MSE News: End to interest-free student loans as 1.5% rate revealed

LittleEarner_2

farso wrote: »

What is hard to understand?

The current loan interest rate is 0%
Next week it will be 1.5%

Not quite the response I was looking for.

What's hard to understand is given that the interest rate for my years as a student (01 to 05) was meant to be linked to inflation anyway. The article doesn't make it clear about the before and after situation and the actual impact on a average loan.

Also, surely there's a legal issue here? I agreed to take out a loan based on it being only linked to inflation. Not for a fee to be charged on top.

Dan

s0198362

How likely is the SLC to change the 1.5 % interest rate though?

Between 1 September 2010 and 31 August 2011, the interest rate may change because it is linked to the rates charged by high street banks.
...
the maximum rate of interest you may be charged between 1 September 2010 and 31 August 2011 is 4.4%.

Poolie

The 1.5% will only change is a selection of banks change their base rate (these banks use the BoE base rate - so if this doesn't go up niether will the SLC rate). The rate is always 1% + the average of the group of banks.

The BoE base rate is not due change for a little while.

It will be inverse of what happened when the BoE dropped its base rate, the SLC rate was dropped at the same time.

FATBALLZ

I agree another crap article written in a completely misleading way. The 1.5% rate has hardly just been revealed, it has been known from March (assuming the base rate stayed at 0.5% which was always very likely). This is business as usual. Still, not quite as bad as the article recommending people to book with travel companies on the brink of going bust.

atypical

LittleEarner wrote: »

Also, surely there's a legal issue here? I agreed to take out a loan based on it being only linked to inflation. Not for a fee to be charged on top.

The only people who were realistically in a position to take legal action were NUS. But if I remember correctly they agreed with the terms - I think the line they were taking was that it was the best that could be expected under the circumstances. The NUS is also in favour of a graduate tax.

dtaylor84

LittleEarner wrote: »

Also, surely there's a legal issue here? I agreed to take out a loan based on it being only linked to inflation. Not for a fee to be charged on top.

There is no fee "on top" of inflation.

If they were to charge interest in line with inflation, they would charge 4.4% from September, based on March's RPI.

Instead, they are capping the interest at "base rate" + 1.0%, which is currently 1.5%. If the "base rate" changes, the interest rate charged will change in step (up to the max of 4.4%, the practical minimum is 1.5%).

(As mentioned above it is not the Bank of England base rate that is used, but it is essentially the same.)

FATBALLZ

atypical wrote: »

The only people who were realistically in a position to take legal action were NUS. But if I remember correctly they agreed with the terms - I think the line they were taking was that it was the best that could be expected under the circumstances. The NUS is also in favour of a graduate tax.

I agree the NUS are a bunch of tw@s. I can't decide whether it's because they are retards or because they are taking bungs, they consistently back up the government when it robs students.

callum9999

FATBALLZ wrote: »

I agree the NUS are a bunch of tw@s. I can't decide whether it's because they are retards or because they are taking bungs, they consistently back up the government when it robs students.

Or maybe they are just being realistic?

I'm poor and heavily relying on student loans, but even I don't see 1.5% as "robbing me". Where else would you get that amount of credit for less?

pinkfluffybabe

FATBALLZ wrote: »

I agree the NUS are a bunch of tw@s. I can't decide whether it's because they are retards or because they are taking bungs, they consistently back up the government when it robs students.

Mainly when a Labour government is in power.

iblametheparents

N1AK wrote: »

I found it pretty straight forwards, although I am a student loan payer so I know the background. At the moment I'm paying no interest, this will be changing to 1.5%.

I, like Farso, am still angered by the government's decision to change the terms of the loan for the last year. They added 0.4% interest onto what I should have paid. That has added ~£400 onto the loan this year, and if I pay it off over the next 20 years will cost me another £200 (at 2.5% avg rate) in interest.

If a bank had done to mortgages what the government did to student loans the government / courts would of come down on them like a tonne of bricks.

Do you have a pre or post 1998 student loan?