Student Finance interest rates are actually quite high...

I had the impression Student Finance had an interest rate of slightly above inflation so I didn't worry much about getting into £39,000 of debt. Looking on the government website, the interest is inflation + up to 3%, so essentially once the government reaches its target of 2%, you'd be paying up to 5% interest. And that's a lot!

Does this concern anyone?

(edited 8 years ago)

Reply 1

Klix88

17

The Co-Op Bank charges 9.58% for the Professional and Career Development Loan. SF is cheap compared to other sorts of loan. No other sort of unsecured loan is that cheap.

What concerns me more is that the government can change the terms and conditions as they see fit.

Reply 2

username1862217

15

I don't think you're expected to pay it off.

Reply 3

applicationa

2

Original post by ImNotSuperman

I had the impression Student Finance had an interest rate of slightly above inflation so I didn't worry much about getting into £39,000 of debt. Looking on the government website, the interest is inflation + up to 3%, so essentially once the government reaches its target of 2%, you'd be paying up to 5% interest. And that's a lot!

Does this concern anyone?

No because the repayment terms aren't like commercial debt. At the end of the day, the impact debt will have on your future finances isn't about the total amount you owe, it's about the affordability of the repayments. You will always be able to afford your student loan repayments because they are directly tied to income.

Original post by Klix88

What concerns me more is that the government can change the terms and conditions as they see fit.

They've never changed the terms and conditions on graduates before. The political fallout from this would be unimaginable!

Reply 4

Wattsy

19

Original post by applicationa

No because the repayment terms aren't like commercial debt. At the end of the day, the impact debt will have on your future finances isn't about the total amount you owe, it's about the affordability of the repayments. You will always be able to afford your student loan repayments because they are directly tied to income.

They've never changed the terms and conditions on graduates before. The political fallout from this would be unimaginable!

They're killing 90 people per month with their welfare policies. This government could and would change these if they wanted to with no real issue.

Reply 5

scrotgrot

16

Original post by applicationa

They've never changed the terms and conditions on graduates before. The political fallout from this would be unimaginable!

They sold the pre-1998 mortgage style loans to a hedge fund and found some way or other of changing the terms. That was a qualitatively different system and with small sums borrowed, but there is a huge black hole in student finance and future governments are going to try to find some way to make us pay, you mark my words. As nobody will have really paid it back we are all going to have to repudiate it like the Greeks.

Reply 6

Klix88

17

Original post by applicationa

They've never changed the terms and conditions on graduates before. The political fallout from this would be unimaginable!

They have already done so, as the previous poster said. The original terms & conditions on the debt they sold made it commercially unattractive. The T&Cs had to be altered to make the debt saleable.

They have written into the new scheme's rules and regs that terms and conditions can be changed, to make it easier in future. Government just sees debt. It doesn't see people. There doesn't seem to be any political fallout from screwing over students. Tuition fees were tripled and they were re-elected. Looks like the promised postgraduate funding was just dreamed up to get a few votes onside - doesn't look like that will ever happen. If students kick off, they're just portrayed as a bunch over over-privileged scrounging yobbos - it's always easy to create a scapegoat.

Loan terms & conditions are almost bound to change. The funding system was already failing. With student numbers now uncapped and all funding converted to loans from next year, that black hole of non-repayment is about to get very much bigger and at the next election doubtless there will be calls to Do Something About It.

Reply 7

applicationa

2

Original post by Klix88

They have already done so, as the previous poster said. The original terms & conditions on the debt they sold made it commercially unattractive. The T&Cs had to be altered to make the debt saleable.

They have written into the new scheme's rules and regs that terms and conditions can be changed, to make it easier in future. Government just sees debt. It doesn't see people. There doesn't seem to be any political fallout from screwing over students. Tuition fees were tripled and they were re-elected. Looks like the promised postgraduate funding was just dreamed up to get a few votes onside - doesn't look like that will ever happen. If students kick off, they're just portrayed as a bunch over over-privileged scrounging yobbos - it's always easy to create a scapegoat.

Loan terms & conditions are almost bound to change. The funding system was already failing. With student numbers now uncapped and all funding converted to loans from next year, that black hole of non-repayment is about to get very much bigger and at the next election doubtless there will be calls to Do Something About It.

Technically they weren't re-elected :wink:

Also, retroactively changing loan terms wouldn't hurt students - it would hurt graduates, a much bigger chunk of the electorate.

Yes, the Government did technically change the terms and conditions of the mortgage style loans when they sold them off. But they didn't actually change the repayment terms, which the new owners of the debt have to follow as well. They also had a reason to sell them off - with the Student Loans' Company becoming more and more refocused on the Income Contingent Loans, they wanted to be able to close down their legacy loans collection department. It wasn't really viable to run it as part of SLC anymore. That reason won't exist with the income contingent loans unless the Govt decides to stop collecting them via the HMRC, and I don't see why they would ever do that as it's an efficient means of collection.

IMO it was pretty crap for the Government to sell off the mortgage style loans, because it does create this kind of uncertainty and I feel bad for the people whose loans have ended up with a private company, when other people have had their mortgage style loans written off. But I really don't forsee any reason for the government to do the same with the ICR loans. There isn't the same difficulty with collecting them that prompted them to sell off the MS loans. The set-up costs for any private business of setting up the data sharing arrangement with the HMRC that the SLC already has, would decrease the profitability of taking on the loans. The Government would have to undersell them and given the way the system works I just don't see why it would be a good idea to do that ever.

Student Finance interest rates are actually quite high...

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