Cambridge Offer Holders 2015 thread
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Original post by L'Evil Fish
I can't speak for his reasons.
I don't see why they should be making money off of us at a variable rate and compounding it.
If it wasn't interest free, but say fixed ie I borrow 40k I pay back 50k, I wouldn't mind that either.
I don't see why they should be making money off of us at a variable rate and compounding it.
If it wasn't interest free, but say fixed ie I borrow 40k I pay back 50k, I wouldn't mind that either.
The interest is based on interest rate on the assumption when majority of students start paying back and doing so over the maximum 20 years period. It is costing the government to holding the debt on behalf of you until you pay back to them, and using compound rate is normal practice in any loan because for any outstanding debt you have to pay interest which becomes a part of the debt, so on so forth. That's how the basic of any loan works. There's an underlining cost for borrowing money.
Actually the interest rate the government uses for student loan is very generous, they're not making money at all. If anything, they're losing a little if you take various costs of administration, etc. into account.
....anyway, the above explanation is extremely simplified gist of how loan and interest rate works, If you're interested to know more, there're lots of books for basic economics (maybe GCSE Economic textbook?).
You can make it as your reading assignment for summer.....once you overcome your fear of libraries!
lol OK....
if you add what jneil said and what I said and digest them both, you'll get the general idea.
if you add what jneil said and what I said and digest them both, you'll get the general idea.
Original post by vincrows
The interest is based on interest rate on the assumption when majority of students start paying back and doing so over the maximum 20 years period. It is costing the government to holding the debt on behalf of you until you pay back to them, and using compound rate is normal practice in any loan because for any outstanding debt you have to pay interest which becomes a part of the debt, so on so forth. That's how the basic of any loan works. There's an underlining cost for borrowing money.
Actually the interest rate the government uses for student loan is very generous, they're not making money at all. If anything, they're losing a little if you take various costs of administration, etc. into account.
....anyway, the above explanation is extremely simplified gist of how loan and interest rate works, If you're interested to know more, there're lots of books for basic economics (maybe GCSE Economic textbook?).
You can make it as your reading assignment for summer.....once you overcome your fear of libraries!
Actually the interest rate the government uses for student loan is very generous, they're not making money at all. If anything, they're losing a little if you take various costs of administration, etc. into account.
....anyway, the above explanation is extremely simplified gist of how loan and interest rate works, If you're interested to know more, there're lots of books for basic economics (maybe GCSE Economic textbook?).
You can make it as your reading assignment for summer.....once you overcome your fear of libraries!
They are making money..the 14/15 interest rate was 5.5%. It's not very generous when you consider that 3rd years are paying inflation only (so no real interest- that is fair).
And the full interest kicks in as soon as you take a loan out...while you're doing your degree. So a 27k tuition fee loan has already crept up to £30,000 before you're even out of uni. I think the system would be much fairer if it didn't penalise students via interest profiteering (inflation is fair...this is a loan for EDUCATION after all)
Original post by jneill
Ok so that's an interesting (sorry) idea. The point about charging compound interest is if you pay of a loan early you pay less. If you leave it for a long time you pay more (because the interest is compounding).
Meanwhile inflation is happening to your money. This means that your money becomes less valuable. But the capital amount of the loan doesn't change. This means that the future value of the capital is decreasing (due to inflation).
So, if you didn't have compound interest, then when you pay off the loan the lender effectively gets back less than they originally lent you.
If interest rates are similar to inflation then in fact the lender makes no profit.
If interest rates are lower than inflation the lender makes a loss.
The profit comes when interest rates are higher than inflation.
With the old student loans the interest rates were very low. So actually they were quite fair. (And could be argued to be sharia compliant I think)
The current loan is RPI (inflation) plus 3%. That's much lower than typical loan interest rates and similar to a standard mortgage rate.
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Meanwhile inflation is happening to your money. This means that your money becomes less valuable. But the capital amount of the loan doesn't change. This means that the future value of the capital is decreasing (due to inflation).
So, if you didn't have compound interest, then when you pay off the loan the lender effectively gets back less than they originally lent you.
If interest rates are similar to inflation then in fact the lender makes no profit.
If interest rates are lower than inflation the lender makes a loss.
The profit comes when interest rates are higher than inflation.
With the old student loans the interest rates were very low. So actually they were quite fair. (And could be argued to be sharia compliant I think)
The current loan is RPI (inflation) plus 3%. That's much lower than typical loan interest rates and similar to a standard mortgage rate.
