the past but by independent figures.

The meaning of a "decision" in this context probably means working out precisely which rules apply and whether the law actually requires interest to be "charged at a negative rate" in these circumstances.

Lokolo

Don't forget that they said its one of many index linked products. This means that those with index linked savings will see their money go down too. I think they will cap everything at 0%.

morg_monster

Yes it will be the decision of whether to make the interest rate go negative with RPI or keep it at zero. The index linked comment is vital - there are many other index linked products like these loans, savings products at the post office etc. They may make a decision across the board or apply different rules to different things. EG the NSI index linked savings certs are at RPI+1%, so if RPI goes below -1% the interest rate on these would be negative.

I would imagine - if they don't let the savings products go negative, they won't allow the loan interest to go negative either. And I'm sorry but i don't think there is any way they will allow the savings products to have a negative interest rate - there'd be absolute uproar!!!
The government taking money OFF their savers would be a much worse story for them (and rightly so!) than whether us students pay no interest for a year or get a few quid back.
Personally I think they'll leave it at 0% for all these products and just cope with the fallout from irate students... they probably have bigger fish to fry!

morg_monster

Hi sorry just realised my understanding of the index-linked savings certificates is incorrect. I don't think that it would go negative as it's to do with the change in RPI or something... don't really get it...
but hopefully my point still stands; the fact that there are a lot of other products the govt has to think about and it can't let itself "give with one hand and give with the other"... it's only going to let us have negative RPI if it's making that negative interest money back somewhere else.

jskcv1

Very Much doubt there will ever be interest free/negative interest on these loans. I can see the government looking into the small print of RPI calculations and capping it at a positive rate, as it will have ramifications across the economy they are deperately trying to stimulate.

On a personal note.

Called them yesterday and arranged for my last repayment to happen in April, cant wait not to have it. those 3yrs worth of drinking are finally paid for. 2k a year extra on my net pay will be nice too.