old style student loan problems

worn_out

My daughter has defered for 23.5 years but this year is over the threshold..with 1.5 years to go. She's had a quote from Erudio which we simoly can not work out how it was arrived at. They are uncooperative and refer us back to Uk.Gov.UK , but they refer us back to Erudio !

The question is the original loan (the principle sum) has accrued interest over the 23.5 years..and they have given us this figure (loan balance, y) although not split between principle amount and interest. The formula says principle sum x 13.5% x 5 years = x, Then add back loan balance y and divide by 60 months.  But this method comes to £20pm less than what they quoted. If we use loan balance y, then x13.5% x 5 years etc it comes to £11pm more than what they quoted ?

What am I doing wrong ? Is the 5 year interest based on priciple amount, loan balance or something else ?

silvercar

https://www.moneysavingexpert.com/students/student-loans-repay/

Details of pre-1988 loans are in the first tab on that page.

The threshold for repayment is £38,255. 

Criteria for write off of your loan is here: https://www.erudiostudentloans.co.uk/content/capquest/erudio/en/news/age-related-cancellation.html

worn_out

silvercar said:

https://www.moneysavingexpert.com/students/student-loans-repay/

Details of pre-1988 loans are in the first tab on that page.

The threshold for repayment is £38,255. 

Criteria for write off of your loan is here: https://www.erudiostudentloans.co.uk/content/capquest/erudio/en/news/age-related-cancellation.html

I've suddenky realised i'm looking at this wrongly. The clue I missed was the 'mortgage style' phrase...So I've now assumed that the relevant interest rate is fixed based on the March 23 RPI and that the repayments are fixed pro rata each month, ie equal proportionate amounts of principle and interest for 5 years..It does differ from variable mortgages which change as when interest rates change, but this is a 'fixed rate' each year.. So come September the balances on the loan are recalculated using the new March 24 RPI rate, looking around 4.4%..That recalcultion will then stay in place for 12 months, with again fixed amounts of proportinate principle and interest.paid each month at a fixed amount based on the remaining months of the original 60 month term. Then come the following Sept, it is again updated for the March 25 RPI and those balances recalculated for the remaining months of the 5 year period...albeit in this case only 2 months are due as it then hits the 25 year write off date.  All the historical interest while deferrment was in place has been consolidated into the original principle and thus incurs additional interest with each annual update...

worn_out

just an addition - I'm not sure how the repayments are allocated by Erudio, or if in fact there are any regulations in place that stipulate the methodology. I've looked at the Regulations 1998 but it doesn't say anything. Basically if you're paying £200pm does that ALL go to pay the interest (as would be the case with a mortgage). I can work out what the interest amount is from the formula by dividing by the 5 years and taking 5/12ths for the period April-August , So while the payments would be £1,000 over the period, the straight line interest is just £424...so the principle should reduce by £576

This is quite important actually because come September, and the new RPI rate, the next 55 months interest is based on the outstanding principle...so obviously the lower it is, the better. I just can not find anywhere . where this is actually written down, or an example of it despite searching Google and asking Erudio. Really frustrating because unless you can check it you don't know if it;'s correct, Surely there should be some transparency ?

silvercar

Find an online mortgage repayment calculator and plug the figures in there. You know the amount outstanding and the interest rate, so should be able to see the repayments.

The calculations are done so that the monthly repayments for the term are identical and each month the amount of interest reduces and the amount of capital paid off increases. So month1 is virtually all interest and the final month virtually all capital.

worn_out

we've tried a few of these to see if it agrees with Erudio   A mortgage calculator (MSE) says £174pm, and a personal loan calculator (Moneysupermarket) says £170pm...Erudio say £200pm  While its described as a 'mortgage style' loan it doesn't give any indication of how you actually pay down yout loan.  Erudio refer us back to Gov.uk but they(the Regs) say ask the Lender. .. Even the basic information they say which is loan bal x 13.5% x 5 years plus loan bal , divided by 60 months doesn't agree as that comes to £211pm ! So we've 3 different answers non of which agree with what they've asked her to pay...and as I said above.., come Sept 1st the ew RPI will be applied but we've no idea what the loan outstanding will be so have no idea what payments they might ask for after then until next August 2025.

It's just a total muddle, nobody and nowhere (so far) can give us the information we need...and most websites only provide information on thewer Plan 1 to 5 type loans and not the old style original loans.. I get that Erudio are just using a computer based on the info given to them but they just tell us it isn't them that calculate it and to go back to the Gov website...while that says get the information from your lender..!