Student finance/ student loans interest

cbaz

Hi- I went to uni in 2000 this was a couple of years after the loans came in. I distinctly remember them telling us at school that these loans were interest free. I've had conversations with other students who went to uni around this time and they all believed this was the case. Being so long ago, I don't have paperwork and as a 17 year old I would have chucked it not caring about terms and conditions!
Does anyone have the info about this? Was there an interest free period?
How was it sold to us and were there rules around loans of this type?
In hindsight I maybe wouldn't have taken it or gone to uni closer to home. The statements just show never ending interest being added which is more than I'm paying in.

I'd be interested to see what other people's views on this are and if you have a similar memory to this.

Pixie5740

I had income contingent repayment plan 1 loans. At no point was there an interest free period. You started accruing interest when you took out the loans. It was all in the paperwork at the time.

The current interest rate of these student loans is 1.5%. Are you earning just over the threshold?

WellKnownSid

+1. I took one out in my final year - the first year they came out and paid it off shortly after starting work the following year.

It was never billed as interest free - but at the time may have seemed very low interest compared to historically much higher interest and loan rates.

Karen777

They have never been interest free - they were very low interest compared to other loans though. Maybe someone said 'practically interest free?'

Ed-1

"Interest free" in relation to plan 1 student loans means that they incur a zero real rate of interest (i.e. the only interest that is added is to account for inflation so that the value of the funds remains the same in real terms over time - as prices increase the value of money falls so inflationary interest is needed to preserve the value of the initial funds borrowed over time). However in actual fact there has been a negative real rate of interest on plan 1 loans since 2010/11 as the base rate + 1% has been lower than inflation. So in real terms the government have been paying off the loan for you!

onlyroz

I think the interest rate is either the RPI rate in March, or the base rate plus 1%, whichever is lower.

Ed-1

onlyroz wrote: »

I think the interest rate is either the RPI rate in March, or the base rate plus 1%, whichever is lower.

Correct (for plan 1 loans). So they incur no real interest rate and can be said to be "interest-free" in real terms.

e.g. you borrow £18000 now; if you repay your full loan you repay the equivalent of £18000 in the future (or less if the base rate + 1% is lower than RPI in March).

cbaz

I think it was how it was phrased to us, perhaps there should have been a little education about taking out loans before we signed up to them.
At least it wasn't wonga in charge of them!

I've returned to education a couple of times so I've not paid an awful lot off it. When you aren't making repayments the interest on it looks quite scary.

Pixie5740

Were you incapable of reading the documents you were signing?

CLAPTON

cbaz wrote: »

I think it was how it was phrased to us, perhaps there should have been a little education about taking out loans before we signed up to them.
At least it wasn't wonga in charge of them!

I've returned to education a couple of times so I've not paid an awful lot off it. When you aren't making repayments the interest on it looks quite scary.

you had the full documents before you signed up

there were literally thousands of newspaper articles over the last few years

information is freely available via a quick google.

you can of course choose to repay the loan at any time: then there would be no further interest

cbaz

It was 1999, I was 17. This was when they were first introduced, not much info out there in the media at the time.

Perhaps you have the luxury of having the money to repay in full but I don't.