bbtmn: Bloody Typical

Bloody Typical

I've just come across a Facebook group called "Campaign Against 4.8% Student Loan Interest".

Ok, so the interest rate on student loans is set to track the retail price index (RPI) at the end of the previous tax year. In March 2006, the RPI was 2.4%, so the interest rate on student loans was set at 2.4% from September 2006. The RPI in March 2007 was 4.8%, so thats what the new interest rate for student loans is from September 2007.

Basically, the RPI is an average measure of changes in the prices of goods, and is basically a measure of inflation. Think of it in terms of ice creams; a few years ago, a Flake 99 cost about 99p in most places. Now, it costs about £1.40. Thats because the price of goods has risen, so £1 buys less now than it did a few years ago. So really the interest rate of student loans is set so that you pay back the "real world" cost of your initial debt - i.e. if you borrowed 99p a few years ago for your ice cream, what you'd pay back now is ~£1.40. So the lender hasn't actually made any money off you.

As an indicator, a typical rate of interest on a credit card is about 14% APR, about 7% APR for loans, about 8% for mortgages and about 18% AER for overdrafts. Student loans are effectively free debt. So we have absolutely no right to moan.

Bloody hell, students annoy me sometimes...

(N.b. I'm no economist, so most of this post could well be complete bollocks. Sorry if it is).

• posted by dickie @ 9/11/2007 12:13:00 AM.

7 Comments...

Lucy: Students would be more justly tolerant, however, if the banks weren't such greedy bastards in the first place.

I had a dream the other night about moving my bank account from my current bank (which has been in the news rather a lot concerning student accounts recently) to the more ethically-acceptable Co-operative bank. There's a side of me which thinks it would be worth the hassle, not least because I'd have more faith in where my money was going, 4.8% RPI or no.

There's also a side of me which worries about my subconscious...
posted @ Wed Sep 12, 11:32:00 PM BST

Lucy: Oh, and they're still going to screw us over for every penny that they can in the long run. In case you were under any illusions.
posted @ Wed Sep 12, 11:33:00 PM BST

aiusepsi: Yeh, people are stupid.

Still frightens me the amount of debt I'm going to come out with, though, even though a student loan is the best kind of debt to be in.

It gets cancelled if you take too long to pay it, you only pay it when you're earning more than 15k, and it tracks inflation. Doesn't suck!
posted @ Thu Sep 13, 12:26:00 AM BST

dickie: "Students would be more justly tolerant, however, if the banks weren't such greedy bastards in the first place."

The Student Loans Company isn't a bank per-se. IIRC it's a governmental body. So the SLC isnt actually screwing Anyone over, and students should be bloody grateful, because we're getting a bloody good deal.

As for banks screwing you over... Well I work in one, so thats not really news to me.

What bank you with now, Lucy?
posted @ Fri Sep 14, 08:38:00 PM BST

Lucy: http://www.nusonline.co.uk/news/274594.aspx
posted @ Sun Sep 16, 09:44:00 PM BST

dickie: Not a dig at you Lucy, but that NUS page just sums up everything that is wrong with students.

(and instead of protesting, why don't they just change banks? It's not even as if HSBC have the best student/graduate accounts...)
posted @ Mon Sep 17, 09:14:00 PM BST

Lucy: They don't change banks because it's so much hassle.

I speak for myself. Even once you've changed all the card details on everything, you're dealing with a new branch, a new statementing system... and hell, you have to look up your sort code and account number every time you want to use it! I've had mine since I was about thirteen, and can rattle it off just like that...

That's why more people don't change!
posted @ Tue Sep 18, 04:21:00 PM BST