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Student loan rate will probably stay near 4.8%
phlash
Posts: 883 Forumite
Don't expect student loan rates to decrease this September.
Current rates are 4.8%, double what they were previously. It means the payments I am making towards paying back my student loan each month don't even cover the monthly interest earned on the debt! :mad:
The BOE have warned that inflation will spike in the near term, meaning both CPI and RPI rates will jump up. The latest rates (February 2008) were 2.5% and 4.1% respectively for each.
Later this month, the March 2008 CPI and RPI figures will be published. Look out for the RPI figure, because this will become the rate of interest applied to your loans from Spetember 2008. I'm waiting for the news with bated breath, I don't want to have another year where my debt grows instead of shrinks, but it is sounding as though my wish will not come true.
PS. Its sickening that the Government are using RPI as our rate of interest, when they conveniently use CPI (which is lower and the "basket of goods" massaged quarterly in order to make inflation look low) to tell us about inflation being under control and low. One rule for the Government and another for students, thats the Government sticking up two fingers to the students. Happy days.
Current rates are 4.8%, double what they were previously. It means the payments I am making towards paying back my student loan each month don't even cover the monthly interest earned on the debt! :mad:
The BOE have warned that inflation will spike in the near term, meaning both CPI and RPI rates will jump up. The latest rates (February 2008) were 2.5% and 4.1% respectively for each.
Later this month, the March 2008 CPI and RPI figures will be published. Look out for the RPI figure, because this will become the rate of interest applied to your loans from Spetember 2008. I'm waiting for the news with bated breath, I don't want to have another year where my debt grows instead of shrinks, but it is sounding as though my wish will not come true.
PS. Its sickening that the Government are using RPI as our rate of interest, when they conveniently use CPI (which is lower and the "basket of goods" massaged quarterly in order to make inflation look low) to tell us about inflation being under control and low. One rule for the Government and another for students, thats the Government sticking up two fingers to the students. Happy days.
I can take no responsibility for the use of any free comments given, any actions taken are the sole decision of the individual in question after consideration of my free comments.
That also means I cannot share in any profits from any decisions made!;)
That also means I cannot share in any profits from any decisions made!;)
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Still cheaper than any high street loanNo longer using this account for new posts from 20130
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Still cheaper than any high street loan
It was never sold to me or anyone else as a 'loan' in the high street definition.
Told it was a borrowing off the Government and we would pay back the same amount. (i.e. it would increase with inflation) However, the measure used should be the same across the board, the Government shouldn't have a pick between which inflation figure they use to determine which best suits them.I can take no responsibility for the use of any free comments given, any actions taken are the sole decision of the individual in question after consideration of my free comments.
That also means I cannot share in any profits from any decisions made!;)0 -
Agree 100% Phlash. My loan was sold to me at the "rate of inflation", and it certainly wasn't made clear that it was RPI not CPI! I think I read that if you owe £12k in student loan, then you need to earn £21,400 to pay the interest nowadays!
Am hoping it's not going to go up any more!!Should've = Should HAVE (not 'of')
Would've = Would HAVE (not 'of')
No, I am not perfect, but yes I do judge people on their use of basic English language. If you didn't know the above, then learn it! (If English is your second language, then you are forgiven!)0 -
That's exactly correct pinkshoes.
Salary of £21,400 pa will mean annual repayment of £576. [(21,400-15000)*0.09].
Interest on £12,000 is £576 pa. [12,000*0.048].
That equates to £48 per month out of a person's salary just to keep the debt at the same level!
In my case, my debt is £15,000, I would need a salary of £23,000 in order to meet the monthly interest.
These could of course get worse if RPI figures out later this month spike upwards, as we have been warned they will.I can take no responsibility for the use of any free comments given, any actions taken are the sole decision of the individual in question after consideration of my free comments.
That also means I cannot share in any profits from any decisions made!;)0 -
Hang on ... does this apply to the general student loan and tuition fee loan?
I can afford to pay my fees but was considering a loan to put into a high interest account. But this isn't worth it if the highest rate bank account is 6%, as it won't cover the tuition fee interest (which is paid straight to the uni.)
correct me if I'm wrong.This is a system account and does not represent a real person. To contact the Forum Team email forumteam@moneysavingexpert.com0 -
Agree 100% Phlash. My loan was sold to me at the "rate of inflation", and it certainly wasn't made clear that it was RPI not CPI! I think I read that if you owe £12k in student loan, then you need to earn £21,400 to pay the interest nowadays!
Am hoping it's not going to go up any more!!
the government does indeed use RPI to index student loans
as it does to index state pensions, inflation linked saving certificates, state occupational pensions, certain state benefits, so tax allowances etc etc
are you really saying you would like these other benefits linked to the lower measures of inflation?
as I see it the state is very consistant as far as index linking is concerned0 -
candyflossing wrote: »Hang on ... does this apply to the general student loan and tuition fee loan?
