[J]

This is Laura Howard:



She's an independant money/finance expert and TSR has been offered the chance to run a Q&A her. So any pressing financial woes you have you could get her response. Topics like:

Replaying loans
Tax
Debt and credit
Investment
Saving

In this thread can we come up with 10-20 really meaty questions that you want to know the answers to. If we get overwhelmed then maybe we'll have to have a poll to wittle them down


Laura's Bio:

Laura Howard is author of A Girl's Guide to Money – a financial self-help book for young women. Having started out in personal finance and property journalism in 1999, Laura now freelances for a range of national newspapers, magazines and websites. She is a regular contributor to the Independent on Sunday and Guardian Unlimited and writes a monthly economy column for Estate Agency Times. Laura was shortlisted in Headline Money's Best Mortgage Writer and Best Freelance Journalist categories in 2006 and 2007 respectively and in both categories in 2008.

[SillyFencer]

What does the current economical climate mean to students who are currently studying? They will be graduating in a few years time, when possibly the worst will have past, or not. Either way, with BT announcing 10,000 job losses coming up, and RBS announcing 3,000 job losses today, are graduates looking at tough times ahead and what can they do now to minimise the impact?

[SuperDaz]

I have two questions

Is there any value in paying back student loans early? I left university last year and have about 14k of student loan debt, even with repayments from my earnings it is going up every month due to inflation. Would it make sense to make additional payments on top of my monthly deductions?

and also will you marry me?

[Indievertigo]

Originally Posted by SuperDaz

I have two questions

Is there any value in paying back student loans early? I left university last year and have about 14k of student loan debt, even with repayments from my earnings it is going up every month due to inflation. Would it make sense to make additional payments on top of my monthly deductions?

and also will you marry me?

Dunno if I'm allowed to, but I can answer that first one.

It used to be a simple No - the RPI which the student loans are based on has for a long time been below the interest rate (based on the BoE base rate) you could earn in a savings account, making more sense to put any over-payments you wanted to make on the student loan into a savings account.

Very, very basically I'll give an example - RPI at 3 %, BoE base rate 4%, xxxx bank account offering savings rate of 6%. if you made an over payment of £100, you'd lose £3, as had you put that into a savings account paying 6%, then student loan would have risen by only 3% in the time that your £100 had risen by 6%. Entiendo? It's complicated.


But now with the recession it isn't such a simple no.

the RPI is set at 3.8% until August 2009. The Bank of England base rate is currently at 3%, and will quite likely go down another half point, to 2.5% possibly before Christmas.

It could be that savings rates offered by banks dip to below 3.8% before August, but I doubt it. It's worth keeping an eye on the rate you can get, (check moneysupermarket or another price comparison for the best rates, and obviously look for an ISA, if you don't have one) as theoretically, unless you find a fixed rate offering, they could dip below 3.8%, meaning you would be better off making overpayments on the loan.

Set August 2009 as a date in your diary though, that is when the interest rate for your student loan changes.

If what I've said isn't accurate, I'm sure it'll be picked up on by someone :o

[Quady]

Where should savings be going? Index Tracker ISA/Cash ISA/Repaying student loan/Pension?
Assuming bank rate goes down to 2% by April.

[J]

some excellent questions (minus the will you marry me one )

keep them coming !!

[Orthala]

Indievertigo - I shall try and improve on that explanation.

Student Loan: 3.8%
ISA: 6%

Example of £1000 loan.

Student Loan after One Year (what you owe): £1038
Savings Account after One Year (what you have): £1060
Profit: £22 (may not be a lot however...)

Now, lets say over 3 years you save your maintenance loan, thats about £10k, so *'s the above by 10. Then after 10 years thats another *10. So thats quite a bit of profit you got there

Also don't forget, if you leave interest in the ISA it compounds year after year

[GR29KHS]

plus if you want to borrow in the future, a personal loan/mortgage is going to cost more than your student loan. Better to keep the student loan! I won't say it's not tempting to pay it off, get rid of it and be debt free (for the moment), but I've decided to put down a larger deposit on a house instead in the future.

