The Anti-Kirsty Posted August 7, 2006 Share Posted August 7, 2006 Hi, I was just on the Student Loans Company website checking what the interest rate is on my loan, and apparently: "As the rate of interest is always based on inflation (Retail Prices Index) the APR for the period of 1st September 2005 to 31st August 2006 is 3.2%. From 1 September 2006 to 31 August 2007 this will be adjusted to 2.4%." This may be a dumb question, but with inflation on the up, how come the interest rate on student loans is actually falling? Can anyone answer? Also, with a view to one day buying a house, do you guys think it is better to make extra payments to SLC in order to clear the loan more quickly, or to make those extra payments in to high-interest savings, given the relatively low rate on the loan? Laters AK Quote Link to comment Share on other sites More sharing options...
Garry AKA Pod Posted August 9, 2006 Share Posted August 9, 2006 Hi, I was just on the Student Loans Company website checking what the interest rate is on my loan, and apparently: "As the rate of interest is always based on inflation (Retail Prices Index) the APR for the period of 1st September 2005 to 31st August 2006 is 3.2%. From 1 September 2006 to 31 August 2007 this will be adjusted to 2.4%." This may be a dumb question, but with inflation on the up, how come the interest rate on student loans is actually falling? Can anyone answer? Also, with a view to one day buying a house, do you guys think it is better to make extra payments to SLC in order to clear the loan more quickly, or to make those extra payments in to high-interest savings, given the relatively low rate on the loan? Laters AK Dunno why the rate is falling but be grateful. As they recently lifted the earnings limit at which you have to pay the loan back to £15k a year, the amount they now take out of my pay slip is barely more than the interest the debt has earned that month. They made it out as if they were helping students by rasing the limit from £10k a year to £15k, but the are actually, (and intentionally in my opinion) screwing us over. I have to make additional payments by cheque every month as you cannot stipulate how much you would lke to come out of your earnings. I have about £13k to pay off, which has hardly gone down in te 4 years since I flippin graduated. I have enough money in savings to pay that off, but I am saving for a deposit. I recommend you do the same. If you can afford to pay a thousand or so off then I'd go for it, but don't pay the whole lot off as you won't get as good a rate on a loan anywhere else. If you have any credit cards or other debts, pay those off instead. Quote Link to comment Share on other sites More sharing options...
CrashConnoisseur Posted August 9, 2006 Share Posted August 9, 2006 ...with inflation on the up, how come the interest rate on student loans is actually falling? It's based on the Retail Prices Index as at March each year... 'Repayment -- Detailed Version': http://www.slc.co.uk/noframe/lr/ms/repaydet.html Calculation of the Interest RateAs the rate of interest is always based on inflation (Retail Prices Index) the APR for the period of 1st September 2005 to 31st August 2006 is 3.2%. From 1 September 2006 to 31 August 2007 this will be adjusted to 2.4%. Quote Link to comment Share on other sites More sharing options...
zag2me Posted August 9, 2006 Share Posted August 9, 2006 Pay off as little of the student loan as you can. I owed 16k a few years ago, and its the cheapest loan i've ever had. Also banks completly ignore it when calculating how much you can borrow when it comes to mortgages. There is absolutley no point in paying it off early if the interest rate tracks inflation, in real terms, it never increases in value. Quote Link to comment Share on other sites More sharing options...
Jason Posted August 10, 2006 Share Posted August 10, 2006 Yes, I get more net interest on my savings in a bank than I pay on my student loan. Free money. Quote Link to comment Share on other sites More sharing options...
PropertyAnalyser Posted August 10, 2006 Share Posted August 10, 2006 Pay off as little of the student loan as you can. I owed 16k a few years ago, and its the cheapest loan i've ever had. Also banks completly ignore it when calculating how much you can borrow when it comes to mortgages. There is absolutley no point in paying it off early if the interest rate tracks inflation, in real terms, it never increases in value. If it were any other type of loan I would say pay it off as quickly as possible, but because the rate for student loans is so low it may even shrink in real terms if inflation takes off in a big way!, so I agree with zag2me, Pay off only the minimum they make you pay. I remember getting my student loans and putting them straight into an ISA (about 6 or 7% i think) and I was only paying about 4%ish on the loan! Stuart Quote Link to comment Share on other sites More sharing options...
The Anti-Kirsty Posted August 10, 2006 Author Share Posted August 10, 2006 Thanks for the replies. Makes things a bit clearer. I agree that the Government intentionally screwed people with student loans by putting the threshold up to £15000. Many graduates will not earn enough for several years after leaving university to be able to make the necessary repayments to even cover the interest on the loans. It gets on my wick. AK Quote Link to comment Share on other sites More sharing options...
