Help With Student Loans - HERE!

theduck_2

HI, I am a student and recently got a payrise but now paying more to the student loans, I am now worse off really and cant really afford to pay that much now to them. Will they let you reduce it even though your pay shows you can cover it?

theduck_2

actually meant was a student, have graduated now and have been for 3 years

mayb_2

theduck I think you will find that this is an automatic deduction from your pay - in much the same way as you pay tax and NI - unfortunately I doubt if there would be any room for negotiating this. Still others may know more than I do.

Didn't you understand Tony Blair when he said that graduates will earn so much more than ordinary folk and so having to repay a loan would be no problem to them? Unless of course you chose the 'wrong' degree! Looks to me that financially most of them were 'wrong'.

petesmall

Hi all,

Apologies if i have missed the answer here in this thread, but I am confused about the RPI being charged for the student loans. Firstly, a lot of people believe that the loan was originally missold as being 'at the rate of inflation' - not at the RPI rate, which is not what most people understand as the level of inflation, however since it does say this in the current information at the SLC website, I will assume that everyone was aware of this when signing up and that it is clear in any documentation.

From the SLC site, "The interest rate for Income Contingent Loans applies from 1 September to 31 August each year. All student loans accrue interest which is linked to the rate of inflation in line with the Retail Prices Index. This means that in real terms, the amount you pay back will have broadly the same value as the amount you have borrowed and no profit is made on the loan itself. Interest accrues on your loan until it has been repaid in full. The current interest rate is 4.8%."

However, the setting of the interest rate to be used by the SLC does not appear to actually mirror the RPI rate. Despite several postings here (and as quoted in Martin's repayment article) stating that the RPI is 4.8%, I find no evidence of this from the national statistics site. The current annual rate of RPI is 4.2% (Oct 2007) and previous months were 3.9% (Sept) and 4.1% (Aug) - so I don't believe that they are using the real RPI. Where did the figure of 4.8% come from?

Additionally, the difference between the SLC rate and the RPI rate does not appear to track a uniform amount above the RPI. This is based on the published rates for these months last year compared to the student loan rate.

The only time I can see that it was ever 4.8% was in March this year, but in March last year it was not 2.4% (which the student loan rate was set to last year), so even if they were using a figure that was 6 months old as the calculation point, they aren't doing it consistently.

(Figures available from http://www.statistics.gov.uk/StatBase/tsdataset.asp?vlnk=229&More=N&All=Y)

Another concern is that they state 'no profit is made on the loan itself' and that it is 'broadly the same value', not that no gain is made or that they are actually offering a loan which rises in line with inflation. To me, this seems to suggest that you are not paying back at the rate of the RPI, but one which also covers their costs. If true, surely this is something that should be 100% clear to everyone who takes up a loan?

Anyone who can clarify exactly how the student loan company calculate these interest rates, please reply and help me out. Additionally, is there any regulator that validates the rates they use or by loosely wording the terms of the interest (as above) have they allowed themselves the flexibility to do 'what they like'?

cheers,
petesmall

roxalana

I'm not that knowledgeable on the interest rate thing but I read somewhere in one of martins articles that it is based on the March figure. In previous years I think Martin said that made us better off compared to 'real'inflation but kinda screwed us this year...

roxalana

theduck wrote: »

HI, I am a student and recently got a payrise but now paying more to the student loans, I am now worse off really and cant really afford to pay that much now to them. Will they let you reduce it even though your pay shows you can cover it?

It is automatic. But I don't understand how you are worse off as the SLC take a portion of your income that goes over the repayment threshold. This means that not all of your payrise will be going to the SLC. For example, following my payrise, my tax, NI, pension and student loan payments went up but I was still a whole £16.50(!) better off. Half the gross increase went on these deductions.

mayb_2

Wow now I am really confused!

My son and I aren't stupid but we both 'understood' that he would be repaying the amount he had borrowed. We didn't realise that the money would be coming from a profit making company. We also were shocked to find that he would be paying interest from the minute that he received the loan. This means that for the whole of the course (4 years in his case) you are accruing interest, which you cannot mitigate in any way, so by the time you graduate you already owe more than you borrowed.