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I understand all that, but the rate of interest is above that of inflation, they're making profit.
So the fixed amount should be a fair calculation depending on how long you take to pay it back.
Ie 10 years = 5%, 15 Years = 7% or whatever, and you have to pay it within that period. If not, then you move onto the next boundary, and pay that extra difference
Original post by vincrows
The interest is based on interest rate on the assumption when majority of students start paying back and doing so over the maximum 20 years period. It is costing the government to holding the debt on behalf of you until you pay back to them, and using compound rate is normal practice in any loan because for any outstanding debt you have to pay interest which becomes a part of the debt, so on so forth. That's how the basic of any loan works. There's an underlining cost for borrowing money.
Actually the interest rate the government uses for student loan is very generous, they're not making money at all. If anything, they're losing a little if you take various costs of administration, etc. into account.
....anyway, the above explanation is extremely simplified gist of how loan and interest rate works, If you're interested to know more, there're lots of books for basic economics (maybe GCSE Economic textbook?).
You can make it as your reading assignment for summer.....once you overcome your fear of libraries!
Actually the interest rate the government uses for student loan is very generous, they're not making money at all. If anything, they're losing a little if you take various costs of administration, etc. into account.
....anyway, the above explanation is extremely simplified gist of how loan and interest rate works, If you're interested to know more, there're lots of books for basic economics (maybe GCSE Economic textbook?).
You can make it as your reading assignment for summer.....once you overcome your fear of libraries!
They are making a profit from it, the amount is above that of interest, and enough to cover any costs you mention, and the sheer number of people using it would add up. So even if it is a tiny bit more (3% isn't tiny, maybe in the world relatively rn, but as an amount to be added it makes a difference imo) it's a lot of money overall.
I'm fine thanks, don't want to do any factual reading. Wanna get lost in the fiction
Original post by vincrows
lol OK....
if you add what jneil said and what I said and digest them both, you'll get the general idea.
if you add what jneil said and what I said and digest them both, you'll get the general idea.
Unbelievable.
I should have waited for you this time. As you're a city slicker
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Original post by newblood
yeah but when you want to take a mortgage out, it'll affect you then
It doesn't affect that either- the government has said it doesn't affect anything like that.
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Original post by jneill
Unbelievable.
I should have waited for you this time. As you're a city slicker
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I should have waited for you this time. As you're a city slicker
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I was, not any more. Seriously felt my brain's go really rusty when I was writing that. Never been good at explaining that sort of things in normal daily-level English...........
Original post by L'Evil Fish
I understand all that, but the rate of interest is above that of inflation, they're making profit.
So the fixed amount should be a fair calculation depending on how long you take to pay it back.
Ie 10 years = 5%, 15 Years = 7% or whatever, and you have to pay it within that period. If not, then you move onto the next boundary, and pay that extra difference
They are making a profit from it, the amount is above that of interest, and enough to cover any costs you mention, and the sheer number of people using it would add up. So even if it is a tiny bit more (3% isn't tiny, maybe in the world relatively rn, but as an amount to be added it makes a difference imo) it's a lot of money overall.
I'm fine thanks, don't want to do any factual reading. Wanna get lost in the fiction
So the fixed amount should be a fair calculation depending on how long you take to pay it back.
Ie 10 years = 5%, 15 Years = 7% or whatever, and you have to pay it within that period. If not, then you move onto the next boundary, and pay that extra difference
They are making a profit from it, the amount is above that of interest, and enough to cover any costs you mention, and the sheer number of people using it would add up. So even if it is a tiny bit more (3% isn't tiny, maybe in the world relatively rn, but as an amount to be added it makes a difference imo) it's a lot of money overall.
I'm fine thanks, don't want to do any factual reading. Wanna get lost in the fiction
What happens if RPI goes up? Eg to 12% or more. Which is very possible and has happened in the recent past. It was over 25% in the 70s.
The rate needs to be RPI linked, plus an amount for administration and to cover bad debts (there will be a lot of unpaid loans). That becomes a significant rate, but still not actually profitable.
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Original post by vincrows
The interest is based on interest rate on the assumption when majority of students start paying back and doing so over the maximum 20 years period. It is costing the government to holding the debt on behalf of you until you pay back to them, and using compound rate is normal practice in any loan because for any outstanding debt you have to pay interest which becomes a part of the debt, so on so forth. That's how the basic of any loan works. There's an underlining cost for borrowing money.
Actually the interest rate the government uses for student loan is very generous, they're not making money at all. If anything, they're losing a little if you take various costs of administration, etc. into account.
....anyway, the above explanation is extremely simplified gist of how loan and interest rate works, If you're interested to know more, there're lots of books for basic economics (maybe GCSE Economic textbook?).
You can make it as your reading assignment for summer.....once you overcome your fear of libraries!
Actually the interest rate the government uses for student loan is very generous, they're not making money at all. If anything, they're losing a little if you take various costs of administration, etc. into account.
....anyway, the above explanation is extremely simplified gist of how loan and interest rate works, If you're interested to know more, there're lots of books for basic economics (maybe GCSE Economic textbook?).
You can make it as your reading assignment for summer.....once you overcome your fear of libraries!
I will have a debt of ~50k after my 4 years. That will generate 2500 of interest a year. Thats not what I would think of as cheap debt...
I just checked and I already owe 260 pounds worth of interest on what I've borrowed...
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Original post by newblood
They are making money..the 14/15 interest rate was 5.5%. It's not very generous when you consider that 3rd years are paying inflation only (so no real interest- that is fair).
And the full interest kicks in as soon as you take a loan out...while you're doing your degree. So a 27k tuition fee loan has already crept up to £30,000 before you're even out of uni. I think the system would be much fairer if it didn't penalise students via interest profiteering (inflation is fair...this is a loan for EDUCATION after all)
And the full interest kicks in as soon as you take a loan out...while you're doing your degree. So a 27k tuition fee loan has already crept up to £30,000 before you're even out of uni. I think the system would be much fairer if it didn't penalise students via interest profiteering (inflation is fair...this is a loan for EDUCATION after all)
Original post by L'Evil Fish
I understand all that, but the rate of interest is above that of inflation, they're making profit.
So the fixed amount should be a fair calculation depending on how long you take to pay it back.
Ie 10 years = 5%, 15 Years = 7% or whatever, and you have to pay it within that period. If not, then you move onto the next boundary, and pay that extra difference
They are making a profit from it, the amount is above that of interest, and enough to cover any costs you mention, and the sheer number of people using it would add up. So even if it is a tiny bit more (3% isn't tiny, maybe in the world relatively rn, but as an amount to be added it makes a difference imo) it's a lot of money overall.
I'm fine thanks, don't want to do any factual reading. Wanna get lost in the fiction
So the fixed amount should be a fair calculation depending on how long you take to pay it back.
Ie 10 years = 5%, 15 Years = 7% or whatever, and you have to pay it within that period. If not, then you move onto the next boundary, and pay that extra difference
They are making a profit from it, the amount is above that of interest, and enough to cover any costs you mention, and the sheer number of people using it would add up. So even if it is a tiny bit more (3% isn't tiny, maybe in the world relatively rn, but as an amount to be added it makes a difference imo) it's a lot of money overall.
I'm fine thanks, don't want to do any factual reading. Wanna get lost in the fiction
It's beyond my ageing brain and English being my second language.
I'll let much more clever people explain it. Please read this.
http://www.ifs.org.uk/comms/r94.pdf
Original post by HopefulLawyerHG
It doesn't affect that either- the government has said it doesn't affect anything like that.
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I'm afraid you're severely misinformed. All student loans are taken into consideration when assessing you for a mortgage
Original post by jneill
What happens if RPI goes up? Eg to 12% or more. Which is very possible and has happened in the recent past. It was over 25% in the 70s.
The rate needs to be RPI linked, plus an amount for administration and to cover bad debts (there will be a lot of unpaid loans). That becomes a significant rate, but still not actually profitable.
Posted from TSR Mobile
The rate needs to be RPI linked, plus an amount for administration and to cover bad debts (there will be a lot of unpaid loans). That becomes a significant rate, but still not actually profitable.
Posted from TSR Mobile
That's why I said a calculated amount to make a fair figure. 5 year period intervals or something, I don't like the idea of it just building and building from first term (when you can't even start to pay it back realistically) at a topped up rate.
If there are so many unpaid loans, then they need to restructure it all someway. What's the point in going to university if you can't get a job.
We need to create jobs, and get people in them. And not manual labour, high skill trades that university provides. It seems people do pointless degrees and find themselves with no jobs.