Garry AKA Pod Posted August 10, 2006 Share Posted August 10, 2006 Yes, i wish I had been a bit more clued up whilst at Uni. I would have invested the money into an ISA also, and got a part time job to fund my drinking sessions. Alas, I didn't as I was too busy drinking. That's all us students do apparently. You learn from your mistakes. Quote Link to comment Share on other sites More sharing options...
Leodhasach Posted August 10, 2006 Share Posted August 10, 2006 I've been paying mine off for 2.5 years now, a bit depressing seeing that £70 disappear every month, especially as I took all mine out pre-1995 - I can't even remember spending the money! I had about 3.7k to pay after 10 years of interest built up on it while I did low pay jobs and went back to uni for 4 years. I got my loans right in the early days, when the scheme was so badly administered that it would have cost the govt. less to have simply given us the money rather than loan it to us. Wrankles a bit, that does. Still, at least I don't have the £15k debts of a recent grad I earn far more on my savings than I pay on the loan, but there is a serious temptation to pay it off, then burn the loan agreements and dance on the ashes singing hallelujah Quote Link to comment Share on other sites More sharing options...
Priff Posted August 10, 2006 Share Posted August 10, 2006 Pay off as little of the student loan as you can. This is the correct advice for any student. It's free money. The debt grows slower than your savings / other debts. So long as you are not spending your money on Ipods + drink and are either servicing other debts or saving, pay the minimum. Quote Link to comment Share on other sites More sharing options...
Fancypants Posted August 10, 2006 Share Posted August 10, 2006 I've been paying mine off for 2.5 years now, a bit depressing seeing that £70 disappear every month, especially as I took all mine out pre-1995 - I can't even remember spending the money! I had about 3.7k to pay after 10 years of interest built up on it while I did low pay jobs and went back to uni for 4 years. I got my loans right in the early days, when the scheme was so badly administered that it would have cost the govt. less to have simply given us the money rather than loan it to us. Wrankles a bit, that does. Still, at least I don't have the £15k debts of a recent grad I earn far more on my savings than I pay on the loan, but there is a serious temptation to pay it off, then burn the loan agreements and dance on the ashes singing hallelujah a broadly similar story to my own. I ended up paying my loan in one go last year when I finally got a decent job went over the threshold. Effectively I had six months grace to save and blitz it until they started bleeding my account over the course of 5yrs or whatever. It may have denied me a few quid but I thought "to hell with it" and wanted to declare myself truly debt free. Quote Link to comment Share on other sites More sharing options...
history repeats Posted August 10, 2006 Share Posted August 10, 2006 a broadly similar story to my own. I ended up paying my loan in one go last year when I finally got a decent job went over the threshold. Effectively I had six months grace to save and blitz it until they started bleeding my account over the course of 5yrs or whatever. It may have denied me a few quid but I thought "to hell with it" and wanted to declare myself truly debt free. Could anyone tell me if there is any truth in this rumor that student load debts would be written off after 25 years. So far I have held off from paying them a bean in the 8 years since I graduated. Quote Link to comment Share on other sites More sharing options...
twinkle Posted August 10, 2006 Share Posted August 10, 2006 If you take a look around the SL website it will tell you, but off the top of my head, it only gets written off after 25 years if you took the loan out before 2000 (or 2001 I can't remember exactly), or when you get to the age of 50. (i don't know what happens to mature students). I think they realised that most graduates don't earn anywhere near the "average" graduate salary of £22K or whatever it is, so that is why they changed the threashold to £15K - probably because most people pre 2000 have defaulted on their loans. Hardly any of my peers have paid theirs off - have all become fulltime mothers, and the one that won the lottery was told by her financial advisor not to pay hers off - she's spent the £200K now and still has the SL! Next April is my last payment - yippee! Quote Link to comment Share on other sites More sharing options...
Panda Posted August 10, 2006 Share Posted August 10, 2006 Cancellation of loan While you are of working age, you will be expected to make repayments until you have paid off all that you owe. The amount of time this takes will depend on your income during your working life. Once you reach the age of 65 your loan will be cancelled - even if you have not paid it all off. Of course, if your income never rises above the threshold before you reach the age of 65, you will not have to make any repayments. Your loan will be cancelled if you die. It will not be passed on to anybody else. Your loan will also be cancelled if you become permanently disabled. Quote Link to comment Share on other sites More sharing options...
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