I can afford to pay my fees but was considering a loan to put into a high interest account. But this isn't worth it if the highest rate bank account is 6%, as it won't cover the tuition fee interest (which is paid straight to the uni.)
correct me if I'm wrong.
Yes the rate of interest applies to both elements of loans. If you took out the loan and managed to put it into a high interest savings account @ 6%, you would make money not lose money. (Assuming you have either put it in an ISA, or told the bank that you are exempt from tax because you’re a full time student)
Simply, borrow £1000 at 4.8% and you’ll pay £48 interest in the year. That £1000 in an ISA at 6% will earn £60. You’re profit is £12. This is why it is still better to put any extra money into an ISA paying greater than 4.8% than it is to overpay your repayments.
NB. For readers who are wondering what candyflossing is referring to, I’ll explain. With the inclusion of top-up fees for university, the student loan was split into “student loan for tuition fees” and “student loan for maintenance”. Previously the two were just together called “student loan”. As a note, next year maintenance grants are being reintroduced.I can take no responsibility for the use of any free comments given, any actions taken are the sole decision of the individual in question after consideration of my free comments.
That also means I cannot share in any profits from any decisions made!;)0 -
the government does indeed use RPI to index student loans
as it does to index state pensions, inflation linked saving certificates, state occupational pensions, certain state benefits, so tax allowances etc etc
are you really saying you would like these other benefits linked to the lower measures of inflation?
as I see it the state is very consistant as far as index linking is concerned
That’s a fair point. However, when the BOE meet to set the rate of interest their target for inflation is CPI, and that target is 2%. Before CPI was introduced, RPI was the target measure for inflation, the target was 2.5%. There has been a decoupling of the two measures, such that in February 2008 CPI was 2.5% and RPI 4.1%. RPI was only meant to be 0.5% above CPI, clearly this is not the case anymore.
If RPI was the measure of inflation that the BOE used, then interest rates would be being raised because inflation would be far too high above target. However, because CPI is used, interest rates have been cut, meaning savers get less from high street banks. So as a saver with a student loan, I’m getting a higher rate of interest on my inflation linked student loan, and a lower rate of interest on my savings accounts. Funny how both work in the Governments favour!
Couple all that with the high house prices I have walked into and an unstable job market due to the credit crunch (a result of gorging on cheap credit for the past decade), I’d say the Government have delivered a pretty unattractive plate of food to my generation.
The point is, if they are using CPI as the main target for inflation, and our loans are inflation linked, then base the loans on CPI.I can take no responsibility for the use of any free comments given, any actions taken are the sole decision of the individual in question after consideration of my free comments.
That also means I cannot share in any profits from any decisions made!;)0 -
If the argument for basing student loans on CPI doesn’t take your fancy, then they should at least track RPI properly. We are paying 4.8% because in March 2007 the RPI figure happened to be 4.8%, the peak of RPI for 2007. We are not paying at the rate of inflation at the moment, we are paying at the peak rate of inflation experienced in a single moment. If linked to RPI, we should pay at the average of RPI over time, not at a snapshot in time. Clearly though, the Government aren’t listening as this argument has been produced to them on several occasions.
It looks like this year, in a few weeks time, we will find out that yet again we will be paying student loan interest at the peak of RPI. Two years running, we will have paid interest at above inflation as measured by RPI, and pretty much double the amount of interest in comparison to CPI, the Government’s favoured measure of inflation.
Clearly something is wrong with the system.I can take no responsibility for the use of any free comments given, any actions taken are the sole decision of the individual in question after consideration of my free comments.
That also means I cannot share in any profits from any decisions made!;)0 -
If the argument for basing student loans on CPI doesn’t take your fancy, then they should at least track RPI properly. We are paying 4.8% because in March 2007 the RPI figure happened to be 4.8%, the peak of RPI for 2007. We are not paying at the rate of inflation at the moment, we are paying at the peak rate of inflation experienced in a single moment. If linked to RPI, we should pay at the average of RPI over time, not at a snapshot in time. Clearly though, the Government aren’t listening as this argument has been produced to them on several occasions.
It looks like this year, in a few weeks time, we will find out that yet again we will be paying student loan interest at the peak of RPI. Two years running, we will have paid interest at above inflation as measured by RPI, and pretty much double the amount of interest in comparison to CPI, the Government’s favoured measure of inflation.
Clearly something is wrong with the system.
With the deepest respect clearly your university subject is not mathematically based.
TPI is what it says, an index that gets recalculated each month.
The rate of inflation is the difference between the index a year ago and the index now (divide by the index to get a percentage).
so if you 'average' the index you would need to do that each year so the 'base' for last year would be lower so you would end up with the same 'rate'.
As far as the debate about which 'rate ' to use there have always been a variety RPI, RPIX, CPI etc) and I feel that on more soper reflection there is merit in keeping the same defintion for all benefits and cost and not swapping depending upon circumstances at the time.
Whilst its true that students today would benefit, pensioners, people on benefits etc would be disadvantaged.
Also, on several threads on these boards people complain that inflation is really much much higher ... so difficult to please all the people..0
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