[uthinkilltellu]

I am borrowing from the govt @ 4.8% (the so called 'student loan' product). Are the rate cuts passed onto it aswell? Or is the rate for the student loan fixed at 4.8%?

[Orthala]

Originally Posted by uthinkilltellu

I am borrowing from the govt @ 4.8% (the so called 'student loan' product). Are the rate cuts passed onto it aswell? Or is the rate for the student loan fixed at 4.8%?

Its 3.8% this year. 4.8% was last years.

[Quady]

As I understand it this thread is about collecting questions, not answering them (yet)

If RPI was negative one March, would the student loan interest rate for the following Sept to Sept also be negative?

[Orthala]

Originally Posted by Quady

As I understand it this thread is about collecting questions, not answering them (yet)

If RPI was negative one March, would the student loan interest rate for the following Sept to Sept also be negative?

Indeed, but no offence to the highly attractive Laura most question could be answered on this forum by another user.

And technically yes, but I am sure the government will then say 'Actually we are now going to change how interest is calculcated with student loans'. Waiting for the day march rpi is negative though.. Technically it would mean they pay us....

[GR29KHS]

Apparantly yes according to MSE. but whether or not that would actually happen in practise will have to be seen to be believed.

There's no point in passing on questions that can be answered here if there's going to be a limit on the number of questions that can be passed on to Laura imho. If a question can't be answered here then it can be passed on. That's why they're being answered!

Edit: Orthala you beat me to it!

[Quady]

OK fair enough, I'm all up for having a 'difficult questions' thread

Link for MSE? It was difficult enough for me in early 2006 to find out it was March RPI that fixed it (since its not written in the T&Cs for the loan) so I wonder if there is a base.

Orthala - the BoE predict negative RPI for 2010 and possible for 2009. (under current conditions)

How about my first question then:
'Where should savings be going? Index Tracker ISA/Cash ISA/Repaying student loan/Pension?
Assuming bank rate goes down to 2% by April.'

:P

[GR29KHS]

What about asking her advice if you want to try and get through Uni debt free - if it really can be done??? I've been thinking about it. Taking a gap year and working every hour that God sends would probably be a good start.... other than that I'm stumped... some people struggle to work long hours during term time as it takes time away from studying.

[GR29KHS]

Originally Posted by Quady

How about my first question then:
'Where should savings be going? Index Tracker ISA/Cash ISA/Repaying student loan/Pension?
Assuming bank rate goes down to 2% by April.'

I think that's a good question as you'll never get the same answer twice plus everyone's different.

What about a locked thread where a mod could put all the chosen questions. Then over enthusiatic people (like me) can't go in and make comments.

[Indievertigo]

Originally Posted by Quady

As I understand it this thread is about collecting questions, not answering them (yet)

Why ask an expert questions which a non expert can answer? A complete waste of the expert. If I see a question I can answer, I darn well will answer it.

[Quady]

Originally Posted by Indievertigo

Why ask an expert questions which a non expert can answer? A complete waste of the expert. If I see a question I can answer, I darn well will answer it.

Thats why I was assuming this thread was for questions that are not easily be answered on here.

'What does the BoE base rate actually mean?' - since Northern Rock could not borrow funds at base rate (they had to take base rate +1%) its not the rate at which it lends to banks, so what is it?

[Quady]

What is the advantage of a pension if your a basic rate tax payer after retirement compared to a maxi ISA? Surely its just a deferal of the tax. If you end up being a higher rate tax payer in retirement, don't you lose 20% on the years of standard rate contributions compared to tax free investment?

[Juno]

Originally Posted by Indievertigo

Why ask an expert questions which a non expert can answer? A complete waste of the expert. If I see a question I can answer, I darn well will answer it.

Exactly.

My questions: What is the point of the "expert" when most of the questions are easily answered? And how much money did TSR waste on this stupid idea? Was this paid for out of the advertising revenue raised by my wiki page?