Tuesday, September 04, 2007

Student Loan Interest Doubles

I wasn't actually aware of this until my mum told me last night, but the interest on student loans increased this month from 2.4% to 4.8%. There's a group on Facebook warning/protesting about the change but, though it was in The Guardian, I don't beleive it's been well-publicized - I certainly could find anything on the BBC website, though they did report on the same thing happening in 2003.

I've never complained about paying interest on my loan, because I always knew it was inflation-linked so my debt (about £13,000) isn't growing in real terms. Moreover, I know the reason for the sudden hike is, in part, that the rate changes only once a year. If inflation had been a steady 3%, then the SLC would've been making a loss on my money all last year.

However, I don't think much of the way the SLC is run. The first time this personally affected me was when they notified me I was entitled to an extra £200 in my second year then refused to give it to me. Generally, since I haven't been paying off, I haven't had much dealing with them, but I've heard a few nasty stories. This large and almost unpublicized rate increase is just what I'd expect.

Also, I can't remember the difference between the RPI and CPI, but I'd like to know why this is tied to the former, which is much higher. The government takes the CPI as its measure of inflation, and is targeting 2% (though it's been between 2 and 3% most of the year). Why then is the inflation figure used for our loan 4.8?

(Still, the good news is many savings accounts can still beat that - in part due to higher interest rates to keep the inflation down)

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