Money Making Student

A bit of positive news after last years shocking interest rate rise. Student loans may see the rate fall from currently 4.8% to 3.8%. Although not confirmed yet, it looks like it will fall. This is most likely to change in September.

But how is the rate calculated? Well the Government’s aim is to set the rate so it mirrors the rate of inflation. Therefore the money you borrow remains the same value. Or at least thats the plan, the problem, how do you calculate the rate of inflation? The two current methods are Retail Price Index (RPI) and Consumer Price Index (CPI). Before September 07 the rate was set by the CPI method, without going into the finer detail this gave the lowest rate of interest. But since September 07, RPI has been used. The difference is disgusting. For the year 06/07 the rate was 2.4% but this year it is 4.8%. Yep doubled.

What makes it more unfair is how it is based on the rate of inflation for March only and not an average for the year. Last year, March was abnormally high compared to the rest of the year, as you can see from the graph below. What is probably more disturbing is the current trend of rising inflation, I think the graph speaks for it’s self. On the back of the ‘credit crunch’, 2009/2010 may see a new record for student loan interest…

Source: National Statistics website: www.statistics.gov.uk Crown copyright material is reproduced with the permission of the Controller Office of Public Sector Information (OPSI)

Just have to wait and see what the future holds.

Martyn

You can subscribe to my posts and be the first to hear my latest hints and tips by E-mail or RSS. Thanks for visiting!