student loan interest

lillydrip

Just thought I would post a quick note, I checked the current interest that I am paying on my student loan this morning, £342.2p interest since the start of 2006. The current balance is 9,563.30p. That means that the interest is now way more than I am earning in my ISA. Will be paying it off ASAP now then! Might be worth others checking theirs as well!

vicki98_2

how did you check this? I had my student loan for 2000 - 2003 & haven't received a statement since 2004. I have contacted them and asked for one so i can check where i'm up to, only to be told I will received a statement 'when it is due'

they won't tell me over the phone either .. just seem to be happy that they are getting minimum payments (that aren't doing anything to be paying it off)

lillydrip

I just phoned the number at the top of a letter from them, its the same number on all the correspondence and asked for a current balance and the total of interest I had paid in 2006. I did do this a year ago and they said I had to write a letter to them to get this information, but this time they just gave it me over the phone. You have to quote your reference number which you will find at the top of most of the correspondence. Last year the interest on my ISA covered the interst they were charging, not so lucky his year!
Hope this helps Vicki.

Sillychuckie

I don't see why.. unless you withdrew money from your ISA.
The rate on your ISA should be higher than that of your loan so assuming you have the same amount of money in both (and have interest earned on the ISA paid into the ISA), the ISA should always have a higher value than the loan repayment total.
Also, the loan repayment AER is decreasing in september.

miaxmia

I find this strange as it is a well known fact that the interest on student loans is very low. I have just checked on the student loan company website and the interest rates for 05/06 is 2.6% APR whilst for the year 06/07 it has "provisionally" been set at 3.2% APR.

surfcat

miaxmia wrote:

I find this strange as it is a well known fact that the interest on student loans is very low. I have just checked on the student loan company website and the interest rates for 05/06 is 2.6% APR whilst for the year 06/07 it has "provisionally" been set at 3.2% APR.

No, other way round, 3.2% now and from september 06 it will fall to 2.4%.

This from slc.co.uk,

"From 1 September 2005 until 31 August 2006 the interest rate which will apply to student loans will be 3.2%. From 1 September 2006 to 31 August 2007 this will be adjusted to 2.4%."

lillydrip

No I did not understand either, but that is what they quoted me over the phone £342.2p interest since the start of 2006. I only made that amount of interest in a whole year in my Coventry Building Society ISA. Do you think I should phone again to make sure they have not quoted me the wrong amount, coz I was just going to pay it off and borrow money from my partner to pay for my postgrad fees.

clarabell1984

I have just called SLC and a nice man called Jim told me that the current rate of interest is 3.2% and that rate is vaild until 31st August 2006. On 1st September a new rate will be applied by the government. He says he doesn't know what this is yet but the website states From 1 September 2006 to 31 August 2007 this will be adjusted to 2.4%.
My loan is not too large but I would like to get it paid off asap. Am i better paying it to SLC as I have it or keep it in a savings account or ISA to earn interest. Will I earn more interest not paying it off as I would in an ISA?

beefturnmail

You will always be better off saving the money - so long as the interest rate on where you put the money beats the interest rate on the student loan.

This is true, even if the total interest you pay on the student loan is greater than the interest you receive from a savings account in a particular year. The following example should illustrate this:

Supopse you owed £400 of student loan (I wish!) and assume for simplicity that the interest rate is 2%. Then the interest charged over a year will be £8.

Also assume at the beginning of the year you had £100 spare to either put towards paying off your student loan or investing in a savings account.

a). Put the money in an ISA, earning interest at say 5%. Interest earnt on the £100 over the year will be £5. This is £3 less than the interest paid on the student loan, so you have 'lost' £3, but...

b) Use the money to pay off your student loan at the beginning of the year, so you only owe £300 and the interest you pay over the year is 2% of £300, which is £6. YOu haven't earnt any interest to compensate, so in this scenario you have 'lost' £6 - more than if you had saved the money.

Gem_

I decided that I am going to start paying off my student loan this month, if I pay £20 per month then that covers the interest charges and at least stops the loan getting any bigger. It is not the best use of my money, as I would get 4.5 % from ING but psycolocially I will feel better for chipping away at it.

I confirm though that having spoken to student loans yesterday the interest is indeed only 3.2% dropping to 2. something after August - so your money would indeed sbe working harder in your ISA.

Gem

dip86

hi i was hoping someone could clarify something for me. basically i should be starting uni in september. from what i understand the interest rate will be 2.4%.
so what i dont understand are the words used in the "student loans - a guide to terms and conditions" booklet.

in one paragraph it states:
"from the moment your loan is paid to you and until you pay it off in full, interest will be charged on a daily basis. The interest will be "compounded", that is, added to the total amount you owe, every month."

does this mean an equivalent of 2.4% will accrue per month.
i.e if £1000 then after a year total = 1000 X (1.024^12) = £1330 repayable

or

have i misunderstood and is it simply for a year: 1000 X 1.024 = £1024

sorry if i sound thick but i just want to make sure. thanks for any help. :beer: