Student finance interest problem

neile1903

Hi

I am on the final year of a 3 year degree course, my brother finished a 2 year course in 2011. He got a letter a couple of weeks ago breaking down the interest he pays on the tuition fees and maintenance loans for the 2 years.

He borrow roughly £3200 per year for tuition and £3500 per year in maintenance loan so a total of £6800.

THE PROBLEM :- The letter he received showed the monthly interest and it showed the interest being added to is £16.48 a month!!.

After looking around on the internet and on this forum this seems insanely highly can any one offer some insight on this or advice? as many past and present students will know its a bit like banging your head against a brick wall when you ring student finance without having a clear idea of what they can and cant do etc.

Cheers in advance Neil

ceh209

£6800 per year = £13600 total loan.

£16.48 per month = £197.76 per year interest.

that's almost exactly 1.5%, which is the current interest rate on student loans. So what's the problem?

Taiko

Problem seems to be a case of poor mathematical skills and a failure to read what they are signing up for.

DCFC79

OP what is your degree in ?

neile1903

Hi thanks for the replies.

Maths is not my strong point though my brain has been a little fried since I finished my exams last week. I guess my brother will just have to lump it.

jason1231972

There's commonly a lot of talk amongst students and their educators alike (who should know better) that the interest on student loans amounts to anything from 'nothing' (!!) to 'pennies', which is just not the case.

Student loans are extremely cheap by comparison to any 'credit' product on the market, but the thing is, the amounts borrowed are usually very large (set to become larger), meaning that the interest - whilst 'cheap' in percentage terms - can easily and quickly escalate into many thousands over the years.

ETA: I borrowed about 12k between 2003-2006. I've never made any payments (I hated the career I qualified into and went back to what I'd always done before, so have never earned over £15k). I get these statements from the SLC every year. I now owe them much more than I borrowed. The statements go in the bin

beadgirl87

I was at uni from 2006 to 2009. For 2 years of that period we were all accruing £40 to £60 a month interest. (it was about 4% interest) Now that inflation has gone down (I think thats right) I have noticed a massive drop in the interest.
I know the interest rate is set at the level of inflation, or the bank of england base rate or something like that, and therefore atm it is very good for student loans. In time it will creep up, but still be a cheap way to borrow £20, 000 ish.