Student Loan Interest Rate Discussion

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  • *ditz*
    *ditz* Posts: 32 Forumite
    silvercar wrote: »
    But for new students, they haven't benefitted by lower rates til now, so should have a rate no higher than inflation.

    By new students do you mean students who took out their loans in 2008? They won't have received or spent their loan until inflation had fallen - therefore they wouldn't be adversely affected because the cost of goods has gone down, and they'll be buying goods at today's prices.

    Those who took out loans in 2007 have benefitted from the lower rate.

    Don't get me wrong. I would like the SLC to stick to their T&Cs and reduce interest to -0.4%. I just think that they are going to worm their way out of it.
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  • MSE_Martin
    MSE_Martin Posts: 8,272 Money Saving Expert
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    *ditz* wrote: »
    The article on the BBC website. I think they're going to say that as they lowered it to 1.5% in March, we're not paying the rate of inflation for the previous year and therefore in order to repay at market value they are keeping it at this rate for the coming year.

    http://news.bbc.co.uk/1/hi/business/8010774.stm

    It's this line which bothers me: "Interest rates on loans taken out after 1998 are calculated in a different way, with greater flexibility in how they are worked out. "

    I agree to an extent I think the only get out clause here is that for post-98 loans it will say "over the lifetime of the loan" it will match RPI and as its been lower this year than RPI it doesn't need to be negative next year. Yet i still think overall it will stick with the -0.4%
    Martin Lewis, Money Saving Expert.
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  • harryhound
    harryhound Posts: 2,662 Forumite
    edited 22 April 2009 at 9:38AM
    This suggestion is amazingly divisive.
    As I remember it (because I have children aged 29 & 31), the fees started in 98. My son booked his Uni course in 97 and then did 3 months work in UK and went off on a round the world adventure.

    My daughter did much the same two years later and faced much higher costs of going to Uni ("Dad can we say our relationship has irretrievably broken down - then I could count as a mature student")

    I regard then both as fully matured adults now, who have had about 10 years of the "fat" years in which they could have saved for the inevitable "lean" years, while working on careers to pay good money for high valued added output.

    ======================================================

    Now let us consider the state of the UK economy:

    This country has squandered the once in 5 million years opportunity of North Sea oil. It has done a near Iceland on the one knowledge industry where it seemed to have a historical advantage banking.
    Where do we stand now: We face a rapid fall in the wealth, the real wealth, the GDP available to the citizens of this country.

    Tell me what this economy has that gives it a national advantage? Compare it with er China, a country holding a chunk of this country's overdraft, with a 6 days a week workforce paid about 10% of our wage levels?

    Today's Westminster "pantomime" should be all about how we distribute this reduction in living standards over the next 10 years.
    In this internet age, the whole world will be watching the Chancellor's performance on U-Tube, including the "waxworks" in China.

    Any suggestion, that this country is going to spend the next few years playing silly populist games, will persuade the people from whom we need to borrow, more than any time in peace time, to jack up our interest rates.

    Being seen to give a bung to the gilded youth of the class of '97; gives a totally wrong message to this country and the world.

    If we go down this the road to Argentina, the country, at best, will end up being governed by the IMF. like some sort of Banana republic.

    Harry.

    Mind you I am old enough to remember some people saying the country was never better run than under the IMF:eek:

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  • JP78_2
    JP78_2 Posts: 19 Forumite
    edited 22 April 2009 at 9:44AM
    I guess I'm one of the few still paying back a pre-98 loan (I actually had deffered entry on that year making me one of the last to receive it under this system). I then deffered repayment for 4 years whilst doing a PhD.

    I'd love to see negative interest on my loan as at the moment it's costing me £185 a month in repayments, which is around 10% of my take-home salary (a 4 year london-based degree meant quite a substantial total amount borrowed). So is there any clause the government can use on pre-98 loans? Or is it just the post-98 ones they'll be able to wiggle their way out of?
  • MORPH3US
    MORPH3US Posts: 4,906 Forumite
    Combo Breaker First Post
    Thanks for the heads up Martin, I will watch with interest to see what happens about this and will fully back any campaign needed to see the -0.4%.....

    M
  • jamesw4
    jamesw4 Posts: 7 Forumite
    @JP78 - I'm also on a pre-98 loan as took a Gap Year 1997-1998 and deferred my university entry. Did a 5 year course so the loan is being repaid over 84 months... still got a way to go!!

    Does anyone know what impact this will have on a pre-98 loan? I think they set next year's interest rate (i.e. Sept 2009 - Sept 2010) based on the RPI in March... but does this mean that I'll be paying no interest at all next year (i.e. I'll just be paying back the "repayment" part)? Or will the total amount I owe actually shrink a little?

    James A
  • birduk
    birduk Posts: 466 Forumite
    I have quite a few loans under the old system. Unfortunately this year, because I earn £70 a year too much, I have to pay back over £150 a month. Not a good situation to be in :( But thems the rules!

    I look forward to the SLC trying to wiggle out of that one or more hopefully seeing my loans actually reduce as I am paying them back most begrudgingly! I have managed to defer for this long, I just wish I had some loophole for the £70 to help my finances balance, seeing as none of us are getting that pay rise this year....
  • MSE_Martin wrote: »
    I agree to an extent I think the only get out clause here is that for post-98 loans it will say "over the lifetime of the loan" it will match RPI and as its been lower this year than RPI it doesn't need to be negative next year. Yet i still think overall it will stick with the -0.4%
    I agree that this may be how they look at it.

    In my view all that should come into it is how the student loans contract is worded. There is no interest rate collar, so for them to unilaterally invent one would be contrary to contract law.

    As far as I know some banks have done exactly that on some below base rate tracker mortgages. They have argued that it's a commercial loan, so the interest can only ever go in one direction, and that this principle should override whatever's written in the contract. However, I believe they have not been legally challenged on this. Also, it says on the SLC website:
    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.
    Legally, unless they go for -0.4% I don't think they'd have a leg to stand on.
  • Another thought:

    If the student loans company has wanted the interest rate to be 'collared' below at 0%, they should have stipulated this in the contract. They didn't. If there is any ambiguity over whether the contract intends for this to implicitly be the case, surely 'contra proferentem' would construe any such ambiguity against the party that drafted the contract.
  • Sol00
    Sol00 Posts: 1,230 Forumite
    First Post First Anniversary Combo Breaker
    It'll be good to see this go down even further. I'll be keeping a close eye on this.
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