I don't know how long the average graduate takes to pay off this student loan, but I can't help thinking it may have been better (or at least have been a consideration if the system had been understood) to get a loan for the whole amount for let's say 10 years at a fixed rate of interest. This way you know exactly how much you have to pay and when your repayments will finish.

I can remember my son being asked to pay the whole of the year's tuition fees in the first term. This came to more than the amount he had been loaned for the term - so now he would be paying interest on his student fees if he had used the money this way. We stepped in to help him out and now have a loan of £7000 ourselves which we used to pay his fees and pay for essential equipment for his course. Without our financial support he would not have been able to afford to complete his course.

So much for equal opportunities. My husband and I have paid for his education twice - once when we both pay our taxes on our earnings and again when we paid fees for his education plus interest. :mad:

I will follow this thread with interest as it has long been a thorn in my side. Perhaps someone will take up the cudgels on behalf of students? Martin? Let's hope so.

petesmall

To check what I said before, I pulled a new spreadsheet from the national statistics site and oddly it does say 2.4% for last March, so i can only assume I was looking at the wrong column when I originally posted.

So, it does look like the rate is based on the March value...but this still doesn't explain why this is not documented in the SLC explanation of it.

Additionally unlike my bank, who have to let me know when my rates change, the SLC have not even sent me my annual statement, anything telling me that it would change or even now, after the event anything to say that it has changed. Given that we are already reasonably captive to the company and our options to leave are limited then this is not really acceptable as it does not give me the opportunity to move my money before I start getting charged the high interest rate.

In terms of moving as well, I have no way of getting a current balance from them, so have to guess at my loan amount if I wanted to consider moving the balance somewhere else. According to the site:
"Finding out your balance
You can estimate your balance in between statements by looking at your most recent statement and taking off any deductions noted on your wage slips and P60."


Aside from the effort I would have to go to to find all my payslips for the last year, this misses the calculation of interest repayments - which is actually a reasonable portion of the annual payments. As they admit in the advice it is an estimate. The bottom line is that I am a customer and they are dealing with a large amount of money - so how can they justify not even having an accurate figure of how much is owed? It doesn't inspire confidence that the interest will be calculated daily otherwise the daily balance would be readily available. I am wondering if it would be a data protection requirement for them to give me an accurate figure since it is data held about me?

roxalana

"I can remember my son being asked to pay the whole of the year's tuition fees in the first term. This came to more than the amount he had been loaned for the term - so now he would be paying interest on his student fees if he had used the money this way. We stepped in to help him out and now have a loan of £7000 ourselves which we used to pay his fees and pay for essential equipment for his course. Without our financial support he would not have been able to afford to complete his course.

So much for equal opportunities. My husband and I have paid for his education twice - once when we both pay our taxes on our earnings and again when we paid fees for his education plus interest. "

Aside from the interest thing where my understanding is limited to the idea that the interest should be at a rate that means the amount you pay back is worth what you borrowed -although when I took out the loan I was also unaware I would be charged interest (and of the rate changes that would affect it).

I'm abit confused at the above part of your post though...

You say that your son was asked to pay a years worth of fees at the start of term - what reason did your Uni give for requesting this? That isn't a normal thing for the Uni to ask for IMO unless you don't qualify for or refuse tuition fee support.

I assume that he started his studies as a 'new system' (variable fees) student either in Sept 2006 or 2007 so his fees were £3000 if he was studying last year and £3070 this year? If he had taken out a loan to cover this the Uni get the money in 2 instalments - the first of which is in the January (i assume interest becomes payable from when the Uni gets the money? Don't know though). Is your £7k loan interest rate greater than 4.8% - would taking out a tuition fee loan this year reduce the interest amounts? Although obviously then the debt would be your son's whereas it is yours at the moment.
Was there a reason why he couldn't take on the debt himself with a tuition fee loan?

Also, he must be on a course that needs v expensive equipment for you to need to spend £4k - I'm glad I didn't do that one!

Student finance is means tested so yes it is expected that parents earning over a certain amount contribute to their child's education. However, parents are within their rights to refuse to do so (and some do)...

roxalana

petesmall - i don't know. But I would be interested in knowing the response from the SLC if you call or write to them (your LEA won't know as they don't have that kind of info).