I still think different degrees should cost different amounts, or receive certain amounts of funding to study some. This isn't really popular but I think it fair, problem is how a valuation is made on the degree type
Original post by vincrows
It's beyond my ageing brain and English being my second language.
I'll let much more clever people explain it. Please read this.
http://www.ifs.org.uk/comms/r94.pdf
I'll let much more clever people explain it. Please read this.
http://www.ifs.org.uk/comms/r94.pdf
Why are you linking this. It is basic economics that interest above inflation will result in a profit. Admin fees are a result of the (poor) way they have gone about devising the student loan plan.
The interest rate they charge is greater than the internal rate of return, aka government are profiteering.
How did they ever manage under the terms of the pre-2012./ syatem of inflation only charges?
Original post by vincrows
It's beyond my ageing brain and English being my second language.
I'll let much more clever people explain it. Please read this.
http://www.ifs.org.uk/comms/r94.pdf
I'll let much more clever people explain it. Please read this.
http://www.ifs.org.uk/comms/r94.pdf
Jneill will explain how much it takes to make me open links
What is your first language?!
Original post by jneill
What happens if RPI goes up? Eg to 12% or more. Which is very possible and has happened in the recent past. It was over 25% in the 70s.
The rate needs to be RPI linked, plus an amount for administration and to cover bad debts (there will be a lot of unpaid loans). That becomes a significant rate, but still not actually profitable.
Posted from TSR Mobile
The rate needs to be RPI linked, plus an amount for administration and to cover bad debts (there will be a lot of unpaid loans). That becomes a significant rate, but still not actually profitable.
Posted from TSR Mobile
Then that is an issue of the way they have structured student loans for them to require that much interest.
The big issue is they've tripled fees yet countered this by raising the entry principal to 21k, so while the unis are seeing the same amount of money, the government see more debt which they're trying to secure with unfair interest rates (for a student loan)
Original post by L'Evil Fish
That's why I said a calculated amount to make a fair figure. 5 year period intervals or something, I don't like the idea of it just building and building from first term (when you can't even start to pay it back realistically) at a topped up rate.
If there are so many unpaid loans, then they need to restructure it all someway. What's the point in going to university if you can't get a job.
We need to create jobs, and get people in them. And not manual labour, high skill trades that university provides. It seems people do pointless degrees and find themselves with no jobs.
I still think different degrees should cost different amounts, or receive certain amounts of funding to study some. This isn't really popular but I think it fair, problem is how a valuation is made on the degree type
If there are so many unpaid loans, then they need to restructure it all someway. What's the point in going to university if you can't get a job.
We need to create jobs, and get people in them. And not manual labour, high skill trades that university provides. It seems people do pointless degrees and find themselves with no jobs.
I still think different degrees should cost different amounts, or receive certain amounts of funding to study some. This isn't really popular but I think it fair, problem is how a valuation is made on the degree type
I agree, particularly the variable cost of different degrees. In fact the idea was only top unis would charge the top rate but the ex-polys didn't play along.
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Original post by jneill
I agree, particularly the variable cost of different degrees. In fact the idea was only top unis would charge the top rate but the ex-polys didn't play along.
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I suppose that makes sense, but I was thinking more the degree than where you study it.
Although it would all come into play.
Put them into bands I say.
Specialist degrees (engineering, law, medicine, architecture, accounting)
Broad general degrees (English, History, languages)
Then the useless things like Harry Potter studies, golf management etc
And sub bands maybe
Although one could argue the specialist degrees should cost more, as they'll be able to pay it back. As opposed to my thinking of they should cost less because we need them more
Original post by Goods
I will have a debt of ~50k after my 4 years. That will generate 2500 of interest a year. Thats not what I would think of as cheap debt...
I just checked and I already owe 260 pounds worth of interest on what I've borrowed...
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I just checked and I already owe 260 pounds worth of interest on what I've borrowed...
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Wtf, that's ridiculous
Do you mind me asking how much you took out?
Original post by L'Evil Fish
Wtf, that's ridiculous
Do you mind me asking how much you took out?
Do you mind me asking how much you took out?
9000 + 3610
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Original post by Goods
You will have taken a debt of £50.4k but once you finish your degree you will owe £57.8k... thats just the interest accrued while at uni (assuming inflation doesn't rise, which it will by Q2, 2016 so you will owe even more, but then thats only to take into account inflation)
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